FBD: Insurance cost hikes ‘essential’

Irish insurer FBD is eyeing a return to underwriting profits in the final months of the year as premiums continue to increase for policyholders.

The company, which recorded an €85m pre-tax loss last year, said it remains “essential” that insurance costs continue to rise.

With premiums increasing across the board and a 33% spike in motor insurance in the last 12 months alone, the statement will come as further bad news to consumers.

Speaking ahead of FBD’s annual general meeting in Dublin yesterday, FBD chairman Michael Berkery said the rate increases were necessary given that the industry remains unprofitable.

“As expected, the hardening of insurance rates has continued into 2016. This remains essential, as we believe the industry continues to be loss making. FBD is focused on maintaining underwriting discipline and prioritising a return to profitability,” said Mr Berkery.

On the claims front, FBD reiterated its belief that the claims environment remains uncertain and said it welcomed the increased level of debate on the issue in recent months.

Insurance companies operating here have pointed towards an increase in the number of people making injury claims as one of the main reasons for the unprofitability in the sector and related premium hikes.

FBD said it continues to “seek structural reforms to tackle the injury claims inflation prevalent in Ireland”.

Such reforms would address the impact of claims on the affordability of insurance for farmers, businesses and consumers, Mr Berkery said.

In response to a parliamentary question earlier this month, Finance Minister Michael Noonan said a review of the insurance sector is underway with an opinion of the existing motor insurance framework likely to be presented to him in the coming weeks.

The initial focus on compensation has been borne out of the fallout from the collapse of Setanta Insurance and subsequent legal wrangling over which parties should bear the cost of its collapse.

FBD has been attempting to stabilise the business over the past year or so after what it referred to as “an exceptionally difficult” 2015.

One of the measures it took was to secure a €70m investment from Canadian multinational Fairfax Financial Holdings which was approved by shareholders at an EGM in December.

The loan, which has helped the insurer meet new EU solvency rules that came into force in January, has an interest rate of 7% a year and the option for Fairfax to convert the 10-year bond to FBD shares at €8.50 each.