Blue is the colour for chief keeping AIG in the black

Blue is the colour and GAA is the game for Declan O'Rourke, who heads the Irish operation of global insurance giant AIG.

Dublin blue, that is, not the shade associated with his native Tipperary. Coincidentally, it mirrors the corporate colours of AIG, which has used its sponsorship of Dublin GAA to heavily promote its brand to consumers over the past two years as it launched products directly to the market.

The walls outside O’Rourke’s modest office are lined with large photographs of the Dubs parading Sam around Croker, and various bits and pieces associated with the county’s teams adorn his office.

The five-year sponsorship began in November 2013 and has transformed the American insurance company from a relative unknown in the consumer market into a highly recognisable brand.

O’Rourke, who hails from Thurles and has a strong GAA background, was the driving force behind the deal.

“I wouldn’t say I was a fan of Dublin before we sponsored them but I’m certainly a fan now,” he says. “We wanted to raise the profile for AIG in Ireland. There aren’t many suitable opportunities for that but Dublin GAA was the one for us. It has a large population of consumers and we do most of our business in Dublin. So it made perfect sense.”

Ironically, O’Rourke is a committee member with the Tipperary supporters’ club but sponsoring his home county never came into the equation. “No. It wasn’t available at the time.”

He won’t talk numbers but the sponsorship is thought to be worth €800,000 a year to Dublin, with AIG spending another €400,000 annually leveraging it via marketing and advertising.

O’Rourke might also be feeling blue about the company’s losses last year in motor insurance, where it has a 6 per cent market share and about 200,000 policyholders.

“We lost a considerable amount of money on motor insurance [last year],” he says. “It’s difficult to give you an exact number because if you look at the statutory basis, we probably ran at close to a 100 per cent loss ratio before we paid any of our marketing expenses, distribution costs or employee expenses. It was a particularly bad year for motor insurance.”

In other words, for every euro AIG took in customer premiums, it either paid out a euro or reserved a euro for claims. And it then had to pay all of its usual business expenses.

“We lost between €10 million and €20 million just on motor,” he says.

AIG isn’t the only motor insurer in Ireland to have hit a bump in the road. Insurance Ireland, the industry lobby group, estimates that losses across the sector amounted to €585 million between 2010 and 2014. It’s a staggering figure and helps to explain the large double-digit increases in premiums that customers have experienced in the past couple of years.

O’Rourke says the other parts of AIG’s business have performed well and overall the out-turn for the year “was around break even”.

“Our traditional commercial business and specialist business offset the losses we made in motor,” he says.

AIG celebrates its 40th birthday in Ireland this year, and is the State’s biggest insurer of commercial lines.

Client confidentiality does not permit him to name names but he can say it insures Croke Park and the “chances are that we insure most of the financial institutions’ bank branches . . . most of the sports clubs . . . most of the shops and offices in towns”.

“Of the top 20 companies in Ireland, we probably insure 19 of them,” he adds.

Given that it last made a profit from motor insurance three years ago, why is AIG bothered operating in the volatile consumer space when it has such a strong foothold in the commercial market here?

“We’re hoping there will be reforms,” he says, ever the optimist. “If you look at motor insurance costs in places like France and Germany, they are all in the €400 to €450 a year mark. In the UK, it might be closer to £500 but in Ireland, if you try to renew your insurance as new business it will be €700 on average.

“And that’s increasing dramatically. A lot of people have seen a 50 per cent increase in the past year. We’re again back in the situation where we are one of the most expensive places in Europe for car insurance.”

On its website, AIG.ie, the company claims to offer motor insurance for as low as €310 but it comes with a load of conditions.

You need to be a 49-year-old accountant, living in Dublin 6 west, with a 10-year licence, six years’ no claims bonus, six years claims-free, driving a 2010 Volkswagen Golf 1.4-litre petrol car worth €11,500. It must be used for “social domestic and pleasure”.

O’Rourke thinks you might also have to take its telematics option, which monitors your driving behaviour.

AIG is writing about 1,000 policies a month with telematics. “In particular, good drivers are looking for value and they’re not afraid of it,” he explains.

In terms of reform, O’Rourke would like to see Ireland follow the UK in considering a ban on whiplash claims to save the industry £1 billion in fraudulent claims. Whiplash awards by judges here have begun to spike in recent years and it’s become a hot topic within the industry.

“In France and Germany, the normal award for whiplash is between €2,000 and €3,000 and the legal fees are in the hundreds,” he says.

“In Ireland, the average award for whiplash is €15,000. So we have the most expensive necks in Europe. Ironically, in the UK, the average payout for whiplash is £5,000 and they dub themselves as the whiplash capital of Europe.”

O’Rourke is hoping revisions being undertaken on the book of quantum, which is supposed to act as an aid in the assessment of compensation claims, will help improve the situation. “We’re hoping that will bring more realistic awards. I would be hoping to get it this year.”

He says insurance companies have no problem paying for loss of earnings or for medical care but want to deter ambulance chasers. “The judiciary make the awards. So we need an updated book of quantum and we need to have reasonable awards that compare with Europe. Or else we need to go down the route of the UK and ban awards for whiplash.”

He would also like to see more specialisation among judges, who preside over these cases.

“We don’t have specialisation in Ireland. Personal injuries can be heard by a judge with a conveyancing background or a family law background. That’s a difficult situation. Awards went up 34 per cent from 2013 to 2014.”

He cites a case recently that AIG valued at €75,000 and which went for €350,000. “When you have those level of awards there’s a fear factor [among the insurers] of going to courts,” he says.

An obvious tool to improve AIG’s financial performance on motor policies is hikes in premiums. AIG put through increases of more than 50 per cent last year for new business and about half that level for renewals.

“We still won quite a bit of new business,” he says, adding that the increases this year will be lower but still double-digit.

"Over a long period of time we'd expect to make money and we did make money when Mary Harney [the former Progressive Democrats minister] brought in the Personal Injuries Assessment Board, various road-safety measures and cut down on the drink driving. We're hoping [that with] government reform in the next year, coupled with rate increases that we've applied, we'll make money again."

If nothing changes, O’Rourke fears that average motor rates could get as high as €1,000 here. “That’s not what we want but that’s ultimately what could happen.”

Setanta Insurance

Another bugbear relates to the collapse of Malta-registered Setanta Insurance two years ago. In September, the High Court ruled the Motor Insurance Bureau of Ireland (MIBI) should be liable for outstanding claims stemming from the collapse of Setanta, which operated in Ireland only.

The MIBI, which makes payments on claims against uninsured drivers, has been placed on the hook to cover the €90 million in claims rather than the Insurance Compensation Fund, which is designed to facilitate payments when insurers go bust.

The matter has been appealed by the MIBI and a verdict is awaited from the Court of Appeal.

“Hopefully the industry will win the appeal,” O’Rourke says. “This is an issue for the compensation fund not the MIBI. Ultimately, policyholders will pay for it but it’s the size of the cheque. If you put the loss on the insurance companies they then have to reserve for the potential of this happening again and it brings more uncertainty.”

“Setanta was based in Malta and used the EU rules to set up fly-by-night insurance company here. It was Irish-managed only selling into Ireland from offshore areas. The opening of the EU was supposed to provide regulation around that but they went bust and it’s come back to the Irish consumer. It’s going to come back to the balance sheets of the insurers [here].

“This is the only jurisdiction that this could happen in. The industry was shocked by the decision of the High Court. It had to be appealed. The decision basically means that every insurance company is underwriting their competitors, who are based in Malta with none of the risk management you need to attract a financial strength rating. It’s an insane situation.”

AIG added another string to its bow last year with the acquisition of Laya Healthcare, which made an after-tax profit of €12 million on turnover of €51 million in 2014. "It's been a very good buy for us."

Stable government

O’Rourke says the general election campaign and the uncertain result being indicated by the polls is not resonating yet at its headquarters in New York.

"[AIG global chief executive] Peter Hancock when he was here said it was an economy that he wanted to invest in. Shortly after that he supported the acquisition of Laya. He put more treasury jobs in here and I think over time we'll see more jobs come here. There's certainly a good relationship with the IDA.

“We want a stable government, a business-friendly government, and I’ve no doubt that’s the type of government that our head office would like to see when they’re investing in the country. There’s always lots of opportunities in a company like AIG for further investment. Hopefully, we can have a period of stability after the election for a term at least.

"I can't see any government that doesn't involve Fine Gael. They've some very capable ministers."

O’Rourke has spent 23 years with AIG. Raised in Thurles, his father was a garda and his mother a nurse. He was encouraged into accountancy by a schoolteacher who told him it could be a passport to see the world.

He worked initially with Coopers & Lybrand (now PricewaterhouseCoopeers) in Dublin before joining AIG in 1993 in its internal audit and operational review department. Since then, he has since travelled extensively with the company, working in New York, Turkey, Poland, Lebanon, Saudi Arabia, Oman, Bermuda, Argentina, Ecuador, Brazil.

His favourite place? “I loved Argentina. We had a game of hurling when I was down there. The Irish in Argentina against the Irish Argentines and they beat us. It was a great occasion and we had a barbecue afterwards on St Patrick’s day. It was great fun and it meant a lot to them. The GAA donated the hurleys.”

He also "really liked" Oman and thought Lebanon was "fascinating", choosing to stay in the hotel room occupied by Briton Terry Waite before he was kidnapped in 1987.

“It [Beirut] was totally bombed out at the time, the centre was just rubble. But the people were so friendly.”

O’Rourke left New York to return to Ireland a week before the 9/11 terrorist attacks. He was initially appointed as financial controller here before becoming financial lines manager in 2004 and commercial lines director four years later. He took on his current role in 2012.

Does he see himself as an AIG lifer?

“Yeah, I do. When I look around the market, I think we have a lot of advantages than other companies don’t have and that this is the place to be. My predecessor was here for 22 years.”

Before leaving, I ask who he thinks will win this year’s All-Ireland hurling and football championships. “In hurling, I’d love to see Tipperary and Dublin in the final, with Tipperary winning. In football, I’d like to see Dublin beat Mayo in the final.”

Blue is definitely his colour.

CV Name: Declan O'Rourke Job: General manager, AIG Ireland

Age: 45

Lives: Badger Hill, Kilteel, Co Kildare. “The house is actually in Dublin but the entrance is in Kildare.” Family: Married with five children. Hobbies: “I play squash every week and the occasional round of golf. Love all sport, really.”

Something we might expect: “All of my insurance products are with AIG.”

Something that might surprise: O’Rourke worked in Lebanon for a period and stayed in the hotel room Terry Waite used before his kidnapping in 1987. “I requested it. I just thought it was a fairly famous room.”