Pearse Doherty (Donegal, Sinn Fein)
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90. To ask the Minister for Finance his views that insurance premium increases in areas apart from motor insurance may be linked to core underwriting losses and an environment of very low investment returns; and if he will make a statement on the matter. [20402/16]

Michael Noonan (Limerick City, Fine Gael)
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Differing reasons have been put forward by various interested parties to explain Ireland's current increasing insurance costs.  The Central Statistics Office has reported that the cost of insurance premiums increased significantly in the past twelve months with a 35.5% increase in motor car insurance and dwelling and health insurance up by 9.9% and 6.5% respectively.

Reasons often presented include the increased level of insurance claims and the increasing value of compensation awards.  Others highlight that the highly competitive nature of the domestic market for non-life insurance in recent years has begun to impact on firms' underwriting profitability with underwriting losses reported in 2014 for a number of high-impact firms.

The Central Bank of Ireland has a statutory responsibility to ensure firms assess risks appropriately and offer insurance at a price that adequately takes into account the conditions prevailing in the market such as increasing claims costs. This ensures firms have the ability to pay all policyholders' claims without recourse to public or consumer funds.  The Central Bank does not have a statutory role in relation to setting premium prices.  

In its Macro-Financial Review for the first half of 2016 which was published on 14th June and is available on the Central Bank of Ireland's website www.centralbank.ie, the Central Bank highlights a number of issues facing the non-life insurance sector.  These include the impact of the low interest rate environment that has resulted in a fall in investment income which historically was used to offset underwriting losses.  The Central Bank believes that investment income will continue to decline as proceeds from maturing assets are reinvested in lower yielding assets. The Report concludes that the domestic non-life insurance sector continues to face a difficult operating environment with all of the high-impact firms reporting underwriting losses in 2015 primarily due to current challenges in the Irish motor market.  It also notes that the risk-sensitive regulatory framework, Solvency II, which came into effect on 1 January 2016, should strengthen insurers' resilience.

I am informed by the Central Bank that the decline in returns on investments through low interest rates has been a key theme in its engagement with the insurance industry for a number of years and forms a key part of its supervisory engagement with individual firms. The Opinion on Supervisory Response to a Prolonged Low Interest Rate Environment published by the European Insurance and Occupational Pensions Authority (EIOPA) in February 2013 required all National Competent Authorities to intensify the monitoring and supervision of insurance and reinsurance undertakings with exposure to the risks posed by a low interest rate environment.

To examine the issues affecting the cost of insurance in more detail and to assess what the options are for the Government, I have established a task force in my Department to undertake a Review of Policy in the Insurance Sector.  This Task Force will be chaired by Minister of State Eoghan Murphy.  The work of the task force includes an examination of the issues debated during the Dáil Private Member's Motion of the 8th and 9th of June 2016.  The work is being undertaken in consultation with the Central Bank of Ireland, other Government Departments, Agencies and interested bodies.  The aim of this work is to identify the factors contributing to the increasing cost of insurance, and to recommend measures to improve the functioning and regulation of the insurance sector in Ireland, identifying the issues that can be addressed on a more immediate basis and those that need more long-term policy implementation.

This work will be completed over the coming months.