Regulation and tight labour market hurting State’s attractiveness for insurers – report

The Republic’s attractiveness as a base for international insurance companies is declining, due to issues with regulation and a tight labour market, a new report has warned.

The report also notes that the imminent departure of both the largest international non-life insurer and one of the largest international life insurers in the Irish market will have a “substantial impact on future premium volumes”.

The report commissioned by industry lobby group Insurance Ireland, and prepared by consulting group Milliman, found that the insurance sector employs 35,000 people in Ireland and contributes more than €2.7 billion to the Irish Exchequer each year.

As of August 2023, there were 187 insurance and reinsurance companies based in Ireland, with total liabilities of €438 billion by the end of 2022.

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Measured by gross premium income, the overall industry has grown considerably in recent years, from €73 billion in gross written premium in 2017 to more than €100 billion in 2022.

The report launched at today’s European Insurance Forum 2023 in Dublin Castle highlights that Ireland is the fourth largest insurance hub in the European Union, with a substantial number of “cross-border” insurers based here with policy holders elsewhere.

However, it notes a decline in the number of insurance and reinsurance bodies based in Ireland since peak numbers in 2009.

Overall, the number of entities has reduced by 39 per cent since then, with the number of life companies down 42 per cent, non-life companies down 29 per cent and reinsurers down by 47 per cent.

Apart from those who relocated here due to Brexit, the report says there have been few insurance companies established in Ireland in recent years.

In a survey of 58 insurance firms, international insurers said that they had set up operations in Ireland due to EU market access, the fiscal and regulatory regime, and availability of skilled labour.

However, these firms said that Ireland is now less attractive than when they first arrived, with regulation and a tight labour market being the two principal factors that have led to that reappraisal.

Ireland also scored poorly among survey respondents in terms of the cost of doing business.

Some 40 per cent of international firms expressed a negative view of Ireland’s regulatory system. In contrast, just more than 50 per cent of domestic insurers said that current regulation has a positive impact on the sector.

Respondents (both international and domestic) that provided additional comment generally said that regulation in Ireland was “excessive”, with a number of international respondents saying that while appropriate for domestic industry, regulation needs to be tailored in its application to the international sector.

Moyagh Murdock, chief executive of Insurance Ireland, said that to build on Ireland’s attractiveness as a base for international investors and “avoid slipping backwards”, issues identified in the report must be “urgently” addressed.

“The Milliman report clearly points to a need to address some key aspects of Ireland’s overall offering as a location for international insurers, the most challenging of these being the regulatory burden, availability of talent and the overall cost of doing business,” she said.