This second Review of 2015 summarises the current state of the macro-financial environment in Ireland by evaluating updates since June 2015.

As part of the Review, the Central Bank notes that, despite an improved macro- financial environment, insurers in the domestic non-life sector continue to contend with a challenging operating environment. In the first half of 2015, high-impact non-life insurance firms suffered underwriting losses due to intense competition for market share. The sector has also been affected by a deteriorating claims environment as the severity and frequency of claims are increasing; the legal environment is changing which is pushing costs up. Motor and liability insurance performed particularly poorly. Investment income has been declining since 2012 and is no longer sufficient to compensate for underwriting losses.

According to the Review, the domestic life insurance sector has benefited from the improving economic environment and has a broadly positive outlook. However, the report notes that domestic life insurance firms face challenges of operating in a competitive market against firms offering similar services. Total life premium income increased by 9.3% in the first six month of 2015 compared to the same period of 2014. The retail protection segment of the market saw a decline of 5% compared with the same period of 2014. However, the investment segment of the life market saw on increase of 35% in that period.

While a figure for the first six months of 2015 has not been provided, Irish reinsurers’ global market share in 2014 was 4.7%. On a global level, the reinsurance sector faces uncertainty due to reduced demand caused by primary insurers adopting more sophisticated approaches to risk management and a continuing increase in alternative reinsurance capital such as catastrophe bonds and reinsurance sidecars. Reinsurers have responded to these pressures through merger and consolidation which may cause integration risk. The Review concludes that the impact of Solvency II will clarify needs and allow firms to make decisions on how to deploy capital more efficiently.

A link to the Review is here.