Richard Curran: ‘Insurance market mess is more than just a pain in the neck’

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Richard Curran: ‘Insurance market mess is more than just a pain in the neck’


Former High Court president Mr Justice Nicholas Kearns has made fresh proposals to fix the insurance market. Photo: Conor McCabe Photography
Former High Court president Mr Justice Nicholas Kearns has made fresh proposals to fix the insurance market. Photo: Conor McCabe Photography

Sometimes judges do talk a lot of common sense. Well, it’s what we kind of expect from them really. When it comes to the mess that is the Irish insurance market, former High Court president Nicholas Kearns was full of ideas, pragmatism, and quite a lot of frustration during the week.

He cannot understand why there isn’t a more concerted effort made to fix insurance market problems when it comes to the crazy costs for firms to insure against accidents.

First of all, Mr Justice Kearns is frustrated there still isn’t a dedicated garda unit to prosecute fraudsters. Insurers have offered to pay for it, but the gardai are of the view that it isn’t healthy to have the private sector paying for garda activities.

Surely, then the Government should allocate the modest resources required to make this happen. In the context of a half-a-billion-euro budget cock-up on a hospital, it seems like it would be a modest amount of money well spent.

Mr Justice Kearns also wants insurance companies to commit that they will reduce premiums if award levels are reduced. A reasonable demand, but insurers can always quote everything from investment returns in the bond market, to Central Bank balance sheet reserve levels, to avoid making such a commitment. A proposal to cap minor injuries awards has not made it through to legislation yet, even though Mr Justice Kearns says he believes it would not create constitutional difficulties.

So why the slow progress? Back in 2013 when motor insurance premiums really started to rise, there was an outcry and a level of political will to do something about it.

Insurance companies pumped up premiums on the back of what they said were rising claims costs and the need to meet stricter balance sheet reserves introduced by the Central Bank.

In the last couple of years motor premiums have started to come back down again, and so insurance has gone off the boil as a hot topic.

In reality, very little has been resolved. A government working group identified lots of problems, but once politicians see motor premiums falling, other priorities take over.

Yet, the motor insurance problems have not been solved. Premiums have come down without any clear identifiable reduction in claims costs. So why did they go up by so much in the first place?

But the spotlight has begun to shine on insurance costs for business. Mr Justice Kearns pointed out at the Personal Injuries Assessment Board conference last week that the problem has spread to many leisure facilities, shops and other places of employment, and is causing people to lose their jobs.

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The Personal Injuries Commission report recommended a Judicial Council be set up and judges would provide guidelines on appropriate damages for personal injuries.

That hasn’t happened yet. Mr Justice Kearns said an interim measure could be introduced while legislation is awaited. He said there was scope to cap soft tissue injuries levels. In fact, he painted a picture of a market distortion that could be tackled, if not eradicated, in a short period of time.

Insurance companies want to blame the lawyers for the compo culture. Lawyers want to blame the insurers for lack of transparency and competition. Some judges have made extraordinary personal injury awards in the last two years. Yet, here is Mr Justice Kearns, putting forward a raft of practical solutions that could make a difference for small businesses in a relatively short period of time.

Is anyone listening?

 

No need to panic about Trump’s dairy EU trade war

United States President Donald Trump’s threat to introduce nearly €10bn worth of tariffs on dairy products, wine and other goods, as part of a possible US/EU trade war, will not have gone down well in the boardrooms of Irish food companies like Ornua and Glanbia.

Both are exporting branded consumer cheese products to the US and both are experiencing good growth. In the case of Ornua, its Kerrygold butter brand continues to grow strongly in the US market.

Given that businesses like these are also preparing for Brexit, and what that may bring, the message from ‘The Donald’ will only have complicated things further.

According to Bord Bia, the North American market grew by 36pc to €366m in 2018 for Irish food exporters. Butter exports increased by 90pc to €161m, while the value of cheese exports was up 20pc.

On the Brexit front, Dairy Ireland has said that potential UK tariffs after Brexit on cheddar would mean a €20m hit for Irish cheddar. This shows how a tariff hit can go straight to the bottom line for producers and processors.

Glanbia has identified the US cheese market, especially the higher end premium grass-fed segment, as a solid growth opportunity. It has gone head to head with Ornua in the branded consumer cheese market in the US with an Irish-made product.

But before anyone starts panicking, a bit of context would go a long way. The €10bn tariff figures include wine. EU countries exported nearly €4bn worth of wine to the US in 2017. None of it was made in Ireland – although we are shipping out a lot of whiskey.

Trump entered a trade war with China, and is already making serious strides to reach an accommodation. He has talked about signing a new trade deal with the EU and tariff threats may well be part of his softening up ahead of any new discussions. Plus, he has to get re-elected to follow through. He may ratchet up the rhetoric ahead of a re-election bid, but it might be some time before he would pull that trigger.

Most Irish dairy exports to the US are branded premium goods. Tariffs might not do as much damage as they would if there were home-made American alternatives.

Despite the rhetoric, and the possibility of a genuine trade skirmish with the EU, I don’t think the likes of Ornua or Glanbia will be curtailing their expansion plans just yet.

 

Magnier-McManus London hotel buy is winner all right

Sometimes, it takes money to make money. That might be said of Michael O’Leary’s second Grand National triumph last weekend with Tiger Roll, a horse that cost £80,000 to buy and won €563,000 for winning the race.

The same can be said for Coolmore giant John Magnier. Magnier and JP McManus have invested millions in commercial property investments all over the world. Latest accounts for one investment company show just how well they have done.

In 2006 they bought the lease on the Hilton Hotel building in Canary Wharf in London for £60m.

It is owned by a company called SCY Ltd, which in turn is owned by an Isle of Man company called Sloane Canary Ltd. The latest accounts for SCY show that the building made a profit of £4.4m in the year to March 2018 but also was revalued upwards by another £8m. The asset had already been revalued upwards by £3.25m the previous year.

This meant it is now valued on the books at £98m, having bought it for £60m. Most people who bought property assets in 2006 are not necessarily sitting on a gain at all. But London is London – Brexit or not.

Sloane Canary is owned 50/50 by Bayton Group in the British Virgin Islands and Brumoy Partnership at Castle Hyde Stud in Fermoy. Brumoy is a Magnier partnership and Castle Hyde is a Coolmore operation.

One of the directors of the company is the Swiss-based financial adviser Tim Otway, who is also a director of JP McManus’s Adare Manor.

Sunday Indo Business

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