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Ireland’s non-life insurance segment is highly competitive and fragmented, however, weak economic conditions and the increasing amount of risk being ceded by insurers is likely to adversely affect the segment’s performance over the forecast period.
The Irish insurance industry declined at a CAGR of -1.7% during the review period, owing to the negative impact of the global financial crisis. This, coupled with the European debt crisis and a decline in equity and bond prices, caused losses in the industry as a whole. However, the economy entered into a period of recovery in 2011 and is projected to grow at a CAGR of 4.2% over the forecast period. The revival of the Irish economy is expected to spur the growth of the industry. Consequently, the non-life segment is projected to grow at a CAGR of 3.8% over the forecast period.
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Attractive taxation policy makes Ireland a favored destination for insurers
Ireland has a corporation tax rate of 12.5%, which is low compared to that of many EU member states. Moreover, the country has inked double taxation treaties with many of world’s industrialized nations and as of 2010, had signed more than 50 treaties. Many insurance companies based in, or controlled by, EU member states − with which Ireland signed a tax treaty − can avail exemption from 20% dividend withholding tax. Ireland does not impose premium taxes or Irish stamp duty on insurance policies if the risk is not located in the country. Furthermore, no value added tax is levied on the sale of insurance services.
Rise in annual disposable income to drive demand for non-life insurance products
Rising consumer disposable income is expected to support the Irish non-life insurance segment over the forecast period. After registering negative growth for three consecutive years (2008−2010), annual disposable income registered positive growth in 2011 and 2012 respectively, due to the revival of the Irish economy. Written premiums in non-life insurance segment grew by 3.7% in 2012 due to a growth in annual disposable income, which grew by 2.4% in 2012. Annual disposable income recorded a CAGR of -2.2% during the review period and is expected to grow at a CAGR of 2.7% over the forecast period. This positive trend is expected to spur the growth of the non-life segment.
Highly fragmented non-life insurance segment
The Irish non-life insurance segment is highly fragmented and competitive. The 10-leading companies accounted for a combined market share of 49% in 2010 and none of the companies garnered a double-digit market share. The extent of competition can be gauged from the fact that only four companies managed to attain a share of more than 5% in 2010. However, the higher capital requirements that will be necessary following the implementation of Solvency II is expected to force smaller non-life companies to merge with larger firms, which will lead to a period of consolidation.
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