The Gazette 1986

GAZETTE

sep

BER 1986

the re-insurance markets and the rates charged by re-

insurers play an all-important role in how they, the

direct insurers, manage their business.

Re-insurance is

insurance for insurance companies: the insurance

company pays the re-insurer a premium, and the re-

insurer agrees to share the risk with the insurance

company. The health or otherwise of the re-insurance

markets helps determine Irish premiums.

The gross premium of the general insurance industry

in Ireland in 1983 was about £600m., 30% of that was

ceded to re-insurers abroad. The risk can be spread

between re-insurers from London to Lagos, from Berlin

to Bombay. Each re-insurer takes a percentage of the

overall risk. The idea is simple enough. No one

insurance company, no matter what its size, will take all

the risk when working out a policy. So, rather like a

bookie, everyone lays off a substantial part of the risk.

Among the majors of those re-insurers is Lloyd's of

London. It has about 15% of the re-insurance business

from the U.S.A. alone:

It has been stated that the unwritten motto of Lloyd's

underwriters is: "There is no such thing as a bad risk —

there is only a bad rate". (Shades of the MGM Hotel).

It has been claimed that Lloyds deliberately upped

insurance premiums in the U.S. and manipulated the

market. This has caused a crisis in the U.S. insurance

market forcing up premiums to the extent where many

companies were forced out of business and more and

more people are finding it increasingly difficult to get

accident cover.

Is Ireland Experiencing Similar Difficulties?

Expense and difficulty of getting cover in Ireland

A survey conducted by the Confederation of Irish

Industry in 1983 highlighted a dramatic rise in

premiums. Some had been increased by as much as

100%.

Naturally, these increases are imposing a

significant burden on many firms. The annual report ol

a leading insurance company states:

"The numbers of claims reported in the year

(1985) decreased by 18% compared with 1984, and

this is attributable to the underwriting measures

taken to reduce claim numbers."

This in effect means that the company refused to

renew certain policies. So we see a situation where

premiums have been increased by as much as 100% in

some cases and a total refusal of cover in others — a

situation similar to that in the U.S.A.

To what can we attribute the expense and difficulty of

getting liability insurance cover in Ireland?

Is the legal system the culprit?

The more vociferous apologists for the insurance

industry cite the legal system as being the main cause of

high premiums. Let us look at the reality.

The cost of liability insurance in Ireland rose by

between 30% and 40% in both 1983 and 1984. Yet in just

over two years we have experienced the collapse of two

major insurance companies, I.C.I, and P.M.P.A., with

losses well in excess of £364m. while more than ten

brokerage firms have gone into liquidation with debts of

about £10 million. Can these failures be attributed to

the expense of the present legal system? The plain

answer is no.

The Jury System

The Insurance Industry has been pressing for the

abolition of the Jury System for many years, on the

basis that the high level of personal injury awards in

jury cases represent a significant input to the cost of

insurance. However, the question arises as to whether

there will be a reduction in premiums when the jury

system is abolished. The answer is given by a represen-

tative of the Insurance Industry:

"The abolition of the jury system for civil cases

would not result in an automatic reduction in

employer's liability premiums. But by making

levels of compensation more predictable and by

speeding up settlements it should introduce an

element of stability to the insurance market-

place."

The Courts System

A further red herring in relation to the cost of

insurance premiums is the repeated fact that for most

High Court actions the requirement is eight lawyers.

Time and again representatives of the Bar Council

and of the Incorporated Law Society have pointed out

that the present system of High Court listing makes it

impossible for a barrister to know which of any of up to

thirty cases will be reached on any given day, thus

making the "two seniors" system unavoidable. Present

listing arrangements result in litigants themselves and

their Solicitors having to remain available, sometimes

for several days, waiting for a Judge to become free on

the termination of another case. Granted that improve-

ments can be made but the savings would be paltry when

one compares them to the present cost of from £500 to

£1,000 p.a. to insure against one individual having an

accident at work.

Offshore Services For Your Clients

We can provide a complete range of services

T.J. BAILEY

co. Ltd.

which include Company Formation and Management,

Lump Sum and prolonged period Investments,

•BALLAGHREINEY'

Offshore Pension Provision and full Offshore

Insurance Services to eliminate all liability

STATION ROAD

to Taxes of any kind.

PORT ST MARY

We travel to Ireland on a regular basis and

ISLE OF MAN

would welcome meeting with you to discuss your

Tel. 03-0624-832512

clients' needs, in complete confidence.

S E ND FOR OUR 1986 I N FORMAT I ON B ROUCHE R E.

241