Regulators are briefed on tie-up between Quinn Health and Swiss Re
THE Central Bank and the Financial Regulator have been briefed on plans for a new entrant into the health insurance market as Swiss Re's takeover of Quinn Healthcare enters the final stages.
Advisers working on the deal are expecting the transaction to be wrapped up before Christmas and regulators are in the early stages of assessing the deal, which will see new competition for VHI and Aviva Healthcare. The Health Insurance Authority is also understood to be aware of the deal.
Swiss Re has €169bn in assets and posts annual revenues of €21bn. It intends to act as the underwriter of Quinn Healthcare's Irish policies, while local management based in Cork are expected to have some equity in the new business.
The Financial Regulator declined to comment yesterday on contacts between the sides, but it is understood the reserves to be injected into Quinn Healthcare have been broadly agreed, with some suggestions the company needs about €130m in fresh funds.
The new company is expected to have a board made up of local managers with some representatives of Swiss Re, a Zurich-headquartered re-insurer. The day-to-day operations of the company will continue to be handled by the local management, based in Little Island, Cork.
No insurance acquisition can be done without the approval of regulator Matthew Elderfield. However, the regulator is keen to make sure competition levels are maintained in the health insurance industry.
VHI is currently in need of fresh capital with the Government trying to meet EU obligations on the regulation of health insurers. A suggestion was recently floated that VHI and Quinn could come together, helping to mix their older and young customers.
However, contrary to some reports, Quinn Healthcare is now owned entirely by the State. It is owned 75pc by the IBRC (formerly Anglo Irish Bank) and a group of banks and private bondholders.
It is understood no proposal for such a merger has been put before any of these groups.
The entry of Swiss Re into the market is likely to shake up the sector as the new venture will seek to strike hard bargains with hospitals and be more efficient than its other competitors.
However, the rising cost of healthcare in Ireland -- which has forced incumbents to raise prices sharply -- will challenge the newcomer to grow market share. Quinn Healthcare already has a growing market share, and in 2008 it wrote about €255m of premiums.