Three foreign-owned insurers have effectively been frozen out of the commercial state market as a result of the downgrading of Irish sovereign debt, according to the Irish Insurance Federation (IIF).
Allianz, Aviva and RSA Insurance have been downgraded by ratings agency Standard & Poor's in line with the State’s sovereign rating, restricting them from providing cover for Irish state companies.
While the three companies, which represent 40 per cent of the non-life insurance market, are foreign-owned they have been capitalised in Ireland and write most of their business here.
Under S&P’s rating criteria, an insurance subsidiary operating in any jurisdiction cannot have a higher rating than the sovereign rating.
As a result, the companies no longer meet the minimum security rating - usually “A” - currently required to underwrite many Irish state and semi-state risks.
The news comes on the back of Aviva’s announcement last week that it planned to lay off 950 of its 2,000-strong Irish workforce on the back of a massive contraction in the Irish insurance market.
The IIF has written to the Minister for Finance Michael Noonan on behalf of the companies, saying the downgrade was adversely affecting the competitive position of the companies.
In its letter, seen by irishtimes.com, the federation said: "They [the companies] feel strongly that, being amongst the best capitalised companies in this market and meeting the solvency requirements of the Central Bank of Ireland, they should not be precluded from writing public sector business solely as a result of an indirect consequence of the downgrading of Ireland's sovereign rating."
The IIF called on Mr Noonan to ensure that the companies be allowed to compete on a “level playing-field” by requiring public sector entities to accept a minimum “BBB” rating from their insurers.
Earlier this month, Mr Noonan wrote back to the IIF, stating that he was unaware of any code of practice or legislation in which the Government “specifies” the minimum acceptable insurance rate to public bodies.
In his letter, the Minister said he recognised that Ireland’s downgrade had impacted IIF members and that this was “less than desirable”.
The IIF’s chief executive Michael Kemp said today that despite no change to their financial position or capital strength the insurers had been disqualified from going for semi-state business as a result of the downgrade which had been out of their control.
Mr Kemp said the insurers had already reported to him personally that they were losing business as a result of the downgrade.
Acknowledging the Minister was not in a position to change th rules upon which semi-state companies underwrite risk, he said the federation was calling on Mr Noonan to intervene on an “advisory basis”.
