EU to regulate reinsurer sector

THE European Union has moved to regulate the reinsurance sector following recent scandals that have rocked the industry.

The European Parliament voted yesterday to approve a directive on reinsurance, allowing regulation of the industry for the first time.

The reinsurance sector has come in for criticism worldwide with several major investigations ongoing across the globe, from Australia to the US and even Ireland.

Several commentators have hit out at the lack of regulation of the sector here, claiming Ireland has become a financial “wild west”.

This followed the linking of companies based here to questionable transactions abroad.

Two executives at the Dublin offices of General Re, one of the biggest players in the worldwide reinsurance market, were slammed by the Australian financial services regulator over their dealings with a collapsed insurance firm.

The links between General Re and American International Group are also under scrutiny in a number of countries.

According to internal markets commissioner Charlie McCreevy, the proposed directive will mean that the regulations applying to reinsurance companies in their home markets will be supervised in the other EU countries they operate in.

“The directive will fill a gap in current EU legislation, which does not regulate specialised reinsurers, and give insurance companies greater confidence in seeking the best deal available wherever it is to be found in the EU,” Commissioner McCreevy said.

He added that the directive would also contribute to “reinforcing international financial stability, an issue over which there has been concern in major international fora.”

Over the past number of years Ireland has grown to become one of the world’s largest reinsurance markets, with close to 200 companies based here and annual premiums in excess of €10 billion.

A spokesperson for the financial regulator, IFSRA, said last night that the agency would not tolerate any dealings that did not involve any genuine transfer of risk.