If the proposed merger between CGU and Norwich Union goes ahead without the intrusion of a counter-bid from groups such as Allianz or Aegon, then the merged CGNU will become the biggest general insurer in the Irish market and the third-biggest in the life assurance and pensions industry.
Industry sources believe that this latest rationalisation in the market will lead to further consolidation, with general insurance and life/pensions business being concentrated into a small number of big players.
Currently, both sides of the insurance industry in Ireland include a number of small operators who will find it difficult to compete with the bigger companies and the subsequent economies of scale. While MSF, the main union representing CGU and Norwich Union staff in Ireland, said it expects no compulsory redundancies in the Irish operations, it is reasonable to assume that, given the strength of the jobs market, there would be no shortage of volunteers for any severance package the merged group might offer its combined 1,750 staff in Ireland.
Other savings in the form of setting up a single Irish head office, streamlining the operations of the respective sales forces, as well as standardising essential functions such as information technology, will undoubtedly allow the merged CGNU to lower its cost base. The 1998 figures from the Irish Insurance Federation are the most recent on which to base market share. In general insurance, these show the combined CGU - which now includes the Hibernian Insurance business - and Norwich Union is the clear market leader, with almost a quarter of the market.
CGNU, if it comes to exist, will leapfrog over the current market leader, Guardian - which has a 19.1 per cent market share - followed by Allianz, Royal & Sun Alliance and Eagle Star. FBD, the biggest indigenous insurer, is in sixth place, while Quinn-Direct, the insurance group established by entrepreneur Mr Sean Quinn, is in seventh position.
Almost 80 per cent of the Irish general insurance market is now controlled by five large overseas institutions. Industry sources believe that this concentration of the market is likely to increase, with groups such as FBD and Quinn Direct likely to become the targets of the bigger companies.
Eagle Star has been consistently mentioned as being interested in increasing its presence in life and general insurance, while on the life side the Eureko-owned Friends First and the AIB-owned Ark Life are seen as two likely bidders for any life assurance assets that come on the market.
In the life and pensions industry, the combination of CGU Life - and newly-acquired Hibernian Life - and Norwich Union has risen from a position of relative market obscurity to displace Friends First in third place in the market share table.
Life and pensions business is still heavily dominated by Irish Life, which has more than a quarter of the market, followed by the Bank of Ireland-owned Lifetime and New Ireland operations with 13.5 per cent and CGNU with just under 11 per cent.
There is general acceptance that too many companies are trying to scratch a living out of what is admittedly a booming market. The common wisdom in the industry is that a market share of 5 per cent is the minimum to allow a life and pension company to generate a proper return.
This suggests that even long-established players such as Standard Life, Eagle Star, Scottish Provident and Canada Life will need to expand their operations - either by organic growth or more quickly by buying out one of the plethora of smaller insurers.
