Following the United Kingdom’s decision to leave the EU and the subsequent triggering of article 50 of the Treaty on European Union, many financial services companies have established or are in the process of establishing a subsidiary in a country with access to the single market to mitigate the potential loss of passporting rights post-transition period (which has been agreed to be December 2020). Ireland’s well-established prudential regulation, common law jurisdiction, and well-educated, English-speaking and flexible workforce, together with its close proximity to the United Kingdom has cemented its status as a thriving hub for the insurance industry. Authorisation-related activity since the Brexit vote has continued to increase, including queries regarding insurance authorisations. It is anticipated that the increase in authorisation-related activity will continue.
Insurance Distribution (Recast) Directive
The European Union (Insurance Distribution) Regulations 2018 transposed the Insurance Distribution (Recast) Directive (IDD) into Irish law on 1 October 2018. The IDD creates a minimum legislative framework for the distribution of insurance and reinsurance products within the EU, and aims to facilitate market integration and enhance consumer protection. Notably, the IDD brings all insurance distributors within the scope of a regulatory framework, which may result in increased regulatory investigations and disputes.
Emerging technologies and risks
Drones are an emerging and rapidly developing technology, and new legislation is proposed in Ireland to increase existing drone regulation and impose criminal liability for certain drone offences. The draft bill (the Small Unmanned Aircraft (Drones) Bill 2017) imposes an obligation on commercial drone operators to have insurance for any liability arising from drone operation, including potential collision with persons or property, and it will be a criminal offence to operate a drone for commercial use without insurance. There is no clear timeline for the implementation of this bill. As the market continues to grow, it seems inevitable that drone insurance will be a growth area.
Driverless cars and autonomous vehicles present particular challenges for the motor insurance industry. The existing Irish legislative framework is driver-centred and will need to be updated to facilitate driverless cars on Irish roads. The United Kingdom has introduced a single insurer model under the Automated and Electric Vehicles Act 2018, where both driver and driverless technology are insured under one policy. While this has not yet been considered by the Irish legislature in any meaningful way, it can be anticipated that the legislature is likely to follow the approach taken in the United Kingdom, given the similarities between the existing road traffic frameworks in both countries.
The market for cyber insurance is growing and is seen as one of the biggest growth areas in the insurance industry globally. According to industry data, the global cyber market was estimated to be worth around US$4.3 billion in premiums in 2017. Fitch believes cyber insurance premiums could increase to US$20 billion by 2020. Cyber insurance is still a relatively new product on the Irish market. However, it has become more popular in recent times and a number of insurers are now offering cyber products in Ireland as a result. Cybersecurity has become a board issue in 2018 in light of the introduction of the GDPR and the Directive on the Security of Network and Information Systems, meaning that companies are more focused on cyber risks and potential insurance requirements. In addition, there has been an increasing number of cyber attacks in Ireland in recent years and the Irish government’s National Risk Assessment 2018 states that this increase is in part owing to the sophistication of tools for carrying out cyber attacks. It is expected that cyber will be a growth area in Ireland in the coming years. In our view, the market leaders over the next five years will be those insurance companies that branch away from the traditional insurance business model towards a more technology-friendly operating model. In today’s digital economy, consumers want instant access to relevant and simplified information and this extends to complex insurance products. Embracing the benefits that technological advances can offer to the design and distribution of innovative insurance products will enable progressive companies to meet the needs and expectations of consumers in a more effective and efficient manner.
Developments related to third-party funding of litigation
In May 2017, the Irish Supreme Court confirmed in Persona Digital Telephony Ltd & Another v Minister for Public Enterprise  IESC 27 that third-party funding of litigation is unlawful, and indicated that any changes to the law in this regard in Ireland would be a matter for the legislature, not the courts. In July 2018, in the case of SPV OSUS Limited v HSBC Institutional Trust Services (Ireland) Limited & Ors, which concerned the legality of an assignment of a cause of action, the Irish Supreme Court called upon the Irish legislature to urgently reform the area and introduce rules surrounding the third-party funding of litigation, failing which the Supreme Court itself may intervene.
The Irish High Court has previously made clear that after-the-event insurance is valid; therefore, post-Persona Digital and SPV OSUS Limited, ATE insurance is the only valid third-party funding in this jurisdiction.
Representative actions in consumer litigation
The European Commission has published a draft Directive that proposes a new type of European-wide collective redress mechanism for consumers. This would allow a ‘qualified entity’ to take a representative action before a member state court, on behalf of a group of consumers who have been affected by a breach of consumer protection laws, to seek redress for the affected group. This would increase litigation risk for industry sectors that are subject to EU regulation, including insurers. The draft Directive will require further consultation in the European Parliament and the European Council and is likely to be amended before publication in the Official Journal. It is anticipated that it will be adopted before the next EU Parliament elections, scheduled for May 2019.
Back to top