When Allianz decided to set up AWC, Buchan explains, there were three locations that were up for serious consideration: Ireland, the UK and the Netherlands.
“We chose Ireland because it is English speaking, there is a great supply of educated labour and there are a lot of foreigners,” he says. “We have a big foreign workforce. Twenty six nationalities work in our head office in Dublin so we needed all that.”
Buchan “unashamedly” says that Ireland’s relatively low corporation tax rates were also attractive for Allianz, while it has enabled AWC to deal with its biggest broker market – the UK – effectively too.
Since setting up shop in 2000, though, AWC has seen Ireland’s economy go through some highs and lows.
“Of course we then immediately had the Celtic Tiger which pushed salary costs up and made labour a bit more difficult to get but it has been a very good location for us,” he explains.
The “death” of the Celtic Tiger has affected AWC “surprisingly little”, Buchan argues, suggesting that the “underlying” Irish economy is holding up.
“All we rely on Ireland for is the availability of the labour,” Buchan says. “Clearly any economic slowdown helps that, it helps with the availability of labour, so the problems facing Ireland haven’t really affected AWC negatively.”
Nevertheless, ratings agencies – the organisations which analyse insurer financial strength – have downgraded some insurance companies that are based in Ireland and trade there. However, AWC’s status means that it has maintained an A stable rating from Standard & Poor’s. That is crucial, Buchan says, given the fact that insurer solvency and financial strength is an issue that has shot up the agenda of corporate purchasers in recent years.
“There is undoubtedly a flight to quality – we see that with our medium and large clients, corporate clients particularly,” Buchan says. “We are now asked questions about – and certainly tender requests major upon – financial security, which five years ago we would never have been asked.”
HOME AND AWAY
But while AWC feels at home in Ireland, Buchan rules out any prospect of its becoming a domestic insurer there. The mechanics of the country’s risk equalisation scheme – under which health insurers with a younger age profile are required to make annual payments to competitors with a larger proportion of lives in the older age segments – proved to be unattractive to Bupa which pulled out of the country in 2006 and are not likely to tempt Allianz into the frame either. Nevertheless, domestic health insurance in wider terms is an area that Buchan is looking at very closely. Or, more specifically, he is looking at ways of dissolving the traditional line between domestic cover and international cover.
“The issue of domestic health insurance per se is interesting to us because we do not really see why there is such a distinction between domestic health insurance and international health insurance,” Buchan explains. “Saying you are fully insured for your health while you are in one country but as soon as you go outside of the country you have to make alternative arrangements [...] is illogical.”