The Central Bank of Ireland (“CBI“) has just published its insurance newsletter (1,361 KB) for March 2025.

Regulatory & Supervisory Outlook Report 2025

The CBI indicates that it expects this year to be a “year of dialogue” on its new supervisory approach, indicating that whilst some elements of supervision may change, the broad approach will continue to be risk-based and proportionate. See our previous article on the CBI’s Regulatory and Supervisory Outlook Report 2025 for further details on the key risks for (re)insurers identified by the CBI for 2025.

Asset Intensive Reinsurance (“AIR”)

The CBI notes the increasing use of AIR (i.e. reinsurance arrangements which involve the transfer of significant investment risks in relation to asset-intensive insurance products) in the insurance sector. While AIR can be an efficient tool for insurers to manage their risks and capital, it can create or increase other risks, such as recapture risk or counterparty default risk.

Counterparty default risk is frequently mitigated by Irish (re)insurers by the use of collateral arrangements, with the majority of reinsurance or retrocession by Irish firms being backed by collateral. However, if the ceding entity does not have sufficient control how the assets backing the reinsured liabilities are invested, there is a risk that the reinsurer may not adhere to the prudent person principle and might invest in lower quality or less liquid investments, or assets which are difficult to value or are not publicly traded. If the reinsurer defaults and the cedant is forced to take back the reinsured liabilities, this will give rise to recapture risk, particularly if the collateral recovered is insufficient to cover the recaptured liabilities.

Interestingly, the CBI notes that the vast majority of life reinsurance from Irish (re)insurers is with counterparties outside the EEA (in particular, to the UK and Bermuda), with Ireland accounting for a large share of outgoing life reinsurance from the EU to non-EU jurisdictions. In addition, around 90% of such life (re)insurance from Irish (re)insurers are intragroup arrangements. The CBI notes that (re)insurers should take a case-by-case approach to considering whether intragroup arrangements meet the prudent person principle (as per its Guidance for (Re)insurance Undertakings on Intragroup Transactions and Exposures) and should avoid excess concentration of assets in any one class or counterparty, especially if that asset is illiquid.

Firms are encouraged to engage with the CBI early when planning to enter into material or complex reinsurance arrangements and are reminded that, if such arrangements are material, they will require pre-notification to the CBI as a material change of business.

Following on the from the recent global regulatory focus on AIR (for example, the PRA supervisory statement on funded reinsurance from November 2024 and the recent IAIS consultation on the draft issues paper on structural shifts in the life insurance sector), the CBI is indicates that this is an area which it is monitoring. In April 2025, the CBI will issue a data request to a sample of less than 20 life (re)insurance firms in Ireland. The focus of the request will be to assess the materiality of AIR, the extent to which it is collateralised and how collateral is invested and monitored, as well as the impact of counterparty risk and the actions available to mitigate that risk.

New Consumer Protection Regulations

The CBI also highlights the publication of the Consumer Protection Regulations (see our previous article on the impact of the Consumer Protection Regulations on insurance for more details).