By Tom Carney, Partner at Dillon Eustace
The Irish Government recently launched a strategy document with the twin objectives of creating 10,000 new employment opportunities across Ireland’s international financial services sector and supporting a responsible and proportionate regulatory system for the sector.
Ireland’s “Strategy for the International Financial Services Industry in Ireland 2011-2016” which was launched in late July 2011, emphasizes that the Irish insurance sector has capacity for significant growth.
Historically, since the establishment of the Irish Financial Services Centre, the Irish national and international cross-border insurance sector has experienced dynamic growth, especially in the life assurance market. This growth is attributable to many reasons including the attractiveness of the Irish Financial Services Centre as a hub for international financial commerce. Indeed, Dublin and the Irish Financial Services Centre are the locations of choice for many of the world’s leading insurance and reinsurance providers. Ireland, as an English speaking Members State of the European Union has proved to be a particularly attractive destination for US insurers seeking to access European markets while deriving the benefits of the EU’s framework for passporting of insurance services. Other factors which point to Ireland as a destination of choice include its favourable corporation tax rate, an extensive double taxation treaty network, a highly skilled English speaking workforce, the presence of an array of experienced third party service providers and the ongoing support and commitment of the Irish Government to the sector, most recently echoed in its strategy document for the next five years.
The strategy document focuses on two key objectives: (i) the promotion of Ireland as the European head office location of choice; and (ii) the expansion of existing cross-border life insurance operations and the pioneering of new cross-border life insurance business lines from Ireland.
Undoubtedly, Solvency II will have a significant effect on the insurance industry once implemented in late 2012. The Strategy identifies two opportunities arising from Solvency II. First, post-Solvency II, it will be beneficial to insurers operating a multi-subsidiary structure to change to a head office/branch structure. Secondly, it is anticipated that many non-EU insurers who will be required to adopt equivalent provisions to Solvency II will consider re-domiciling their operations to the EU. Under the Strategy, it is hoped that Ireland’s position as a preferred head office location for cross-border life insurance operations will attract such insurers to its shores.
Additionally, the Strategy retlects that many cross-border life insurers offer a limited selection of products to a limited number of jurisdictions. Under the Strategy, such insurers are to be encouraged to diversify their business-lines so as to take full advantage of the freedom of services regime. Further, the Strategy identifies capital protected products as a potential growth area in which Ireland may have a competitive advantage, having gained the reputation as a leading jurisdiction for the development and distribution of such products in Europe.
The Government aims to ensure its regulatory system maintains at least parity with that of other respected financial services centres in terms of efficiency and effectiveness. Improved efficiency in the regulatory approval of entities in Ireland (including entities re-domiciling to Ireland) is vital if Ireland is to remain as one of the EU’s leading “exporting” jurisdictions.
The Strategy, therefore, is a welcome document for those engaged the insurance and reinsurance industry in Ireland insofar as the Irish Government has illustrated its clear intention to assist growth in the sector in the short to medium term.
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