Frank Feighan (Roscommon-South Leitrim, Fine Gael)
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Question 56: To ask the Minister for Finance if his attention has been drawn to the pressure by insurance companies to raise premiums; if he has undertaken any analysis of the impact and of the justification of such increases; and if he will make a statement on the matter. [36463/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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At the outset it should be noted that neither I nor the Central Bank can prohibit or restrict an insurance company from increasing its annual premium rates, as this is a commercial decision for the company in question. I am aware of increased pressure on insurance premiums in recent times particularly in the household insurance area. Much of this is due to the unprecedented level of claims which the insurance industry suffered last winter. The insurance industry estimated that between last November's flooding and the big freeze at the start of this year they have paid out about 550 million euro worth of claims. The industry has put the level of claims in further context by indicating that the insured cost of these two weather events exceeded the total cost of all serious weather events that have occurred in the last decade estimated at 358 million euro.

However, even in advance of the weather-related claims, market analysts had identified and reported on a number of important market developments that were expected to lead to upward pressure on premiums. For example, the 2009 Standard & Poors report on the non-life insurance market warned that the next few years were likely to mark a testing time for Irish non-life insurers. In particular the report highlighted that underwriting profitability would become much more important due for example to declines in global stockmarkets amongst other factors. The report noted the importance of price discipline to ensure the long-term economics of the insurance marketplace.

It should also be noted by the Deputy that from a prudential perspective insurance companies are required by the Central Bank of Ireland to meet their capital requirements on an ongoing basis in order to ensure the sustainability of their business. In these circumstances when they are exposed to the level of claims incurred in the last 12 months, it is inevitable that their capital position will suffer and put pressure on prices. In this regard, it should be noted that the new prudential regime for insurers in the EU known as Solvency II which will come into force from the start of 2013 will place a greater emphasis on the need to price risk appropriately than the existing regime, and will in turn require insurance companies to be more conscious of their pricing policy. This will benefit the consumer in many instances, however in circumstances where there has been a significant increase in claims, it is likely to result in higher premiums.

The Government is of course committed to ensuring that the insurance costs in Ireland are competitive and correspond to appropriate international benchmarks. In that context the Revised Programme for Government contains a commitment to review insurance costs. It is expected that this review will commence shortly.