In­sur­ance in­dus­try losses ‘sig­nif­i­cant’

Struc­tural changes mean losses for Ir­ish mar­ket de­spite low eco­nomic risk

The Irish Times - - Business + Your Money - FIONA REDDAN

Ire­land’s in­sur­ance in­dus­try is likely to record “rel­a­tively sig­nif­i­cant” losses in 2017 Stan­dard & Poor’s said yes­ter­day in a new re­view of the sec­tor.

Ac­cord­ing to the rat­ing agency, while it is still too early to as­sess the in­sured losses at­trib­ut­able to Storm Ophe­lia, it be­lieves that losses to the in­sur­ance and rein­sur­ance mar­ket will nonethe­less be “rel­a­tively sig­nif­i­cant” for 2017. It is fore­cast­ing a mar­ket av­er­age com­bined ra­tio of about 105 per cent in 2017-2019 (a ra­tio of greater than 100 per cent sig­ni­fies an un­der­writ­ing loss).

S&P ex­pects that fu­ture sec­tor prof­itabil­ity is likely to re­main con­strained by a num­ber of fac­tors, in­clud­ing the in­crease in court awards from ¤38,000 to ¤60,000, thus height­en­ing claimants’ ex­pec­ta­tions; struc­tural changes in the claims en­vi­ron­ment, such as the in­tro­duc­tion of pe­ri­odic pay­ment or­ders (PPOs); high le­gal costs; a rise in claims fre­quency, as­so­ci­ated with eco­nomic growth; and high ex­pense ra­tios.

“Set­tle­ments are also likely to re­main un­pre­dictable due to struc­tural changes,” the rat­ing agency said.

Not­ing that the claims en­vi­ron­ment had “sta­bilised some­what” dur­ing the first half of 2017 and in 2016, S&P said claims in­fla­tion had con­tin­ued to mod­er­ate from the ex­tremely high lev­els seen in 2014 and 2015, and there had been pos­i­tive trends such as a fall in Ire­land’s crime rates and the fre­quency of dam­age to prop­erty.

On the mo­tor front, S&P said it was “see­ing the ben­e­fits” of an ap­peal re­lated to the Mal­tese-regis­tered Se­tanta In­sur­ance in 2017 fi­nan­cial re­sults – con­cern­ing a de­ci­sion to make in­sur­ers po­ten­tially li­able for claims against Se­tanta In­sur­ance. In­stead, suc­cess­ful claims against Se­tanta will have to be met from the State’s In­sur­ance Com­pen­sa­tion Fund. This means in­sur­ers have been able to re­lease their pro­vi­sions re­lated to Se­tanta.

Last week, FBD said Storm Ophe­lia was set to cost it be­tween ¤4 mil­lion and ¤6 mil­lion, adding that, bar­ring fur­ther in­clement weather, the group was set to hit its fi­nan­cial tar­gets ear­lier than pre­vi­ously in­di­cated.

S&P also ex­pressed a view some­what con­trary to the pre­vail­ing view on the im­pact of the UK’s de­par­ture from the Euro­pean Union. The agency said a weak­ened Lon­don in­sur­ance mar­ket may not ul­ti­mately be in Ire­land’s long-term best in­ter­ests, as Dublin-based in­sur­ance firms have tended to ben­e­fit from their prox­im­ity to the Lon­don mar­ket. The re­port added that there were also “po­ten­tial up­sides”, in that “a sig­nif­i­cant amount of trade” cur­rently based in Lon­don could re­lo­cate.


Last week FBD said that Storm Ophe­lia was set to cost it be­tween €4 mil­lion and €6 mil­lion.

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