In advance of the EIF, we sat down with Darren Maher, partner and Head of the Financial Institutions Group in Matheson, our main partner for this year’s EIF, and asked him what one piece of advice he would have for our insurance members when it comes to doing business in Ireland?

As legal advisor to many of your insurance members, my one piece of advice is grounded in something I am asked about regularly, and that is advising clients on interactions with the Central Bank of Ireland (“Central Bank”). A good working relationship with the Central Bank is critical to the on-going success of an insurance business in Ireland. The regulatory environment in which insurers operate is increasingly more onerous and it is in the light of this fact that your firm’s relationship with the Central Bank is even more fundamental than it might have been previously.

In my experience, if the Central Bank does not have trust and confidence in a regulated firm, this can understandably lead to an increased level of regulatory engagement which requires senior personnel at the firm to spend a significant amount of time dealing with regulatory queries and requests for information. This can naturally have an impact on productivity and mean that staff have less time available to spend on the implementation and delivery of strategic business initiatives. It can also mean that more time is spent engaging with the Central Bank on requests for regulatory approvals relating to new business initiatives, as the Central Bank needs to be convinced that the appropriate systems and controls and risk and compliance frameworks are in place, and that the firm has the required business acumen to support the new initiative.

In my view, you start as you mean to go on. The foundations of your relationship with the Central Bank start pre-authorisation. If you engage openly from the beginning, you can lay the groundwork for a positive relationship into the future. I am not saying that you don’t question the Central Bank or that the Central Bank is always right, but it is your job as the firm seeking authorisation to come to the table with knowledge of the relevant regulatory requirements and to make a business proposal and application which has this understanding at its core. Naturally, there will be a level of engagement around certain aspects of your application but if you are willing to engage in a positive and reasonable manner, the experience will likely move more smoothly and swiftly. We have all heard anecdotes from unsuccessful applicants about how difficult the authorisation process can be. In my experience, unsuccessful applications usually fail to demonstrate any real understanding of the local regulatory regime and are doomed to fail from the outset.

I am often asked how a firm should approach its relationship with the Central Bank once authorised. Each firm will decide on its own communication strategy with the Central Bank, but there are key points worth bearing in mind:

• an open, honest and transparent relationship is required and will serve the firm best in the long run.At times, as an advisor, it can be difficult to convince people who are familiar with regulatory regimes in other countries that this is the best approach in Ireland, but the earlier regulated firms grasp this point, the better the outcomes they will have.
• seek to engage proactively with the Central Bank in relation to material developments in your business rather than waiting for the Central Bank to raise questions. The Central Bank may not always have the time for a call or a meeting to discuss your new business proposal, but it is better to make the offer and allow the Central Bank to decide whether they want to take the opportunity to engage with you. Keeping the Central Bank informed of your business plans will allow the Central Bank to better understand your business which will in turn assist with the Central Bank’s interpretation of positions your firm takes on certain matters;
• have one designated point of contact within your firm who is included on all correspondence with the Central Bank to ensure that a joined up and consistent approach to communication is taken. It should be that person’s role to ensure that the firm is engaging with the Central Bank on a regular basis, keeping the Central Bank updated on all material developments within the business and responding to any questions received from the Central Bank in a timely manner;

• ensuring all staff and directors prepare thoroughly for their PRISM interviews is particularly important. This will allow those individuals to have an engaged discussion with the Central Bank in relation to the business and to speak to the regulatory framework in which they operate – something which is ever more important given the introduction of the Individual Accountability Framework and the related Senior Executive Accountability Regime.
• timely implementation of new regulatory requirements is critical. The Central Bank must be able to trust regulated firms to act in a professional and responsible manner by keeping up to date with new regulatory requirements and ensuring compliance with them. Failing to engage with new regulatory requirements may save time and money at the outset, but it can lead to very significant regulatory issues in the future, which are usually far more time consuming and expensive than the timely adoption of the requirements would have been;
• monitoring industry and cross-sectoral communications from the Central Bank and taking active, recorded, steps to address issues raised in those communications ensures that when the Central Bank asks the firm to demonstrate compliance, this information is to hand. In recent years, the Central Bank has increased the use of industry communications such as Dear CEO Letters and Feedback Statements to Consultations. These set out what the Central Bank sees as good practices, poor practices and its expectations of regulated firms. These should be examined, and steps taken to comply with the requirements and the expectations of the Central Bank.
• In the particular context of insurance businesses, the Central Bank’s Insurance Quarterly Newsletter and the Intermediary Times are excellent communications which take deep dives into topics which the Central Bank believes warrants attention in the market, and will often flag in advance some of the plans of the relevant supervisory teams on thematic inspections, data requests as well new and updated regulatory proposals. By engaging with these communications, your firm will be able to respond appropriately; and

• meeting filing deadlines and delivering on regulatory requests for data or information in a timely manner demonstrate to the Central Bank that your firm is well run and appropriately resourced.

The combined impact of these actions can lead to a positive working relationship with the Central Bank which is critical to the success of your business and will allow your senior personnel to focus on running your business.