Speech by Dr Paul Ryan
European Insurance Forum: 25th May 2017 - Croke Park
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Thank you Kevin for the welcome and introduction.
Good morning ladies and gentlemen, I am very pleased to be present this morning to represent the Minister of State for Financial Services Eoghan Murphy at the opening of EIF 2017 in the very impressive surroundings of Croke Park.
Unfortunately Minister Murphy was unable to be here this morning and he sends his apologies to you the attendees of the Forum but also to the organisers, Insurance Ireland, and the speakers through the day. He was very much looking forward to opening the Forum and getting to meet some of you because of the significance of the event, but also the very important theme of “Change the Game”.
As many of you may be aware, Minister Murphy has also had considerable engagement with the Insurance Sector, both from a domestic and international perspective, and he is fully aware of the importance of this financial service to Ireland’s financial services ecosystem as a whole in terms of economic activity and employment, direct and indirect.
I would now like make some remarks on IFS2020 which is the Government’s Strategy for Ireland's International Financial. Specifically, how IFS2020 links to the EIF 2017 theme of “Change the Game”.
The Government launched the International Financial Services 2020 Strategy (IFS2020) in 2015 to address the ever-changing and increasingly competitive environment for international financial services.
The IFS2020 Strategy takes a ‘whole-of-Government’ approach with significant input from industry to driving the development of Ireland’s international financial services sector. The Strategy embraces all Government Departments and State Agencies with Quarterly sign-off and reporting to the Cabinet and the Taoiseach/Prime Minister. Significantly, IFS2020 is developed and implemented jointly between the public sector and industry – no one sector ‘owns’ the Strategy – instead, it belongs to everyone involved in Ireland’s international financial services sector from the Government to Departments/Agencies, industry representative bodies and, of course, individual businesses. I am pleases to say that the insurance sector in its widest sense plays a key role in IFS2020.
In terms of vision, the Strategy highlights that we want Ireland to be recognised as a global location of choice for specialised international financial services. This builds on our strengths in talent, technology, innovation and excellent client service, while focusing on capturing on new opportunities in a changing market and embracing the highest forms of governance.
The key aim of IFS2020 is to increase the numbers employed in international financial services by 30% or 10,000 net new jobs over the five years of the Strategy from 2015 to 2020. I am pleased to say that by end-2016 we have already seen a 13% increase in those employed with significant levels of economic activity since the Strategy was launched. Ireland is currently the 5th largest centre for IFS in the EU – after London, Paris, Frankfurt and Luxembourg. However, we want to be bigger and this is achievable!
Clearly the Strategy was devised long before Brexit, but because it is underpinned by annual Action Plans it is designed to allow for flexibility so it can react to changes in the international environment such as Brexit, Trump Presidency, etc.
In May of 2016, as part of the new incoming Government Minister Eoghan Murphy appointed Minister for Financial Services. In this role, he leads IFS2020 Strategy and Chairs the various Committee charged with developing, implementing and overseeing IFS20202 and specifically the annual Action Plans. The appointment was important because for the first time, there is a Minister for specific sole responsibility for international financial services – previous incumbents (Simon Harris and Brian Hayes) held responsibility for the OPW as well as MOS in the Dept of Finance and sister Dept of Public Expenditure & Reform.
MOS Murphy has a role across the Dept. of Finance and Dept. of Public Expenditure & Reform similar to predecessors but responsibilities for Financial Services is unique and a sea-change for international financial services. He also has a very specific role in relation to insurance.
At the same time, responsibility for IFS2020 and the underlying structures, including supporting M/Murphy moved from the D/Taoiseach to D/Finance. This was an important move because for the first time the development and implementation of IFS Strategy is linked to policy development, domestically & EU, on the complete range of financial services: banking, insurance, funds, payments, etc.
Clearly the main focus of work on IFS2020 since last May has been the potential impact of Brexit on IFS: how to address the challenges and how to benefit from the opportunities. One of the Government’s four priorities for Brexit has been to minimise the impact on trade and the economy – IFS fits into this space. In December of 2016, an IFS2020 Brexit Strategy was developed and subsequently approved by the Government’s Cabinet Committee on Brexit. This was subsequently launched in the context of the 2nd European Financial Forum in Dublin Castle on 24th of January 2017 by Minister Murphy.
Action Plan 2017
In January Minister Murphy launched the IFS2020 Action Plan for 2017, this Action Plan is the first since the UK’s vote to leave the European Union and although IFS2020 is not a Brexit strategy in itself, Brexit underpins the strategy and features in a number of specific measures. The Action Plan is divided into two distinctive components. The first part is a contextual piece with a strong focus on Brexit and how we approach the challenges from an IFS perspective. This part also highlights the importance of communications between government and industry and the continued promotion of the IFS Ireland brand and Team Ireland identity.
The second part outlines the 40 individual actions that are to be implemented in 2017 and the agencies, departments and organisations responsible for their delivery. Each of the measures is linked to one of the four strategic priorities of IFS2020.
The 2017 Action Plan is a clear framework to maximise opportunities that may arise in the international financial services sector from Brexit. The plan is fully integrated into the wider cross-Government Brexit contingency planning that deals with challenges and opportunities facing IFS, especially ensuring that our offering remains competitive for firms looking to locate here from the UK and those who are currently based outside Europe but seeking an EU location.
IFS2020 is a dynamic and evolving strategy and the structures provide the toolkit to react to domestic and international challenges and opportunities that will arise over the coming months and years.
There has been significant international outreach by Government and State Agencies with the help of industry organisations and individual businesses over the past twelve months. A key part of the IFS2020 Strategy has been a focus on ensuring effective messaging of Ireland’s financial services offering. In January 2016, the IFS Ireland Banner Brand and accompanying website IFSIreland were launched. The Brand is designed for use by both private and public sector stakeholders when promoting Ireland overseas. We are now able to go out into the market with a single Team Ireland identity, under a single banner brand – a brand that stands for innovation and specialisation.
Upon the appointment of Minister Murphy he established a Communications Subgroup as part of the implementation framework. This group works on the continued coordination of messaging and promotional material in order to ensure Ireland’s financial services sector is presented in the best way possible globally.
Minister Murphy has travelled extensively to promote Ireland’s IFS offering. In late-2016 he launched the IFS Ireland brand in key markets such as China, Singapore, Japan, UK and the US. As part of these visits he met with both IDA and Enterprise Ireland client firms and also with government officials, state agencies, regulators, the media and think thanks.
One area we have been keen to highlight through engagement with IFS firms is that Ireland’s IFS sector is not just a Dublin-based industry, although it began in Dublin’s docklands in the late 1980s it is now nationwide in 2017. In fact 30% of the people employed in the sector in Ireland are based outside of Dublin in our regional towns and cities and this is a percentage we are keen to see increase towards a target of 50%. Firms based in our regional locations report greater staff retention and lower operating costs as key reasons for locating outside Dublin and given the international accessibility we enjoy through Cork, Shannon and Dublin airports our regional centres have good access to the global financial centres such as London and New York.
From an insurance perspective we are pleased to see the likes of AIG in Cork, MetLife in Galway and Zurich in Wexford and as part of IFS2020 we will hopefully see more insurance firms opting for our regional cities.
Education and Skills Measures
IFS2020 also places a strong emphasis on education and improving Ireland’s offering in terms of skills and talent. One education measure that I should note here today is the insurance apprenticeships offered by the Insurance Institute of Ireland. The apprenticeship is a ‘earn and learn’ style programme whereby successful applicants both earn a salary while working towards a level 8 degree over three years and is designed as a method to attract new entrants into an industry who may not have considered it before.
As part of IFS2020 we have also seen the development of apprenticeships across other subsectors of financial services such as accounting, FinTech, and data analytics in addition to insurance. These apprenticeships are designed for a broad range of applicants from school leavers to those looking for a career change.
Diversity and Inclusion
A second area that we decided to incorporate into IFS2020 for 2017 is the area of diversity and inclusion. I must commend Insurance Ireland on their “Year of Inclusion” for 2017. We have now committed to providing quarterly updates on the promotion of diversity measures across the sector in the strategy’s quarterly progress reports for 2017. Insurance Ireland’s commitment to a year of inclusion for 2017 is the kind of leadership in this area we are looking to see from across financial services and I hope to see other representative bodies dedicating the time and resources to promoting diverse and inclusive working environments.
In January Minister Murphy hosted the European Financial Forum in Dublin Castle, which is a key deliverable as part of the Strategy. The 2017 event was the second EFF and built upon the success of the inaugural forum in January of 2016. The 2017 forum was attended by approximately 650 delegates, representing over 300 organisations from around the world.
Keynote speakers included Jin Liqun (President of the Asia Infrastructure Investment Bank), Phillip Hildebrand (Vice-Chairman of Blackrock) and Noreen Doyle (Vice-Chair of the Board of Directors of Credit Suisse), to name just a few.
Given the significant continued success of the forum I am pleased to confirm the European Financial Forum 2018 will return to Dublin Castle on the 31 January 2018. Although still a growing event the European Financial Forum has gone from strength to strength since the inaugural 2016 and we are sure the event will continue to be a success and become a flagship event in the international financial services calendar and I hope to see some of you in Dublin Castle next January. We hope to develop more parallel sessions and are keen to discuss potential topics for these sessions and, of course, the Forum itself with industry including the insurance sector.
I would like to take the opportunity this morning to update you on the position in relation to Setanta Insurance Company (in Liquidation). Setanta Insurance was placed into liquidation by the Malta Financial Services Authority in April 2014 and this liquidation is being carried out under Maltese law.
Progress in the liquidation to date has been delayed due to court proceedings in the case of Law Society of Ireland v the Motor Insurers' Bureau of Ireland (MIBI). The focus of the court action is to determine whether it is the Insurance Compensation Fund (ICF) or the MIBI which is responsible for the payment of third party claims.
The Supreme Court heard the case in October 2016 and the judgment is due to be delivered later this morning.
It does not make sense to speculate on the outcome of the judgement at this late stage, as most people here today on whom it will impact are aware of the consequences of whatever decision is made. However, wherever the responsibility for meeting the Setanta third party claims falls, it is imperative that every effort is made to ensure that payment is made as quickly as possible. It is however recognised that because of the complex nature of this issue and the fact that due process needs to be followed including fully verifying the claims, some cases will take additional time to conclude.
It is also appreciated that going forward industry are seeking certainty about the extent of any future exposure they may have in the event of another motor insurer insolvency. The Minister for Finance is conscious of this and has indicated a willingness to address this issue in the proposed insurance compensation fund legislation which is currently being prepared.
Solvency II Directive:
The Solvency II Directive, which has been transposed into Irish law and came into effect on 1st January 2016, represents a substantial overhaul of European insurance regulation. This framework puts in place a stronger EU-wide requirements on capital adequacy and risk management for insurers with the key aims of increasing policyholder protection and better ensuring the financial soundness of insurance undertakings over time.
The Solvency II regime presents challenges to the insurance industry but I am aware that industry here have been well prepared for some time and are responding positively to them. These challenges include the change of emphasis of the regulatory regime to a system more focused on risk management including the need for firms to define their own risk profile, the need to appropriately implement key functions, and the increased reporting requirements.
The end result of improving risk management, developing sustainable business models and more consistent supervisory approaches across Member States should benefit all stakeholders over time. Based on the indications available as at March 2017, the first full year of Solvency II application has been largely successful in contributing to the financial stability and integration objective of the European Union.
As you will be aware, the review of the Solvency II regime is now underway and is due to be completed by 2021. The review of the Solvency Capital Requirement (SCR) standard formula, the first phase of the overall review, has commenced and this should be completed by the European Commission before December 2018. The objective of the review process in the context of the SCR standard formula is to achieve a proportionate and technically robust, risk-sensitive and consistent supervisory regime for the insurance sector. EIOPA, which has until February 2018 to provide its technical advice to the Commission, is particularly interested in proposals to ensure greater simplicity and proportionality whilst reflecting the risk-sensitivity of the system and avoiding pro-cyclicality. EIOPA has not proposed policy options but these will be addressed during roundtable discussions with relevant stakeholders organised in the course of 2017.
The Department of Finance continues to liaise with both the Central Bank and the insurance industry with regards to the impact and implementation of the transposed Directive.
I’d like to conclude by once again in thanking you for the opportunity to speak here today and I hope I have given you a flavour of the ongoing work and commitment Minister of State Murphy and the Government has in terms of promoting Ireland as a location for continued high quality financial services investment. It only remains for me to wish you all the very best for the remainder of the day and I hope that it is a very useful and productive event for all participants.
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