The International Monetary Fund has called on the Government to “enhance” the Central Bank’s independence and said it should address the “significant” challenges the bank faces in attracting and retaining insurance supervisors.

In a lengthy report on the insurance sector, the IMF said the Central Bank had made significant progress in updating the regulatory regime. The Washington-based institution said the impending implementation of a new European solvency directive was expected to address most of the regulatory gaps it noted.

The total number of insurers in the sector declined from 307 in 2009 to 234 in mid-2014, but total assets held by Irish re-insurers increased to €210.7 billion at end-2013 from €139.5 billion in 2008.

Although the IMF said there was no evidence of political and commercial interference over the Central Bank’s operational autonomy, it found the legal framework for the bank’s governance arrangements “may potentially introduce political considerations” that could have implications for its independence.

“Effective supervision hinges on adequate supervisory resources of the right calibre and it is critical that [the Central Bank] builds on its current technical capacity to conduct quality supervision and to continue its enhanced supervisory approach introduced in 2011,” the IMF said.

The fund said the bank’s statutory independence could be enhanced by:

Reconsidering the composition of the Cental Bank Commission, which oversees its work;

Examining the role of the Minister of Finance in approving the appointment of deputy governors;

Providing more clarity on the grounds for the dismissal of a commissioner;

Setting down legal obligations on public disclosure of the reasons of the removal of a governor or commissioners;

Reviewing the Minister’s statutory power relating to the Central Bank’s regulatory functions, including the extent of consultation for rule-making and approval for industry levy structure.

The IMF also said emergency laws to cut public pay after the crash had left the Central Bank with a staffing problem in insurance regulation.

“The turnover rates for insurance supervisors in CBI have been high by international standards, largely due to its unattractive remuneration package compared with the market, compounded by the constraints imposed under Financial Emergency Measures in the Public Interest Acts of 2009 and 2013, which are expected to end in 2016,” the IMF said.

While it said the probability risk impact supervisory system (Prism) has significantly improved supervision of insurers with high/medium high impact ratings, it advised the Central Bank to review the supervisory risk appetite underpinning Prism. This included a review of potential reputational risks.