Sam Barrett investigates the current challenges and opportunities on offer to employees and recruiters in Dublin - the heart of Ireland's insurance market
The establishment of the International Financial Services Centre in Dublin in 1987 has been instrumental in the growth of the insurance industry in Ireland. Attracting many of the world's largest insurance, banking and financial services players and employing more than 10,000 people, it has brought many benefits to the area.
"It has attracted a lot of international companies, particularly in the captive market," says Paul Cotter, managing director of Joslin Rowe Ireland.
He believes that the location makes it an ideal stepping stone for Bermudian companies looking to access Europe.
This influx means that employees have been able to enjoy higher salaries and greater choice over employment in recent years. For example, according to Edward Snell, group director for the IPS Group, when the IFSC was first set up, salary inflation outstripped that in other insurance centres.
Johannes Etten, European human resources director for Chubb Insurance, agrees. He says that salary increases have tended to be two to three percentage points higher in Ireland. "This is more than keeping pace with the standard of living," he notes.
Yet this is beginning to change. "Salary inflation is slowing down now," points out Mr Snell. "There is less competition and fewer new entrants."
Although the balance may now be shifting towards the employer, some positions are still notoriously difficult to fill. Like other insurance centres, Dublin's shortage lies in the technical area with a particular scarcity of these staff with 10 or more years of experience. "We do not have any problems with junior roles but, for the more senior positions, we find we are only able to field two or three candidates, which is not really enough," says Mr Cotter.
As well as difficulties in filling these positions, both the IFSC and the rest of the local market are beginning to feel the pinch in other areas. Mr Snell believes that the insurance industry is still feeling the pain of decisions taken in the last recession.
"At the time, the industry did not recruit many graduates, so now it is left with a skills shortage," he explains. In addition to failing to recruit graduates, there was also a lack of training in general. "Many companies fell short in the training they provided to employees and they are starting to pay for this now," says Mr Etten.
Some companies are taking steps to address this, however. For instance, Mr Etten points to a European trainee programme that is run for Chubb Insurance employees. Likewise, Hugh Governey, chief executive of broker Coyle Hamilton Willis, says that his company invests heavily in employee training and development schemes. "Wherever possible we will promote internally," he adds.
External agencies are also helping to re-skill the insurance market.
"The Insurance Institute of Ireland is very active on the education front and we also benefit from the two university-degree courses in insurance in Ireland, one in Dublin and the other in Limerick," says Mr Governey.
Included as part of one of the degree courses is a six-month student placement, which Coyle Hamilton Willis supports. It typically has up to 10 students on placement and Mr Governey says it is an excellent way to identify individuals for future employment.
Although these steps are helping to address the lack of skills, both the domestic market and the IFSC face their own problems too. Recent announcements by the domestic insurers indicate the market is under pressure. For example, in October, Hibernian, which employs 1,400 people in insurance in Dublin, announced it was cutting 180 positions through voluntary redundancy and early retirement.
"This is a result of increased competition," explains Kela O'Riordan, spokeswoman for Hibernian, citing the Motor Insurance Advisory Board's report and the establishment of the Personal Injuries Assessment Board as contributory factors. "Prices are coming down and we really wanted to reduce our costs in preparation for the slump that is envisaged in the next few years," she adds.
The insurer's redundancy package has already been 100% oversubscribed and will be rolled out throughout 2005. Hibernian's announcement was closely followed by one from Axa, which, as part of a restructure, is rolling out a voluntary redundancy and early retirement package - although it will also be recruiting new employees.
Placing these people within the IFSC is an option, although Mr Cotter believes this would be unusual. He explains: "They do not necessarily have the right skill set for the IFSC. They could retrain but, in reality, this happens very rarely."
Furthermore, the IFSC is facing its own pressures with changes in taxation potentially reducing its appeal. When it was first established, a tax incentive helped to encourage financial services companies to the area.
With this, businesses paid corporation tax at 10% rather than the standard 12.5%.
Following pressure from other European Union countries, this incentive was removed at the end of 2002. Companies set up before July 1998 have a little longer to enjoy the lower tax rate but, from the beginning of 2006, they will also be subject to the standard corporation tax rate.
Could this result in an exodus of companies from the IFSC? "Some of the Bermudian companies that were using Dublin as a stepping stone into Europe now have substantial London operations and have scaled back their headcount in Dublin as a result," explains Mr Snell. But others do not think the loss of the tax incentive will have any impact.
"The change is only marginal and will not really affect the ability of the IFSC and Dublin to attract businesses," says Mr Governey. "After all, the City of London is the City of London because it has all the insurance companies there. Dublin works on exactly the same model."
- Loss-making GRP spent £112.6m on acquisitions over its last financial year
- Hiscox names former claims boss as UK CEO
- Hiscox's James Brady on why cyber knowledge remains a barrier
- Mike Bruce promoted to GRP group managing director
- CBL shareholder in bid to save troubled firm from liquidation
- Top 100 Insurtech: Quarter four update
- Marsh boss joins GRP-backed Marshall Wooldridge