IRELAND SPENDS FOUR times the EU average on insurance premiums on a per person basis, according to the International Monetary Fund (IMF).
However, this is likely due to the large number of multinational insurance companies that have an Irish presence.
Among several technical notes published about Ireland yesterday, the Washington-based IMF focused in on the Irish insurance industry.
Overall, it said that insurance in Ireland is “well-developed (and) diverse with a large international business”.
However, it added: “Insurance penetration in Ireland is almost three times the EU average and four times more premium per capita is spent than the EU average.”
The body found that on a per capita, or per person, basis, Ireland spent just over $12,000 on insurance premiums in 2014, far above the EU average of $3,100.
However, this does not necessarily mean that the average Irish consumer, or ‘man on the street’, spends four times as much as their European counterpart on insurance premiums.
Multinationals
The figures for the country’s overall spend are likely altered somewhat by the large presence of multinationals in Ireland.
The IMF report noted that several multinational groups “have established their head office in Ireland while the operations are done through branches and/or subsidiaries outside the country.
“The majority of the insurers operating in Ireland are subsidiaries of large international insurance parents,” it said.
It notes that of the total €76 billion premium spend in Ireland at the end of 2015, 81.5% was focused on risks “outside Ireland”.
This is partially because of something called ‘unit-linked products’, which are the main investment product offerings by many Irish life insurance firms.
‘Unit-linked products’ are offered by insurance companies to investors. As part of the product, investors spend a small amount of money on the actual insurance, while the bulk of their cash goes towards an investment vehicle.
The IMF found that these products made up 75% of the assets of Irish life insurance companies “compared with less than 20% for some EU member states”.
“The Irish insurance sector is a significant provider in the EU of unit-linked business,” the body said.
Domestic spend
Figures for 2015 are not available, but in 2014, of the €37 billion spent in the Irish economy on life insurance premiums, €27 billion was international while just under €10 billion was domestic. The bulk of the Irish non-life insurance spend was also international.
Also likely affecting the seemingly high average spend on premiums by Ireland is the country’s large reinsurance business. Reinsurance is when one insurance company buys insurance from another firm.
It accounted for about a quarter of the Irish premiums written as of the end of 2015.
A statement from Insurance Ireland said that it is “important to note” that the IMF report “does not mean insurance premiums are four times the EU average, rather it is the total spend on insurance in the economy by head of population”.
The cost of insurance premiums, particularly for cars, has become a controversial issue in Ireland as consumers look set to get hit with price hikes for their policies.
Written by Paul O’Donoghue and posted on Fora.ie
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