Ireland in general and Dublin in particular are in a financial crisis but the insurance and reinsurance sectors appear to be weathering the storm.
In a recent interview, Sarah Goddard, CEO of the Dublin International Insurance Management Association (DIMA), said that insurance and reinsurance “are very much holding up.”
“We see a marked increase in the activity of the players here, so we’re seeing organic growth, which is great to see,” she said.
According to Goddard, while the overall Irish economy is “having problems at the moment,” most of them stem from the property and construction boom. “The banking crisis, which is currently being ‘unraveled’ at this point in time, was very much localized. It was to do with the property bubble,” she said.
Goddard described the efforts of the National Asset Management Agency (NAMA), as being “not dissimilar in a strange way to what Lloyd’s did with Equitas.” It’s designed to “take the poison out of the system.” She has first hand experience of that crisis, as she worked on both Lloyd’s Reconstruction and Renewal plan and Equitas, as a member of Lloyd’s communications department.
NAMA operates as the “bad bank,” buying toxic assets, i.e. mostly non-performing loans, at substantial discounts ranging between 58 percent for Irish Nationwide Building Society to 35 percent for the Bank of Ireland and 43 percent for Allied Irish Bank.
The country’s commitment, however, to attracting foreign direct investment remains unchanged, and is looked to as necessary for a recovery. Goddard said Ireland has successfully attracted biochemical firms, but the most important sector remains re/insurance. A recent survey by Z/Yen on Dublin’s competitiveness gave the number one position for Ireland/Dublin to the insurance and reinsurance sector and these areas are in fact “certainly holding up.” according to Goddard.
Not only are present companies remaining in Ireland, but also new companies are entering.
“In the last few months we’ve seen headquarters come in from Willis, which has had a presence in Ireland for a hundred years through the Coyle Hamilton operations and has a reinsurance operation here. We’ve seen XL decide to redomicile its global headquarters; now they first set up in Ireland 20 years ago,” she said. Ireland was the first country where XL decided to locate outside of Bermuda when it established a reinsurance operation there.
There are also new players attracted by either “the hub and spoke opportunities, having an operation here and being able to go cross border, or from looking at the point when it comes to Solvency II where they need an onshore European operation when they’re ex-European.”
Concerning the ever looming imposition of the Solvency II regulations, which will shift the focus of regulators from strictly financial, i.e. capital, requirements, to a more complex formula based on the degree of risk an insurer is exposed to, Goddard said there’s “obviously still some time to go before the whole Solvency II project to be completed.”
Irish regulators, insurers, and organizations like DIMA and FERMA, the Federation of European Risk Management Associations, have been working with CEIOPS (Committee of European Insurance and Occupational Supervisors) to address several important issues. These include newly proposed increases in capital requirements and the degree of regulation to be imposed on captives.
“We’ve recently been over to see the European Commission on certain issues, which we still feel are not the right way of approaching certain parts of Solvency II, they’re impractical, or perhaps they’re just straight forward flawed,” she said.
Goddard doesn’t see the current financial crisis as putting into question either the soundness of Irish regulations or the capabilities of its regulators. “From the point of view of the bank’s failing we haven’t seen that being another type of systemic risk for insurance and reinsurance.”
Goddard said the appointment of Matthew Elderfield, who came from the BMA and formerly the FSA, and now heads up the regulatory body in Ireland, probably “bodes well as somebody who understands how the sector works and understands the infrastructure needs. And at the same time somebody who…has the capacity to be a ‘right touch’ regulator.”
Goddard said there are “more innovations that are being supported by the government as well,as far as international financial services are concerned, that are being worked on at the moment.” She couldn’t “give any details, because the government has yet to announce these particular initiatives.” But she’s convinced that the government is “prepared to provide the infrastructure for new opportunities to arrive. It’s another positive aspect that gives me hope for the future.”
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