Profits for firms in non-life insurance plunge almost 80%

PROFITS generated by firms operating in the non-life insurance market plunged almost 80% to €228 million last year despite a rise in premiums.

Insurance companies blame the 23% increase to €2.1 billion in the cost of new claims for the hike in insurance costs and the drop in profits.

According to figures released by the Irish Insurance Federation (IIF) total income generated from insurance premiums in both non-life and life was €13.4bn, a drop of 26%.

IIF chief executive Mike Kemp said the global recession and aggravating local factors have made the business environment difficult for insurers and their customers.

“However, insurers are fundamentally different to banks, business models and cash flows are not the same and as a result our market has survived the rigours of the financial crisis in good shape so far.”

An IIF spokeswoman said she could not say if insurance costs would increase further over the coming months. The life assurance business, particularly the investment market, has suffered a significant downturn, according to the IIF.

Premium income was down 26% in 2008 and this trend has continued in the first half of this year.

Life companies paid out nearly €8.7 billion in claims, maturities encashments and pensions last year, with increases of 12% in death and critical illness claims and 14% in annuity payments.

“The continuing crisis in the public finances and uncertainty about future government pensions policy strongly suggest that people who haven’t made private provision for retirement should seriously consider it now,” said Mr Kemp.

On the non-life side, which includes motor insurance, new claim numbers increased 14% on 2007.

Household claim costs increased by 53% and the number of new household claims increased 29%.

The IIF notes that motor insurance premium rates started rising again last year.

“All the above trends are continuing in 2009 so far. However, this should be seen in the context of significant falls in prices from 2004-2008, for example, motor insurance is up 7.3% from January to June 2009, but is still only at 67.4% of its peak cost in April 2002,” he said.

The value of funds managed by life assurance companies dropped by 22.5% last year to €63.5 billion, as the value of their stock market investments plunged by 42%.

Due to stock market turmoil, life assurance firms were investing a much bigger proportion, almost 30%, of funds in bonds by the end of last year.