AMB Country Risk Report
August 18, 2015
Our Insight, Your Advantage.
Ireland
Country Risk Tier
• The Country Risk Tier (CRT) reflects A.M. Best’s assessment
of three categories of risk: Economic, Political and Financial
System Risk.
CRT-2
• Ireland is a CRT-2 country with low levels of economic and
financial system risk and very low political risk. The Irish
economy returned to growth in recent years, expanding by
4.8% in 2014, following a significant contraction from 2008
to 2010. The recovery has been driven by improved investor
and business sentiment, accommodative monetary policy, low
inflation and increased consumer demand. Growth is expected
to continue at a rate between 3-4% near-term.
Economic Risk
Moderate
Low
High
Very Low
• A.M. Best considers the majority of countries below to be
categorized as CRT-1 and CRT-2. The notable exceptions are
the Eastern European countries of Bosnia and Herzegovina,
Belarus and the Ukraine.
Very High
Political Risk
Moderate
Low
Greenland
High
Iceland
Finland
Iceland
Greenland
Sweden
Very Low
Finland
Sweden
Very High
Norway
Norway
Estonia
Financial System Risk
Isle of Man
Isle of Man
Russia
Latvia
Denmark
Denmark
Latvia
Lithuania
Low
High
Belarus
Ireland
United
Kingdom
Netherlands
United
Germany
Kingdom
Belgium
Guernsey
Very Low
Liechtenstein
Guernsey
Luxembourg
Jersey
Very High
Switzerland
France
San Marino
Croatia
France
Andorra
Andorra
Portugal
Azores
Market Outlooks
Copyright © 2015 by A.M. Best Company, Inc.
as
Dominican
Monaco
Gibraltar
Canary
Islands
Montenegro
Malta
Tunisia
Turkey
Greece
Cyprus
Malta
Syria
Cyprus
Lebanon
Iraq
Israel
Morocco
Algeria
Azerbaija
Turkey
CRT 1 2 3 4 5
Canary
Islands
Georgia
Armenia
Albania
Monaco
Tunisia
Russia
Bulgaria
Macedonia
Greece
Gibraltar
Morocco
Bosnia & Serbia
Herzegovina
Italy
Albania
Spain
Portugal
Azores
For information on companies followed
Macedonia
Romania
Croatia
Bulgaria
Republic of
Moldova
Hungary
Slovenia
Bosnia & Serbia
Herzegovina San Marino
Italy
Ukraine
Republic of
Switzerland
Romania
Montenegro
Spain
Czech
Ukraine
Republic
Slovakia
Moldova
Austria
Hungary
Slovenia
Poland
Germany
CzechBelgium
Republic
Slovakia
Liechtenstein
Luxembourg
Austria
Jersey
Belarus
Poland
Netherlands
Russia
Lithuania
Moderate
Ireland
Estonia
Lebanon
Israel
Jordan
Libya
Algeria
Libya
Egypt
All rights reserved. No part of this report may be reproduced, stored inWestern
a retrieval system
or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.
Sahara
(Occupied by Morocco)
Western Sahara
(Occupied by Morocco)
Jordan
Kuwa
Bahrain
Egypt
Saudi
1 Arabia
Qat
AMB Country Risk Report
Ireland
Regional Summary: Western Europe
Vital Statistics 2014
Western Europe is a highly developed
and affluent region. The 28 countries of
the European Union (EU) accounted for
25% of world GDP in 2014. The EU is
facilitating a single European market with
standardized regulatory systems and free
movement of people, goods, services and
capital. The 17 EU members of the eurozone use the euro as their currency.
Nominal GDP
Population
GDP Per Capita
Real GDP Growth
Inflation Rate
Premiums Written (Life)
Premiums Written (Non-Life)
Premiums Growth (2013 - 2014)
USD bn
mil
USD
%
%
USD mil
USD mil
%
246.44
4.6
53,462
4.8
0.3
45,136
8,817
6.4
Regional Comparison
• Western Europe has been experiencing a
prolonged period of slow economic growth,
with the EU growing 1.4% in 2014. Growth
is largely expected to remain muted at 1.8%
and 1.9% in 2015 and 2016 respectively.
On-going concerns over Greece’s economic
and political future have increased the
potential downside risks to growth and
stability throughout the European Union.
Country Risk Tier
CRT-2
CRT-1
CRT-1
CRT-2
CRT-2
CRT-1
Ireland
France
Germany
Italy
Spain
United Kingdom
Source: IMF, Axco, Swiss Re and A.M. Best
• In March 2015 the European Central
Bank (ECB) launched a program of
Quantitative Easing, expected to last
through September 2016.The program
entails the purchase of 60 billion EUR of
assets monthly in an effort to boost growth,
encourage lending and increase inflation.
Economic Growth
Economic Risk: Low
• Ireland’s economy is highly industrialized
and depends heavily on foreign trade
and investment. Free market policies and
a low tax rate have made Ireland a top
destination for foreign direct investment.
• The improving economy has helped
to reduce the unemployment rate,
from a high of 14% in 2012 to 9% in
2015. Ireland’s human capital and open
economy have encouraged growth and
helped to close the output gap from -5.0%
in 2012 to -1.4% in 2015.
• Consumption is expected to strengthen
as austerity measures are eased, freeing
up an estimated 1.7 billion USD for tax
cuts and spending.
8
Real GDP
CPI Inflation
6
4
2
%
0
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
-2
-4
-6
-8
Source: IMF World Economic Outlook and A.M. Best
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AMB Country Risk Report
Ireland
Political Risk: Very Low
Political Risk Summary
• Ireland is a member of the European
Union and one of the original 11 countries
to adopt the euro as its currency in 1999.
Score 1 (best) to 5 (worst)
Ireland
World Average
International Transactions
Policy
5
4
Legal System
• The 2015 fiscal budget introduced
several tax cuts and increased spending,
while still shrinking the fiscal deficit.
While the budget does rely on the
improving economic outlook, it is the
first budget to end the continued fiscal
austerity measures following the bailout.
Monetary Policy
3
2
1
Regional Stability
Fiscal Policy
0
Social Stability
Business Environment
Government Stability
Labor Flexibility
Source: A.M. Best
• The low interest rate environment
has allowed Ireland to lower its overall
borrowing costs through refinancing and
pre-paying 18B EUR worth of IMF loans in
2014 and 2015. In doing so the country has
lowered its debt service interest expense
to below 10% of government revenues.
• Ireland ranks #13 out of 189 countries
in the World Bank’s 2015 Ease of Doing
Business survey.
GDP Per Capita and Population
for Selected Countries
Financial System Risk: Low
• The Central Bank of Ireland is
responsible for the authorization and
prudential insurance supervision of the
insurance industry.
90
60,000
GDP Per Capita
Population
80
50,000
70
40,000
60
40
20,000
30
20
10,000
10
0
Ireland
France
Germany
Italy
Spain
United Kingdom
0
Millions
USD
50
30,000
• The Irish banking system continues to
work through bad debts as credits are
written off. Non-performing loans remain
high at 25% of total loans. Accommodative
monetary policy and low interest rates are
allowing for refinancing, but also keeping
bank margins under pressure.
• The investigation report on the state
guarantee of the banking system is
expected in November 2015. Numerous
failed banks and regulatory failures
compounded the banking crisis.
Source: IMF and A.M. Best
• Ireland has adopted Solvency II and
remains largely compliant with all ECB
and EU regulations.
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AMB Country Risk Report
Ireland
GUIDE TO BEST’S COUnTry rISk TIErS
A.M. Best defines country risk as the risk that country-specific factors could adversely affect the claims-paying ability of an insurer. Country risk is
evaluated and factored into all Best’s Credit Ratings. Countries are placed into one of five tiers, ranging from “CRT-1” (Country Risk Tier 1), denoting
a stable environment with the least amount of risk, to “CRT-5” (Country Risk Tier 5) for countries that pose the most risk and, therefore, the greatest
challenge to an insurer’s financial stability, strength and performance.
A.M. Best’s Country Risk Tiers are not credit ratings and are not directly comparable to a sovereign debt rating, which evaluates the ability and
willingness of a government to service its debt obligations.
Country risk Tiers
Country risk Tier
Definition
CRT-1
Predictable and transparent legal environment, legal system and business infrastructure; sophisticated financial
system regulation with deep capital markets; mature insurance industry framework.
CRT-2
Predictable and transparent legal environment, legal system and business infrastructure; sufficient financial system
regulation; mature insurance industry framework.
CRT-3
Developing legal environment, legal system and business environment with developing capital markets; developing
insurance regulatory structure.
CRT-4
Relatively unpredictable and nontransparent political, legal and business environment with underdeveloped capital
markets; partially to fully inadequate regulatory structure.
CRT-5
Unpredictable and opaque political, legal and business environment with limited or nonexistent capital markets; low
human development and social instability; nascent insurance industry.
Country risk reports
A.M. Best Country Risk Reports are designed to provide a brief, high-level explanation of some of the key factors that determine a country’s Country
Risk Tier assignment. It is not intended to summarize A.M. Best’s opinion on any particular insurance market or the prospects for that market.
Categories of risk
Country Risk Reports provide scores for three categories of risk for each country. These scores are (1) Very Low; (2) Low; (3) Moderate; (4) High
and (5) Very High.
Category of risk
Definition
Economic Risk
The likelihood that fundamental weaknesses in a country’s economy will cause adverse developments for an insurer.
A.M. Best’s assessment of economic risk evaluates the state of the domestic economy, government finances and
international transactions, as well as prospects for growth and stability.
Political Risk
The likelihood that government or bureaucratic inefficiencies, societal tensions, inadequate legal system or
international tensions will cause adverse developments for an insurer. Political risk comprises the stability of the
government and society, the effectiveness of international diplomatic relationships, the reliability and integrity
of the legal system and of the business infrastructure, the efficiency of the government bureaucracy, and the
appropriateness and effectiveness of the government’s economic policies.
Financial System Risk
Financial system risk (which includes both insurance and non-insurance financial system risk) is the risk that financial
volatility may erupt due to inadequate reporting standards, weak banking system or asset markets, and/or poor
regulatory structure. In addition, it includes an evaluation of whether the insurance industry’s level of development and
public awareness, transparent and effective regulation and reporting standards, and sophisticated regulatory body will
contribute to a volatile financial system and compromise the ability of an insurer to pay claims.
Political risk Summary
To provide additional detail on the political risk in a given domicile the Country Risk Reports include the Political Risk Summary. The Political Risk
Summary is a radar chart that displays scores for nine different aspects of political risk scored on a scale of one to five with one being the least
amount of risk and five being the highest amount of risk.
Category
Definition
International Transactions
Policy
Measures the effectiveness of the exchange rate regime and currency management.
Monetary Policy
Measures the ability of a country to effectively implement monetary policy.
Fiscal Policy
Measures the ability of a country to effectively implement fiscal policy.
Business Environment
Measures the overall quality of the business environment and ease of doing business.
Labor Flexibility
Measures the flexibility of the labor market, including the company’s ability to hire and fire employees.
Government Stability
Measures the degree of stability in a government.
Social Stability
Measures the degree of social stability, including human development and political rights.
Regional Stability
Measures the degree of stability in the region.
Legal System
Measures the transparency and level of corruption in the legal system.
Country risk Tier Disclosure
A Country Risk Tier (CRT) is not a credit rating, rather it represents a component of A.M. Best’s Credit Rating Methodology that is applied to all
insurers. A CRT is not a recommendation to purchase, hold or terminate any security, insurance policy, contract or any other financial obligation
issued by a government, an insurer or other rated issuer, nor does it address the suitability of any particular policy, contract or other financial
obligation for a specific purpose or purchaser.
Copyright © 2015 by A.M. Best Company, Inc.
Version 091714
Copyright © 2015 by A.M. Best Company, Inc.
All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.
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