Group will need €100m to boost solvency

VHI which dominates the health insurance market with a 68% market share will need a capital injection of “at least €100m” to bring its solvency ratios into line.

The group is in “discussions” with Government to find a solution to that problem and a number of options are being explored, group chief executive, Jimmy Tolan said.

To satisfy the Financial Regulator on solvency, the group is obliged to have 40% in free reserves relative to premium income against its current level of 27.7%. That is high by European standards, but is the benchmark set under the VHI Healthcare Amendment Act, passed by the Oireachtas last year.

The 40% compares with 28%-30% in other jurisdictions, but the VHI said it is proceeding to meet those new demands.

The Government has given the group until September 1 to achieve that target, the group said.

Mr Tolan said bridging the gap will “require additional equity as well as re-insurance and/or subordinated debt”.

It was of “strategic” importance that compliance with the new regulations is achieved.

The group has new products it wishes to develop and one is ready to bring to the market, he said.

In the 10 months under review the group earned more than €1.025 billion against €1.15bn in 2008, but the 10-month period makes direct comparisons difficult, Mr Tolan said.

Getting the solvency ratio adjusted is a priority, but Mr Tolan said VHI was also focused on the market where last year it paid out 95% of premium income meeting the medical needs of its clients.

It will do the same this year and will spend substantially more than rivals Quinn Group and Hibernian Aviva in delivering a wide range of health care options to its membership which at the end of the year stood at 1,535,0000, relatively steady in what was a difficult year.