Hundreds of restaurants at risk of closure as insurers exit hospitality sector
Donohoe rules out Government assistance after four firms announce plans to withdraw
The new year could see the closures of hundreds of restaurants,
cafes and coffee shops across the country as four of the companies offering
insurance to the sector have announced their intention to withdraw from the
market.
The dramatic contraction in the number
of companies willing to offer quotes to small businesses could see the cost of
some insurance premiums increase by almost 200 per cent and in an industry with
notoriously thin margins, increases of that magnitude could lead to many
businesses shutting, it has been warned.
Responding to the development, Minister
for Finance Paschal Donohoe said
that the Government will not be making additional funding available to the
secto mitigate this.
Referencing the announcement on
Wednesday by Minister for Children Katherine Zappone of a one-off payment to
registered childcare providers of €1,500 to deal with rising insurance costs,
Mr Donohoe told RTÉ radio’s Morning Ireland there is no equivalent payment
available to those who work in the hospitality sector.
The increased support to childcare
providers was made through the Department’s Payment Support Programme (PSP),
which allows for once-off payments, nominally to support providers during the
time needed to complete administrative work associated with applying for
financial programmes run by the Government.
Mr Donohoe said that there is a
fundamental difference between the provision of childcare and other parts of
the economy in which the Government cannot intervene.
The chief executive of the Restaurant
Association of Ireland Adrian Cummins told The
Irish Times he had received correspondence on Wednesday from the association’s
broker Dolmen Insurance warning that “a number of insurers have exited the
Hospitality/Leisure market and may not be offering 2020 renewals.”
The letter said that companies commonly
used by businesses in the hospitality sector that had announced their intention
to curtail their business in the Republic were AIG, Axis, Contessa and
Surestone.
“The margins
are very tight in this business and while a price increase from €700 to €2,000
might seem small when compared with larger enterprises, as a percentage of a
cafe’s revenue it is very high and it comes on top of increases in many other
areas of the business,” Mr Cummins said.
“Some will
simply not be able to cope with the increases,” he warned.
He said it
was hard to see why so many companies had decided to exit the market almost
overnight and he called on the Competition and Consumer Protection Commission’s
monopolies division to launch an investigation to try and establish exactly
what was going on in the sector.
High claims
“I am
hearing that insurance companies are saying that the claims are too high but if
they are so high how come insurance companies are making the profits they are
making?” asked Mr Cummins.
He pointed
out that cafes were not a high claim area as the public did not typically spend
long on any premises and suggested that the move would also impact on pubs,
hotels and other enterprises operating in the hospitality space.
He suggested
that if insurance premiums were allowed to continue their upward trajectory
“there will be very few businesses left.” Mr Cummins
drew comparisons with the child care sector which has seen crèches similarly
hit by a contraction in the market.
“The
Minister for Children Katherine Zapone was
very quickly able to announce a once off payment of an average of €1,500 to
affected crèches but what about all the other businesses? It seems to me that
the insurance industry is running rings around the Government.”
A spokeswoman
for the Minister of State Michael D’Arcy said he was aware of reports about the
reduced availability of insurance to the hospitality sector but said the sector
itself “has not approached Minister D’Arcy or the Department directly on this
immediate issue around capacity in the market”.
She said
that as a result the Mr D’Arcy was unable to comment “with regard to particular
insurers withdrawing from the market”.
The
spokeswoman pointed out that neither the Minister for Finance Paschal
Donohoe or Mr D’Arcy were in a position to direct insurance companies, through
insurance legislation or otherwise, as to the pricing level that they should
apply to particular categories of organisation, “nor is he in a position to
direct them to provide cover to particular companies or sectors. This includes
the hospitality sector,” she added.
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Over 1,000 créches are at risk of closure
as minister threatens to 'super tax' insurance profits. New crisis for families
as childcare firms warned about insurance withdrawal.
The Children’s Minister has approved a one-off
extra payment of 1,500 euro to childcare providers who are facing rising
insurance costs.
Up to 1,000 creches across the country could
see a 100% increase in their insurance premiums after Ironshore Europe quit the
Irish market earlier this month.
It leaves only one firm offering insurance to
creches and childcare facilities, meaning all providers will see a hike in
premiums.
Katherine Zappone told the Oireachtas
Children’s Committee that around 1,000 providers who were insured
through Ironshore will face rises in the region of 100%.
About 2,600 Allianz customers will
face increases of about 10% next year, while 400 providers will see an
increase of around 30%.
In an emergency Oireachtas meeting, Ms Zappone
said the additional payments will be made by December 28.
“It is undoubtedly causing distress to
providers and great worry to parents, and I acknowledge that there are many
providers who are facing increased insurance costs,” she said.
On December 6 Ironshore told its 1,300 clients
it would be withdrawing from the market.
No new underwriter has joined the market to
take over Ironshore’s clients.
Ms Zappone said the Government is
“limited in what it can do”, adding that it cannot compel a private
business to remain in the market.
“However, officials in my department are
working hard to find a way to support those services that have been impacted,”
she added.
“We’ve engaged with Allianz, whom I understand
have confirmed that they will offer quotes to all but the most high- risk
services.
“Some 1,100 quotes have been issued by midday
today to previous Ironshore clients. This leaves 200 providers who have not yet
received quotes.
“There may be a very small number of very high-
risk services which will not receive quotations.
“With regard to the issue of insurance, I’m
liaising with my colleague, the Minister for Finance, to consider a review of
insurance in the childcare sector as part of the ongoing independent review of
costs that I’m doing in the sector.
“Consequently, we need to make the market more
attractive to both existing insurers and to new entrants in order to increase
competition which in turn should lead to a reduction of pricing in an increase
in capacity.”
Labour’s Sean Sherlock said he had been
contacted by childcare providers whose risk profile has not changed but have
been told their insurance costs are increasing six-fold.
Mr Sherlock added: “What you’re saying, and I
say this respectfully, doesn’t give those providers any comfort.”
Sinn Fein’s Kathleen Funchion said she
was concerned that the support programme would not help everyone.
She added: “There is total panic this week and
I just feel like it always seems to land on the shoulders of the workers and
the providers.
“For some of those people 1,500 euro will be a
help but for some of the them it won’t.”
Fianna Fail’s Robert Troy said that where
there is a monopoly, there is an opportunity to overcharge.
He called for the minister to help bring in
the necessary reforms and incentivise more firms into the market.
“While the announcement you made today is
welcome, it’s a sticking plaster if we don’t actually address this and bring
insurance premiums down,” he added.
“We shouldn’t have to use tax resources to
supplement the insurance industry and that’s what’s happening now.”
Creches scramble for insurance cover as premiums ‘double’
Over 400 operators still without quote after one of only two insurers in childcare market departs
More than 1,300 childcare facilities were told by broker Padraic Smith & Co last week that it was no longer able to secure cover due to the departure of Ironshore Europe from the market.
The broker is advising clients to
contact Arachas Corporate Insurance Brokers immediately to establish if they
would be in a position to take them on to access insurance with Allianz
Ireland.
Frances Byrne of Early Childhood Ireland
told RTÉ Radio’s Today with Sean O’Rourke that by Wednesday morning 869
providers had received quotes from Alllianz, while 431 had yet to receive them.
Elaine Dunne of the Federation of Early
Childcare Providers said that while Allianz would provide cover for the sector
it came at a very high price that most childcare providers would not be able to
afford. “Yes Allianz will take us on, but at
what price?” asked Ms Dunne.
“One of our members found their
insurance increased from €3,400 last year to €9,000 this year. How are people
to pay that?”
Speaking on RTÉ radio’s Morning Ireland,
Ms Dunne said the Minister for Children needed to meet with the federation and
the Taoiseach “needs to support us. We cannot do this on our own”.
Early Childhood Care and Education
schemes (ECCE) could also close down, she warned.
Ms Dunne spent two days in the UK last
week meeting with insurance providers, but she found that “people are not
willing to touch us”. This was because of non-compliance regulations which were
not varied and could range from an out-of-place toothbrush to children not
being fed.
“If the Government thinks we’re going to
find someone (to provide insurance), they’re very wrong. No one is going to
touch us.”
She added Padraic Smith “broke his back” trying to find
cover for the 1,300 childcare facilities. The federation had been in touch with
Allianz but the prices they were quoting were 100 per cent higher than those
arranged by Padraic Smith last year. “They have a monopoly now,” Ms Dunne said.
Mr D’Arcy acknowledged that Allianz
rates were higher but pointed out that it already covers two thirds of the
childcare sector, or 2,500 creches.
“They are paying those rates which work
out at €60 per child per year to get cover. That’s not an unreasonable figure,”
he added.
Reform of the insurance industry was not
happening at the rate he would like, he added, but the Government could not intervene
in a sector where there was a viable alternative for insurance.
Company acquisition
Meanwhile, the new owners of Ironshore
Europe has said it was not to blame for the company’s decision to pull out of
the Irish market.
The Bermuda-based group, Hamilton
Insurance, said it was incorrect for Padraic Smith & Co to have suggested
its recent acquisition of Ironshore Europe was the reason it had stopped
providing cover to childcare facilities in Ireland.
The Bermuda group said the decision to
cease selling insurance cover to childcare facilities in Ireland was made
before it entered into discussions with Liberty Mutual to purchase Ironshore.
The deal, the terms of which were not
disclosed, was completed on August 20th.
Hamilton said Padraic Smith had been
formally notified of the decision by Ironshore to cease selling cover for
creches in Ireland on July 17th, while additional communications were sent on
December 4th to ensure policyholders were notified of the withdrawal of cover.
The group said it understood that
Ironshore had decided to exit providing insurance cover for certain types of
risk including childcare facilities.
Padraic Smith & Co said this week it had been unable to
secure alternative cover for Ironshore’s 1,300 clients who owned creches and
playschools, despite intensive efforts over the past six months.
Despite contact with over 35 different
insurance providers, underwriters and intermediaries, the broker said it was
not possible to source another insurer for customers who would need to renew
their policy after January 1st 2020.
Speaking on RTÉ Radio 1’s Late Debate on
Tuesday, Fianna Fáil spokesperson on Children and Youth Affairs, Anne Rabbitte,
said many couples were facing the prospect of one partner having to give up
work if the problem of insurance cover for creches was not resolved within a
short space of time.
Ms Rabbitte called on the Minister for
Children, Katherine Zappone, to source extra funding as measure to provide
interim cover.
“We need to have some form of
intervention or we won’t have creches on the 1st of January,” Ms Rabbitte said.
Labour’s education spokesperson, Aodhán
Ó Riordáin, said the State had abdicated its responsibility in the early years
sector by leaving services to be provided by the private sector.
Mr Ó Riordáin said a report by the
Central Bank earlier this week had provided little evidence to support
suggestions that the high cost of claims was driving increasing costs of
insurance cover. Instead, the Labour TD, said there appeared to be “a massive
amount of profiteering” by insurance firms.
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