By Katie Baker —–Over the course of 2019 general insurers in Ireland shifted €2.8 billion in risks associated to liability premiums to international reinsurers, close to three-quarters of all business written by the industry that year.
The Irish Times’ report also notes how, despite much of the transfers going to overseas companies, this high reliance on reinsurance only serves to heighten the risk to consumers.
Currently standing at a record 73% of aggregate insurers’ 2019 premiums, the level of reinsurance stands far beyond the reported 15% average prior to 2014.
The Irish Times also claims there would be an additional €545 million available in Irish-supervised entities if insurers reverted to their previous levels of reinsurance.
The report’s author, John Farrell commented: “The big risk for policyholders is if a large part of their policy is effectively taken on by a reinsurer and something happens to that reinsurer. This may be unlikely but is not beyond the bounds of possibility.
“There is also a concern that with insurers in Ireland on the whole relying so much on reinsurance, the business model could be hit and insurance capacity lost if there is any dislocation in the market.
“We saw what happened when banks became overly reliant on international markets for funding and there is now a similar risk emerging in insurance.”
Farrell went on to criticise the Central Bank for lacking the appropriate formal policies
“At its core, reinsurance was designed to cover insurance companies against catastrophic losses. But when you reinsure high levels of the business you write, you’re moving away from being an insurance company to becoming a distributor and are merely using reinsurance to cover your result,” he added.
A spokeswoman for the Central Bank commented: “The regulator recognises that reinsurance, as a risk-mitigation strategy, can be beneficial and appropriate. However, this needs to be done appropriately as part of a coherent business and risk-management strategy.
“This strategy should have due regard to the quality of the counter-party and the overall business model of the undertaking. We review the approach to and levels of reinsurance on a case-by-case basis in the context of risk management and overall business model of all the insurance undertakings authorised in Ireland.”