Insurers in threat to quit ‘flawed’ Irish market

Insurance companies repeatedly warned senior government ministers that they could withdraw from the “flawed” Irish market while premiums continued to soar.

Individual insurers and representative bodies such as Insurance Ireland warned Michael Noonan, the finance minister, at the end of 2015 and the beginning of last year that insurers could decide to leave the Irish market after a series of what they deemed to be adverse events.

Motor premiums fell by 8.4 per cent in the first five months of this year but have risen by 57 per cent in the past four years while the cost of health insurance has also risen significantly.

Insurers cited increased claims costs, the prevalence of fraudulent claims and initial court rulings relating to the collapse of Setanta Insurance as reasons for their potential withdrawal. Such a move would reduce competition, limiting choices and leading to higher prices for consumers, and result in job losses at the insurance companies.

The liquidator of Setanta Insurance, a Maltese-registered insurer which sold policies exclusively in Ireland, determined that the cost of claims could run to about €90 million. Court rulings had meant that the bill for 1,649 outstanding Setanta claims was due to be settled by the industry through the Motor Insurers’ Bureau of Ireland (MIBI), which is funded by insurers. This was overturned by the Supreme Court last month but an Insurance Ireland spokesman said many of the issues highlighted by the industry in 2015 still existed.

“Volatility still remains in the market through the current level of awards, the associated settlement costs and the inconsistency of award payments. Until progress is made in these areas, the market will be viewed cautiously by existing and potential new entrants,” he said. In a meeting with the minister in October 2015, John Quinlan, who was the managing director of Aviva Ireland’s general insurance business and is now its chief executive in Ireland, told Mr Noonan that while “unthinkable a number of years ago, Aviva could see a situation where a large insurer leaves the Irish market due to the structure of the market”.

The following month, Ciarán Phelan, chief executive of the Irish Brokers Association, which represents more than 480 insurance intermediaries in Ireland, told Mr Noonan that the government needed “to fully appreciate the difficulties in the market” and act to protect the country’s reputation.

He said the government had a responsibility to “ensure international insurers see Ireland as a safe, stable and worthwhile place to invest their capital”. There were “serious flaws” in the Irish insurance market that required immediate action, particularly in relation to motor insurance, he added. The chief executives of all the main insurers in the Irish market including Allianz, Aviva, Axa, FBD, Liberty Insurance, RSA Insurance and Zurich met Mr Noonan and Paschal Donohoe, the transport minister at the time, in December 2015, with representatives from Insurance Ireland. According to minutes of the meeting, seen by The Times, they outlined concerns including a belief that other jurisdictions were “more efficient and more attractive” for insurers and that the initial Setanta ruling which held MIBI liable was causing embarrassment to “those who go out and sell Ireland”.

Michael McGrath, the Fianna Fáil finance spokesman, described the revelation that insurers had threatened to withdraw from the market as “deeply worrying”.

In a subsequent meeting in January 2016 Insurance Ireland representatives warned government officials that insurers “could stop writing business over the next 24 months unless action was taken”, documents show.

A spokesman for the Department of Finance said that a cost-of-insurance working group was established to introduce greater stability into the pricing of motor insurance and prevent market volatility.

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