The Irish insurance sector is diverse, comprising life, non-life and reinsurance firms operating across a range of product and geographical markets. As Minister for Finance, I am responsible for the development of the legal framework governing financial regulation of the sector. This framework is mainly governed by the EU Solvency II Directive, which provides for three ways in which an insurance undertaking can operate within the Irish market. These are to:
- establish a head office in Ireland (authorised by the Central Bank of Ireland);
- establish a branch in Ireland through Freedom of Establishment (FOE); or
- operate on a Freedom of Services basis (FOS), i.e. conduct business in Ireland from another country.
It should be noted that there are companies operating in each of these channels in the Irish insurance market. The Solvency II framework is designed to allow for a level playing field across the European Union for insurers, not only in terms of access to markets within the EU, but also with regard to the level of supervision and regulation. Therefore it plays an essential role in facilitating competition in the insurance sector across the EU.
However, there are other factors, beyond the legal and regulatory framework which also inform the decision making processes of insurance companies as to whether or not to operate or to continue to operate in any country. For example, the number of claims, the level of awards for personal injuries granted, the legal costs associated with settling/defending claims, and the time taken to settle claims will be important such considerations for insurers. In this regard, there has been some sectors of our economy such as the leisure, adventure and hospitality sectors where, because of these aforementioned factors, insurance cover has either become unavailable or prohibitively expensive. Indeed, I understand that in recent meetings in London between Minister of State for Financial Services and Insurance, Michael D’Arcy TD, and a number of UK insurers/underwriters who have recently left the Irish insurance market, the reasons above were outlined as factors in their decision to leave the Irish market. Therefore for these parts of the Irish market there is undoubtedly an issue around its attractiveness and this consequently has impacted on competitiveness.
Consequently, in order to create a more competitive environment, the Government is focussing on implementing the recommendations of the Cost of Insurance Working Group (CIWG), including those of the second Personal Injuries Commission (PIC) Report. That Report concluded that soft tissue injuries are significantly higher here than in England and Wales (4.4 times) and recommended that action be taken to address this disparity through the establishment of the Judicial Council. The recently enacted Judicial Council Act 2019 provides for the establishment of this Council, which will allow for the recalibration, by the Judiciary, of award levels for personal injuries. It is now a matter for the Judiciary to establish the Judicial Council and the subsequent Personal Injuries Guidelines Committee. While the Government cannot interfere in their deliberations due to the constitutional separation of powers, it is my hope that the Judiciary will recognise the importance of this issue and will prioritise it accordingly by completing a first set of guidelines, which take account of the PIC’s benchmarking report, as soon as possible. At the same time, the Law Reform Commission (LRC) has begun a detailed analysis of the possibility of developing legislation to delimit or cap the amounts of damages which a court may award in respect of some or all categories of personal injuries, taking account of Constitutional considerations as part of its Fifth Programme of Law Reform.
I believe that the creation and implementation of the Personal Injuries guidelines by the Judiciary will result in the lowering of award levels. As importantly, I believe it should lead to a greater consistency in award levels for injuries of the same type. This therefore should mean that there will be less of an incentive for a person to litigate, as they should not be getting any more from a court award than a PIAB award, which in turn should have a significant impact on legal costs. In summary, I believe that over time the clearest signal that these changes are working is when there is an increase in the number of PIAB cases being accepted by claimants particularly for minor and moderate injuries. In addition, I believe that the cumulative effects of the completion of the CIWG recommendations will include increased stability in the pricing of insurance for consumers and businesses and a more competitive insurance market overall. Furthermore, Government expects that the market will adjust positively to these developments and thus competition and competitiveness throughout the market place should materially improve.