THERE WERE “spectacular failures of corporate governance” not just in banking but in insurance at home and abroad, according to the head of financial regulation at the Central Bank, Matthew Elderfield.

At the annual lunch of the Irish Insurance Federation yesterday, Mr Elderfield said tougher rules would help to restore the reputation of the State’s financial services.

“Ireland’s reputation as an international financial centre will be even stronger if it can knock on the head the lingering perception that corporate governance is sometimes compromised by concentrated personal business relationships,” he said.

Mr Elderfield has proposed limiting the number of directorships that may be held by board members of banks and insurers and also preventing chief executives from becoming chairs.

These proposals would not only prevent future problems but would provide “tangible, robust and indeed enforceable standards that will stand up to international scrutiny and deny the sceptics of the Irish success story an all too easy line of attack”.

Mr Elderfield said he was surprised at the “thin level” of resources available for supervision in insurance as well as banking after taking up his job in January. He warned that more robust supervision of insurers would “cost more and mean higher fees”.

“We need to ensure that those insurance firms with the biggest inherent risk profile due to their size, complexity or retail involvement have the right level of supervisory cover and engagement.”

Mr Elderfield told insurance executives that the regulator would take “a proportionate approach” to changes expected under the new solvency II rules for insurance firms from 2013.

“The more exacting standards for risk management will require firms to raise their game,” he said.

The scale of the forthcoming changes was “not just a regulatory challenge but a profound commercial one too”.

He believed Ireland could take advantage with organisational changes and attract more non-EU firms to set up Irish operations and more EU companies seeking to centralise their operations.