Central Bank changes to Ireland's corporate governance standards are designed to 'fill a gaping hole in the Irish regulatory framework', according to Financial Regulator Matthew Elderfield.
In an address to the European Insurance Forum, Mr Elderfield said reports into Ireland's financial crisis had identified a number 'fundamental gaps' in the basic regulatory infrastructure across all sectors.
These included an absence of effective standards for corporate governance and also weaknesses in how the Central Bank is resourced and organised for front line supervision.
Mr Elderfield said the Central Bank approach was aimed at 'encouraging more focus on governance and broadening the gene pool of Irish corporate life by bringing more diversity and experience onto boards'.
This would require 'substantial changes' for some companies, he said.
Mr Elderfield said that international insurance market was continuing to experience soft pricing conditions, and that the 'relative stability of the Irish-based sector in such a difficult environment is notable and reflects positively on the attractions of Ireland as a financial centre'.
Mr Elderfield warned that while there were lessons to be learned from the banking crisis for regulating the insurance industry, the banking 'rule book shouldn't be Xeroxed wholesale onto insurance'.
He warned that Ireland's reputation as a financial centre 'would take a very serious blow if the problems in the banking sector were to manifest themselves elsewhere'.
Mr Elderfield said that the Central Bank was currently engaging in a consultation process about fitness and probity standards to close a 'glaring gap' in the regulatory framework in Ireland.
He said that domestic firms with large retail sales forces would want to think carefully about the proposals.
Mr Elderfield also outlined increases in Central Bank staffing numbers, which he said was under resourced.
The overall size of the regulatory staff will approximately double from when he took up his position to the end of next year.
The number of insurance staff will increase from 42 at the end of 2009 to a target of 113 at the end of 2011.
The Central Bank actuarial capacity has increased from four qualified actuaries and three trainees at the end of 2009 to seven qualified actuaries and four trainees currently, and by the end of the year the Bank plans to have eight qualified actuaries and seven trainees.
He also announced a number of other specialist supervision groups, and the creation of a dedicated post of director of insurance supervision.
Mr Elderfield spoke about the variable annuity sector; he said that Ireland had developed into a centre VA business.
He said that he had a list of 12 insurance companies which had suffered significant VA losses and required billions of euro of recapitalisation.
'A sense of tact inhibits me from reading out the list of companies, but they are very prominent ones and are firms which on the face of it would for the most part otherwise be considered well managed,' Mr Elderfield warned.
Mr Elderfield said that Central Bank regulators would be working with EU regulators to conduct joint inspections of VA business.
Dealing with European regulation, Mr Elderfield said that two very big developments were the creation of EIOPA - the European Insurance and Occupational Pension Authority - and the introduction of Solvency II regulatory requirements for insurance firms.
The formation of EIOPA was potentially a 'game changer' for European insurance regulation, Mr Elderfield said, and shouldn't be considered an incremental step up from its predecessor body, CEIOPS, but a significant new regulatory authority with its own identity.
The Solvency II standards should be considered an important and welcome innovation in international insurance solvency standards, providing a more risk-based and market consistent approach to assessing the solvency requirements of insurance companies.
Mr Elderfield said that he believed that overall 'the trend will be towards more rigorous solvency requirements'.
He said non-traditional activities at insurance companies 'can indeed pose profound systemic risks and need to have a heavy weighting'.
'I think these especially need to include OTC derivatives activities (properly measured, where there are some important nuances to be tackled) and financial guarantee activities.'
He said that inter-connectedness was a difficult issue to tackle, and that there was interconnectedness between the insurance sector and the banking industry 'through, for example, investment in bank debt and equity by insurers'.
