Captive insurance and reinsurance management companies are specifically excluded from new guidance by the Central Bank of Ireland (CBI) on the use of service companies for staffing purposes in the insurance sector.
CBI’s consultation paper 144 seeks stakeholder views on the proposed guidance, which the bank says is formed in the context of its mission to contribute to the stability of the financial system, as well as effectively regulate financial service providers and markets.
The guidance notes that CBI has observed a trend of insurance and reinsurance undertakings entering arrangements for the use of separate legal entities (service providers) to provide extensive staffing.
CBI states its concerns about the potential of these staffing arrangements, if ineffectively managed, to jeopardise the operational resilience of the undertakings it regulates.
Therefore, CBI requires such staffing arrangements to implement proper, robust risk management and appropriate governance, including compliance risk, due diligence, operational resilience, regulatory reporting and business continuity planning.
However, CBI declares that this guidance does not apply to captive insurance and reinsurance undertakings, nor captive management companies, “due to the specificity of the captive reinsurance model”.
The bank recognises that captive undertakings greatly vary between one another; therefore, “the specificities of each arrangement should be taken into account in an undertaking’s assessment of the appropriate measures needed to align with CBI’s expectations as set out in [the] guidance.”
CBI notes that captive companies are still expected to be able to clearly demonstrate and evidence the justification for their approach, and receive appropriate approval from the board.
