Recent guidance by the Central Bank of Ireland (CBI) has clarified the regulator’s expectations of insurers and reinsurers that use outsourcing as part of their business models.

Outsourcing is common practice for Irish insurers and reinsurers, and it is very rare to encounter a firm that does not rely on at least one outsourcing arrangement. Reasons for outsourcing vary and include, for example, economies of scale and accessing new insurance related technology.

The CBI guidance (73-page / 1.4MB PDF), published in December 2021, applies to Irish head officed insurers and reinsurers that use outsourcing as a part of their business model. References to “insurers” in this article should be read as referring to insurers and reinsurers. The need for insurers to identify and manage outsourcing risk that has the potential to influence or to threaten their operational resilience forms the basis for the CBI introducing the guidance. While mainly applicable to critical or important outsourcing arrangements, certain requirements (e.g., maintaining an outsourcing register) apply to any outsourcing arrangement.

Irish insurers are already subject to the rigours of complying with the outsourcing requirements of the EU’s Solvency II Directive. The CBI now expects them to consider the guidance as supplemental to those requirements, describing it as “a guide to good practice with regard to outsourcing”. Where the Solvency II outsourcing requirements and guidance are less prescriptive or...

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