Bernard Durkan (Kildare North, Fine Gael)
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Question 134: To ask the Minister for Finance the extent to which he monitors developments in the insurance industry with particular reference to the level of premium increases in the past 12 months; the degree to which premiums in respect of various forms of insurance cover have fluctuated in the past five years to date in 2010; the grounds for these fluctuations; if an assessment has been carried out regarding the reason premises should increase while the value of property, motor vehicles and commercial values generally have fallen; the degree to which regulation is applied to the insurance industry; and if he will make a statement on the matter. [5295/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The Financial Regulator does not maintain statistics on insurance premium costs, so I am not in a position to comment specifically upon the level of such increases in the past 12 months nor on the fluctuation in the past five years. However, as mentioned in previous PQs (45220/22 of 2009) the Financial Regulator has provided some background as to why insurance prices have increased in recent times. It has advised me that while the non-life insurance market performed well up to the end of 2006, market sources indicate that much non-life business was written at a loss in 2007. This trend continued in 2008, but the companies were still willing to write business at a loss in order to maintain their market share. They were able to do this as a result of the reserves they had built up during profitable years. However, the situation could not go on indefinitely and indications are that firms have taken action on pricing to underpin their financial positions.

This position is supported by a report published in 2009 by Standard & Poor's titled 'A Testing 2009 for the Irish Non-Life Insurance Market, Despite Fundamental Strengths'. It provided an insight into the problems facing the industry in 2009. The report envisaged a difficult year for the non-life industry as a result of rising claims and continuing intense competition which they said was limiting price increases. They added that this combined with anticipated lower investment returns was expected to hinder profitability. It should be noted that this outlook has if anything been compounded by the cost of claims as a result of the November flooding and the recent big freeze.

On the issue of regulation, the insurance industry as a whole is governed by the Insurance Acts 1909 to 2000 and regulations relating to insurance and reinsurance made under section 3 of the European Communities Act 1972. This body of legislation deals with a range of issues including authorisation provisions, prudential supervision and governance matters. The day to day responsibility for ensuring that the insurance industry complies with this legislation is a matter for the Financial Regulator which is statutorily independent in the exercise of its regulatory functions.

Consumer issues are covered by the Financial Regulator's Consumer Protection Code which amongst other things sets out a series of general principles about how financial service firms (including all insurance companies) should interact with their customers. The Code however does not prohibit or restrict an insurance company which conducts insurance business from increasing its annual premium rates, as this is a commercial decision for the company in question and is generally determined by such issues as higher claims volumes, and the nature of the product.