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A Broker’s View By Paul Carty Deputy Chairman BIPAR EU Standing Committee Director, Head of Broker Services, Coyle Hamilton Coyle Hamilton (Established 1903) Ireland’s largest Broker - 550 employees Life and Non-Life business Established in Dublin, Cork, Belfast, Limerick and London. Has a Lloyds Broker as a subsidiary Irish Market Life and Non-Life 2000 Key Data Gross Premium Income (€m) Premium Income GDP(%) Premium per capita (€) Life €7600 Non-Life Total €2693 €8241 €10293 7.35 2.60 9.95 - €2010 €711 - €2721 Average annual growth of the domestic life sector in the 5 years 1996-2000 was 31.4% Average annual increase in non-life premiums for 1996-2000 was 11.8% Non-Life Premium Income by Class Category Private Motor Commercial Motor Household Commercial Property Employers' Liability Public Liability PA & Travel Other Total IR£m 781.3 323.2 249.8 255.9 140 148.4 31.1 191.3 2121 Non-Life Premium Income 2000 1% 9% 7% 37% 7% 12% 12% 15% Ireland’s is a Brokers Market Competition from: Financial Institutions Post Office Directwriters (Life/Pensions) (Motor) (Motor) The Economy I Ireland Real Growth ( GDP at constant 1996 prices ) ( IR£ billion ) Real Growth ( GNP at constant 1996 prices ) ( IR£ billion ) Consumer Price Index (% change) Unemployment Annual Average (%) Population ('000s) Insurance Premiums ( IR£ billion ) Annual Change 1996 2000 1996 1997 1998 1999 2000 IR£bn €bn 44.719 49.564 58.830 59.671 66.511 84.458 10.4% 39.557 43.286 46.705 50.514 55.772 70.128 9.0% 1.6 1.5 2.4 1.6 5.6 - 2.8% 11.5 9.8 7.4 5.5 4.1 - - 3626 e 3661 e 3705 e 3745 e 3787 3.367 4.010 4.934 6.491 8.116 e = estimated Source: CSO 1.1% 10.306 24.6% Economy II GDP at current market prices per head of population Year 1997 1998 1999 2000 D 107.8 106.1 105.6 104.7 2001 103.8 2002 103.3 2003 103.4 F 99.0 98.8 98.9 98.3 IRL 103.6 105.7 112.1 118.8 NL 112.4 115.2 115.1 116.0 S 102.2 101.5 102.3 102.9 UK 102.5 103.4 103.3 104.1 US 150.7 151.7 152.7 153.8 98.8 121.6 116.1 101.7 104.6 152.6 98.8 122.5 116.1 101.2 104.9 150.6 98.4 124.4 115.7 100.7 105.1 150.7 Market Concentration (2000) Total €2,693m 100% AVIVA AXA Allianz RSA Eagle Star €669m €407m €346m €323m €216m 25% 15% 12.9% 12% 8% 73% Regulated by the Central Bank In the process of becoming a Single Regulator The Ingredients: Investment Services Directive Capital Adequacy Directive Investor Compensation Directive + some Irish “spice” = Regulation in Ireland! Regulation by Activity Key Elements Professional Requirements Information to Clients “Best Advice” Registration Professional Requirements General Knowledge and ability (EU & IRL) PI Cover (EU & IRL) Good repute (EU & IRL) Financial Capacity (EU & IRL) Segregated Client Account Premiums paid to an intermediary is deemed paid to the insurer Capital Adequacy Contribute to Compensation Fund. Information to Clients Terms of business must be given to each client prior to providing the first service, a) the name & address etc b) a copy of the firm’s Status; c) a description of the services provided; d) a statement of the basis on which an Intermediary is to charge for its services; e) details of the commissions structure(s), if any, through which the Intermediary is or may be remunerated; f) policy in relation to conflicts of interest; j) confirmation of membership of a compensation scheme etc. EU’s “Best Advice” is Ireland’s “Client’s Best Advantage” An Intermediary must ensure that it acts to the best advantage of its clients. Arising from this requirement Intermediaries must, taking all relevant factors into account, recommend for each client the most suitable product available, regardless of whether or not the Intermediary holds an appointment in writing from the relevant product producer. “Reason Why” Before recommending a transaction to a client, an Intermediary must take all reasonable steps to ensure the client understands the risks involved. An Intermediary should prepare a statement of the reasons why a product is considered suitable for the client and why a transaction is considered to be in the best interests of the client. A copy of this statement should be given to the client and the firm should retain a copy. The Intermediary should endeavour to have the client sign this statement. What are the lessons? The EU will shape your Regulatory environment Giving information to clients is not a problem and can be positive the Single Market whilst a legal reality has not become a reality for most clients The EU experience is a shared experience