The cost of doing business in Ireland has become a “significant concern” for the insurance industry, with many firms also worried about the likely impact of climate change on future claims, according to a new report from the industry.
The report by consultancy firm Milliman, commissioned by Insurance Ireland, cited the cost of complying with European regulations, inflation, as well as the related challenges posed for attracting staff as key challenges facing the sector.
The report, which surveyed all Insurance Ireland members as well as some selected non-member firms, said inflation is also impacting claims costs, resulting in increasing premiums.
Non-life insurers and reinsurers in particular are concerned about the likely impact of climate change on future claims.
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Regulatory risks raised by insurers include the cost of compliance in Ireland and Europe, concerns about future regulatory change, and “increasingly nationalistic agendas internationally”.
“This is reflected in a perceived high cost of doing business in Ireland, which is seen as a consistent issue across Europe,” the report said.
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Domestic life insurance companies, which help consumers save for retirement, will become “even more significant” as Ireland’s population ages, with the dependency ratio forecast to rise from 23 per cent in 2022 to 55 per cent in 2065.
“Given one of the key opportunities relates to the growing need for retirement solutions, the complex regulatory and taxation environment for pensions products in particular is seen as an obstacle to product innovation in this space,” the report said.
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Separately, the report said consolidation in the broker market is resulting in larger brokers with greater negotiating power and a greater portion of the value chain.
“The role of the broker has a material impact on customer outcomes, so it can be difficult for the insurer to demonstrate that customers are getting appropriate advice and that customers’ needs are met,” it said.
The industry is seeing a continued declining trend of international companies establishing in Ireland, which has been visible since the peak in 2009.
Overall, the number of entities has reduced by 42 per cent since then, with the number of life companies down 44 per cent, the number of non-life companies down 33 per cent, and the number of reinsurers down by 50 per cent.
Despite this reduction, however, the size of the industry measured by premium volumes has continued to grow.
Contributions by the insurance sector to the exchequer have risen to €3 billion annually in 2024, up from €2.7 billion recorded in 2023.
Employment in the sector has also increased by more than 20 per cent since 2023, with more than 43,000 people now employed in the Irish insurance industry.
Insurers based in Ireland paid €74 billion in claims last year, which was up from €68 billion in 2022. The report did not disclose details of the proportion or value of claims that were denied.
