The Central Bank of Ireland regulates the solvency of Irish life companies.  Life companies who operate as a branch of a foreign life company are regulated by the authorities in that life company’s home State. Standard Life operates here as a branch of Standard Life in the UK, whose solvency is regulated by the FCA in the UK. The solvency of all life companies in the EU is regulated according to a common set of EU rules and regulations. There are a number of layers of protection in place in terms of the money that insurers must set aside to be able to meet liabilities to policyholders.

When an Insurer issues a life policy it creates both an asset – the premium payable and a liability – the potential pay-out on death.

The life company works out the size of its liability to the policyholder, taking account of any surrender value it would need to pay, any death or other protection claims it would need to pay, the expenses it would incur in servicing the policy, any guarantees that it has made and any other relevant factors.

Regulations, supplemented by mandatory actuarial requirements, mean that the amount to be set aside must be calculated on a prudent basis. This means that life companies cannot just set aside their best estimate of what the liability to policyholders will be, but must add in additional amounts in respect of prudence.

EU legislation sets out additional requirements for life insurers to hold a Required Minimum Solvency Margin (RMSM). Life companies must at all times hold additional assets at least equal to the value of the RMSM.

The Central Bank in Ireland requires that the additional assets held by Irish insurers must exceed 150% of the calculated RMSM (for new insurers this requirement is increased to 200% for the first three years of operation).

Insurers’ capital position is closely and regularly monitored by its board of directors and its Appointed Actuary. Life companies established in the State must submit reports setting out details of their solvency position to the Central Bank on a quarterly basis, with very detailed returns on an annual basis.