South African insurance company Outsurance has injected an initial round of equity into its fledgling Irish unit. It is expected to ultimately commit more than €100 million to the business, which is seeking regulatory approval to start offering car and motor coverage next year.
Outsurance, based in Centurion, near Pretoria, has channelled an initial €2 million into Dublin-based OUTsurance DAC through an Irish holding company, according to filings submitted to the Companies Registration Office last week.
However, group chief executive Marthinus Visser signalled in an interview in South Africa in March that the move to set up an Irish subsidiary will ultimately cost the equivalent of about one year’s group profits.
What are the key challenges when attracting new investment here?
He added that it would take five to six years for the Irish business, where senior group executive Peter Broome has been installed as chief executive, to be self-sustaining.
The group’s underlying earnings came to 2.33 billion South African rand (€110 million) in its financial year to June 2022.
The Irish unit will be funded partly by group retained earnings and partly through temporary use of debt, analysts that cover the Johannesburg-listed company were told on March 23rd, according to the transcript of a call. Mr Visser also made it clear at the time that Outsurance “won’t go into the market and start the price war”.
“We’ll try to price as accurately as possible to price for the right risk. And subject to that, we need to have successful distribution,” he said. “So, if we are going to fail, we’re going to fail because we don’t get scale. There won’t be a massive blowout of writing unprofitable business.”
Outsurance is among a number of companies that have moved recently to get into the Irish market following a series of reforms aimed at reducing volatility and coverage costs in a historically highly volatile market even by the cyclical nature of insurance internationally.
Generali’s acquisition
Last month, Italian insurance giant Generali agreed to buy Liberty Mutual’s businesses in Ireland, Spain and Portugal in a deal worth €2.3 billion. It will mark a return by the Italian group to the Irish general insurance market some 22 years after it closed its Dublin office, which had been writing small amounts of property and casualty business as well as commercial insurance at the time.
The deal will give the Italian group an initial 5 per cent share and eighth position in the market in the Republic.
Neobank Revolut revealed in March that it also plans to enter the Irish motor insurance market, with policies underwritten by AIG, which has about a 7 per cent share of the Irish motor market.
The introduction of judicial guidelines on personal injury awards in 2021 has led to a sharp fall in the average award by the Personal Injuries Assessment Board. Laws enacted last year to strengthen the board’s role are being rolled out on a phased basis.
Meanwhile, legislation aimed at balancing a property owner or business’s responsibilities with those of customers or the general public passed through the final stages of the Oireachtas last week.
