The Gazette 1986

GAZETTE

sep T em 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. 7 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. 8 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: 9 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. 10 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%. 11 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." 12 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 Offshore Services For Your Clients We can provide a complete range of services which include Company Formation and Management, Lump Sum and prolonged period Investments,

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." 13 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.

T.J. BAILEY & co. Ltd.

•BALLAGHREINEY' STATION ROAD PORT ST MARY

Offshore Pension Provision and full Offshore Insurance Services to eliminate all liability We travel to Ireland on a regular basis and would welcome meeting with you to discuss your to Taxes of any kind.

ISLE OF MAN

Tel. 03-0624-832512

clients' needs, in complete confidence. S E ND FOR OUR 1986 I N FORMAT I ON B ROUCHE R E.

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