to see how well they have achieved their desired outcome. i would hope these plans provide clarity to a board or senior management in terms of where the central bank is coming from and can be part of a “ no surprises ” approach. thirdly, the prism framework includes an important role for risk governance panels. these are challenge and quality assurance forums, chaired by more senior supervisors and involving experienced risk advisers from industry or regulatory backgrounds. i ’ m pleased by how these are working, in terms of providing challenge to supervisory teams, both to be more robust in some cases, but also more proportionate and focused in others. it is, however, important that the central bank is prepared to fine tune and continuously improve our supervisory framework. part of this will mean a continuing investment in staff training and development : our staffing numbers have levelled off ( and indeed will be somewhat lower than we projected necessary a few years ago ), but we know we need to work harder to improve our understanding of business models, market developments and financial analysis, to balance out more established audit and compliance skill sets. we also plan to take stock of prism implementation before too long. good supervision involves a commitment to continuous improvement, keeping up with best practice supervisory techniques and also improving skills and industry knowledge in front line supervisors. the last few years has seen, i believe, a significant upgrading in supervisory approach and capability in ireland. as these are probably my final public remarks on the subject while at the central bank, i would like to comment that while the tide of regulation – that is rule - making – may naturally ebb and flow over the years, it is important to maintain a constant commitment to strong supervision. before i develop that thought, i think it is only appropriate that i recognise the big effort that most management teams and boards of directors have taken to step up and adapt to the significant changes that are happening internationally and here domestically. that ’ s not only the insurance industry – which has put in a lot of effort to prepare for solvency ii – but other firms in other sectors too who have, for example, implemented important strengthening of rules on corporate governance and fitness and probity, and who are now subject to more rigorous supervisory assessment. i recognise that this has involved a lot of work on the part of industry and for the most part we have been pleased by the engagement we see and by the improved standards of compliance that are resulting ; most firms ’ management and boards “ get it ” and realise that, post crisis

a floor at some proportion of the mcr derived under solvency ii, when agreeing the scr output from an internal model. pending active development at a european level of an agreed approach to ensure a level playing field, the central bank ’ s message to irish firms is to take a conservative approach to the recognition of diversification and to think very hard about how well this will hold up in extreme tail event stress scenarios. while the interim guidelines covering models, system of governance and reporting are at the top of eiopa ’ s agenda in terms of standard - setting, the key supervisory issue at the top of the eiopa list of concerns is the impact of long - term low interest rates on the insurance sector. one of the principal instruments deployed by monetary policy authorities in combating the current financial crisis has, of course, been the policy of maintaining low interest rates for a sustained period of time in light of price stability and in order to address economic weakness. however, this has the potential to have adverse side - effects for insurers. of greatest concern to eiopa, and indeed the central bank, is the potential adverse impact on life insurers with long - term guarantees to policyholders which exceed the available yield on assets in current market conditions. we need only look back to the japanese experience of the 1990s to see the severe damage that this can do. however, general insurers are not immune from the side - effects : low yielding investment portfolios expose uncompetitive combined ratios, and therefore put extreme pressure on underwriting performance at the time of continuing soft markets. these considerations have led eiopa to recently publish an opinion setting out its concerns on the prudential implications of a sustained period of low interest rates. this encourages supervisors to take a range of measures to monitor and tackle the potential risks that are bis central bankers ’ speeches building up. this issue is relevant to the irish market, especially because of the concentration of variable annuity writers that are based in ireland and operate internationally. to my mind, the issues for this particular business can be conceptually divided between a front book and a back book problem. for newly written business, it is important that firms are adjusting their product design and improving their risk management capabilities. we are largely seeing this happening already for the irish based va writers. and our regulatory actions in the past few years have had this in mind. for example, the central bank tightened solvency requirements on newly written variable annuity business at