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.
