Irish insurers set to record ‘significant’ losses in 2017, says S&P

Structural changes mean losses for Irish insurance market despite low economic risk

S&P predicted that losses to the Irish insurance market as a result of Storm Ophelia will be “relatively significant” for 2017. Photograph: Daragh McSweeney/Provision

Ireland’s insurance industry is likely to record “relatively significant” losses in 2017 Standard & Poor’s said today in a new review of the sector.

According to the rating agency, while it is still too early to assess the insured losses attributable to Storm Ophelia, it believes that losses to the insurance and reinsurance market will nonetheless be “relatively significant” for 2017. It is forecasting a market average combined ratio of about 105 per cent in 2017-2019 (a ratio of greater than 100 per cent signifies an underwriting loss).

S&P expects that future sector profitability is likely to remain constrained by a number of factors, including the increase in court awards from €38,000 to €60,000, thus heightening claimants’ expectations; structural changes in the claims environment, such as the introduction of periodic payment orders (PPOs); high legal costs; a rise in claims frequency, associated with economic growth; and high expense ratios.

“Settlements are also likely to remain unpredictable due to structural changes,” the rating agency said.


Noting that the claims environment had “stabilised somewhat” during the first half of 2017 and in 2016, S&P said claims inflation had continued to moderate from the extremely high levels seen in 2014 and 2015, and there had been positive trends such as a fall in Ireland’s crime rates and the frequency of damage to property.

Motor insurance

On the motor front, S&P said it was “seeing the benefits” of an appeal related to the Maltese-registered Setanta Insurance in 2017 financial results. The motor insurance industry won its appeal earlier this year concerning a decision to make insurers potentially liable for claims against Setanta Insurance. Instead, successful claims against Setanta will have to be met from the State’s Insurance Compensation Fund. This means insurers have been able to release their provisions related to Setanta.

Last week, FBD said Storm Ophelia was set to cost it between €4 million and €6 million, adding that, barring further inclement weather, the group was set to hit its financial targets earlier than previously indicated.

S&P also expressed a view somewhat contrary to the prevailing view on the impact of the UK’s departure from the European Union. The agency said a weakened London insurance market may not ultimately be in Ireland’s long-term best interests, as Dublin-based insurance firms have tended to benefit from their proximity to the London market.

“Any downturn in the fortunes of the London insurance market could therefore affect Ireland and the strength of the relationship between Dublin and London might well diminish,” the authors of the report said, although they added that there were also “potential upsides”, in that “a significant amount of trade” currently based in London could relocate.

Fiona Reddan

Fiona Reddan

Fiona Reddan is a writer specialising in personal finance and is the Home & Design Editor of The Irish Times