philip r lane : dual perspectives on the insurance sector – consumer protection and financial stability address by mr philip r lane, governor of the central bank of ireland, at insurance europe ’ s 8th annual conference, dublin, 25 may 2016. * * * acknowledgements : i thank allan kearns for his input into this speech. good morning. i am pleased to welcome you to dublin for the 8th insurance europe conference. this event also marks the 30th anniversary of the insurance ireland industry association. the theme of today ’ s conference is serving our customer in tomorrow ’ s world. as the regulator of the insurance sector, the central bank of ireland is continuously engaged with the topics to be discussed in today ’ s panel sessions. in addition, from a central banking perspective, the high degree of interconnectedness between the insurance sector and other parts of the european financial system means that we also monitor the insurance sector in relation to our financial stability mandate at both domestic and european levels. let me share a few ideas in relation to the themes of the conference. the first panel addresses the impact of the regulatory environment on consumers. a wellfunctioning insurance sector is essential in managing the risks faced by households and firms. the importance of the insurance sector to european citizens has motivated the introduction of a modernised regulatory framework in the form of solvency ii, with the twin goals of enhancing consumer protection and maintaining financial stability. an important property of solvency ii is that it is a maximum harmonisation regime, and so should increase supervisory convergence across europe. in view of the high degree of cross - border trade in insurance products, the central bank of ireland strongly supports convergence in supervisory standards, which would contribute in a significant way to the long - term resilience of the financial system in ireland and europe. most of the policyholders of irish - resident insurance firms are abroad ; in the other direction, many irish policyholders are covered by foreign european firms. regardless of location, all customers should benefit from the same high standards of supervision and should all rest assured that their underwriters are unlikely to fail. however, much work remains to be completed in attaining the goal of consistent supervisory standards across europe. furthermore, the coordination of national protection schemes for policyholders remains unsatisfactory : should an insurance firm fail, citizens are covered in full, in part or not at all, depending on where they are and where their insurers are regulated. solvency ii has also left untouched the processes, conditions and standards for author

was introduced to provide authorities with a regulatory toolkit to manage bank failure, with the objectives of ensuring the continuity of critical economic functions, minimising the impact on the economy and financial system, avoiding the destabilisation of financial markets and limiting the cost to taxpayers. resolution is therefore fundamentally a financial stability issue. the brrd has also importantly changed how we supervise banks. resolution authorities have the primary responsibility for resolution planning and execution. nonetheless, supervisors should be actively considering the resolvability of a firm, alongside financial resources ( for example, supervisors review institutions ’ internal capital and liquidity adequacy assessment processes ), business model sustainability and governance, culture and risk management. ultimately, whether a firm can be resolved should be reflected in our supervisory risk appetite. the supervisor is consulted on resolution plans, prepared by resolution authorities, which gives us a deeper knowledge on legal structure, critical functions, internal and external interdependencies ( i. e. essential services etc ), it systems, access to financial market infrastructures, preferred resolution strategies, and separability to name just some of the contents. moreover, supervisors should be actively working with resolution authorities to address impediments to resolvability. this is not without its challenges, but if a bank is only surviving because it is not resolvable, it is not viable, and requires appropriate supervisory intervention supervisors now also review recovery plans, prepared by banks which map out what they will do if they get into difficulty. we now assess detailed recovery options, scope and timelines for action for each bank. 12 we have financial impact assessments and feasibility assessments which include financial, operational, reputational, legal and business model risks, as well as a consideration of a 4 / 7 bis central bankers'speeches much wider range of factors. plans are required to include the assumptions underlying effects, governance and implementation, impact on critical shared services, critical functions and core business lines, impact on stakeholders and systemic consequences, communications plans, and preparatory measures. last year, ecb banking supervision undertook a review of recovery plans to learn from best practice and experience to help further shape operational success of plans going forward. whilst much has been achieved, there is still considerable room for improvement in terms of feasibility, credibility and options for recovery. this new eu recovery and resolution framework is not a panacea. it remains a work in progress. but important work in progress. much work therefore remains to be done to ensure financial stability going