As a raging fire fundamentally alters the nature of bricks and mortar so the insurance industry itself has had to adapt to the rapid pace of structural change, or risk being overwhelmed by the roaring flames of mergers and rationalisation.
Over the past decade the Irish insurance industry has changed dramatically. There has been major consolidation within the industry at international level. This has had a knock-on effect in Ireland where companies have changed hands, merged, been renamed and subsumed into larger entities.
Historically, the Irish insurance market was dominated by subsidiaries of UK-based insurers. But this changed with the formation of Irish-owned companies such as PMPA, Hibernian and New Ireland. The recent wave of change has reconfigured the marketplace once again and there are now 20 companies writing life and pensions business here and 20 providing non-life cover in areas such as motor, property, liability and travel.
Gross premium income for the industry - the revenues derived from the sales of policies, but excluding investment income - reached £6.5 billion (€8.25 billion) in 1999. This was an increase of just more than 30 per cent on 1998.
Life and pensions business is the largest segment, accounting for £4.7 billion of total income, while general insurance premiums represent the balance of £1.8 billion. Premium income in 1999 was equivalent to 9.4 per cent of Ireland's Gross Domestic Product. Employment in the sector (in insurance companies) stands at approximately 11,300. In addition to the life and general insurance companies which write business here, there are also a dozen or so international insurance companies which service overseas markets from the International Financial Services Centre in Dublin.
"We have seen a great deal of dynamic activity within the industry over the past five years in particular," says Mr Michael Kemp, chief executive of the Irish Insurance Federation. "On the one hand there has been an overall reduction in the number of companies operating here due to the intense consolidation, but on the other we have had a number of companies entering the market, such as the Irish-owned company Quinn Direct and an Irish arm of the US company, St Paul. Essentially, the new players have identified niches and have set up here to serve them."
Consolidation of the insurance market has meant that many old familiar names have changed. For example, Guardian and PMPA are now part of the large French company, AXA while Church and General and the former Insurance Corporation of Ireland are part of the German giant Allianz, in which Irish Life is a shareholder. In broad terms, five major players control about 80 per cent of the total Irish insurance market.
Despite the move towards internationalisation, however, there are still Irish-owned insurers. For example, Quinn Direct, FBD, Irish Public Bodies, Irish Life and the life companies of AIB (Ark Life) and Bank of Ireland (Lifetime), which also owns New Ireland. Quinn Direct is one of the new arrivals. It was established in 1996 to sell general insurance and a life company (Quinn Life Direct) was formed in January of this year.
FBD was set up 30 years to provide insurance to the Irish farming community. The company was floated in 1988 and the Belgian bank, KBC, holds a 23 per cent shareholding. For many years farmers remained FBD's largest customer group, but the changing nature of Ireland's farming landscape has had an impact. "Farming still represents about 50 per cent of our business, but we expect the balance to have swung towards business customers by 2003. Small retail businesses are a growing part of our business," says FBD's group, development manager Mr Adrian Taheny.
"At present we have about eight per cent of the general insurance market and we feel we can continue to cut it as an independent operator. We are developing our business aggressively in new regions (including breaking into Dublin and strengthening our business in Cork City) and we are growing slightly ahead of the market. We deal directly with our customers, which we see as a strength, and of course all the decisions affecting the Irish market are taken here," Mr Taheny says.
One of the first large scale mergers to take place was that between UK insurers, Royal and Sun Alliance (RSA). This happened in 1996. The company now operates in 130 countries and has 50,000 staff (more than 500 in Ireland) and 20 million customers worldwide. RSA has a 13 per cent share of the Irish non-life market and is the largest property insurer in the State. In 1997 RSA in Ireland acquired AMEV from its Belgian owner Fortis.
"The industry continues to move very fast so one can't rule out the possibility of further mergers and acquisitions as companies seek to position themselves on a global basis," says Mr Paul Donaldson, chief executive of Royal & Sun Alliance in Ireland. "In my view consolidation has been good for the industry and for the consumer."
