Mr Murphy had been tipped as a replacement for Denis Casey when he announced his resignation in February after just 20 months in the job.
Mr Casey resigned after a deposit scandal involving the bancassurer and now nationalised Anglo Irish Bank.
Mr Murphy, 57, an actuary by profession and from Ballinlough in Cork city, has worked with the Irish Life unit since 1972 and led the group’s fund management arm Irish Life Investment Managers between 1993 and 2005. He was appointed to the group’s board in 1999.
Earlier this week he was appointed as president of the Society of Actuaries of Ireland.
He is also a director of the Irish Stock Exchange and a past president of the Irish Insurance Federation.
ILP chairman Gillian Bowler said: “Kevin is one of the outstanding strategic thinkers in the financial services industry in Ireland. He knows this group intimately and has played a critical role in managing it over the past five months.
“Like all financial services businesses at present, we face challenges in the months and years ahead and Kevin has the right blend of experience and skills to build on the progress we’ve already achieved and to lead us through this period.”
Ms Bowler also indicated that the group would be looking to recruit new non-executive directors.
“We will make sure that each of our businesses have all the resources they require to deal with current challenges and that at board level we have the right combination of experience and freshness,” she said.
Mr Murphy said: “Our group has some considerable advantages in dealing with the current situation – the strength of our life, banking and pensions businesses, the low risk nature of our operations and the fact that we didn’t engage in any significant development lending to speak of in recent years.”