Guardian auction should generate rationalisation pressure

Whatever about rationalisation in the banking sector, we seem to have been hearing about rationalisation of the Irish insurance industry since time immemorial. How 24 companies writing non-life and 22 companies writing life insurance expect to wring a living from a state the size of Ireland beggars belief, but the industry has been snail-pacedly slow to rationalise.

The auction of Guardian should, however, generate serious rationalisation pressure, especially if Royal SunAlliance emerges as the successful bidder. A combined Guardian-RSA in the Republic would have a market share of more than 30 per cent of the non-life market. That could have serious repercussions for the staff of the two organisations - 1,000 at Guardian and 600 at RSA - as many functions, particularly in the head office, information technology and client servicing operations are duplicated.

Eureko is being tipped as the other serious interested party for Guardian, and a combination of these two would be a far more benign prospect for the staff. Eureko life business in the Republic is three times the size of its non-life business in terms of premium income. So a merger with Guardian, whose life business is minuscule compared to its enormous non-life business, would result in far less duplication.

It is by no means certain that RSA or Eureko will end up buying Guardian - groups like AXA-UAP and Allianz, with little or no presence in the Irish market, have also been touted as potential bidders. But if they do, it should act as a catalyst for further mergers in the industry.

In the non-life sector alone, there are seven companies whose market share is less than 1 per cent each, and only three - Guardian, Hibernian and RSA - with a market share in double figures. And in the life and pensions business, the IIF's 1997 figures (the most recent available) show that Irish Life is the only life assurer with a double-figures market share, although there are eight companies with market shares between 5 and 10 per cent.