Syndicated News Archives - Page 3 of 292 - P F Power & Co. Accountants

Injury awards driving up insurance prices – insurers

Injury awards driving up insurance prices – insurers

Insurance premiums will fall if the cost of claims in Ireland falls, insurance companies have been telling the Oireachtas Finance committee.

The Chief Executive of Allianz, Sean McGrath, said the single biggest issue facing the cost of claims is getting the high level of injury awards under control.

Mr McGrath said that awards in the Republic of Ireland are 4.4 times those in the UK, excluding special damages and legal costs.

A number of representatives of Ireland’s largest insurance companies have been appearing before the committee.

Philip Bradley of AXA rejected suggestions of excessive profitability by insurance companies and said that the Irish market is relatively small.

“It has also proven to be a difficult market in which to develop a sustainable and profitable business with high and volatile claims costs,” he said.

“We are all aware of the high-profile companies who launched in to this market only to withdraw or fail as times got tougher.”

He said the motor and liability insurance between 2013 and 2017 was not profitable.

Mr Bradley said that the introduction of the Personal Injuries Assessment Board (PIAB) had directly led to a fall in insurance premiums of around 40%.

However, he said the legal profession in particular has found ways to work around PIAB and the system encourages lawyers to do just this.

“Its effectiveness has been hugely undermined as a result,” Mr Bradley said.

Fiona Muldoon, chief executive of FBD, said the high cost of bodily injury claims remains the biggest factor.

“If we take the example of the play-centres, the average public liability award at PIAB is €27,000,” she told the committee.

“If the premium for a business is €2,500, then if there is even one claim in ten years, the ten year premium will not exceed one single average PIAB award, never mind a claim that goes to court.”

She said structural reforms are necessary to moderate the cost of claims.

“The current one way bet in the courts system must change,” she added.

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US threatens tariffs on EU cheese, pork and whiskey

US threatens tariffs on EU cheese, pork and whiskey

The US is threatening tariffs on $4bn worth of additional EU goods – including Irish whiskey – in a long-running dispute over aircraft subsidies.

This is in addition to tariffs placed on European Union goods in April.

The list also includes sausages, hams, pasta, olives and cheeses, including parmesan-reggiano, provolone, edam and gouda.

“Today, the Office of the US Trade Representative is issuing for public comment a supplemental list of products that could potentially be subject to additional duties,” it said in a statement.

The potential tariffs are due to “EU subsidies on large civil aircraft”, the statement said.

“This supplemental list adds 89 tariff subheadings with an approximate trade value of $4bn to the initial list published on April 12, which included tariff subheadings with an approximate trade value of $21bn,” it added.

For more than 14 years, the US and the EU have accused each other of unfairly subsidising aviation giants Boeing and Airbus, respectively, in a tit-for-tat dispute that long predates US President Donald Trump’s time in office.

The Boeing-Airbus spat is the longest and most complicated dispute dealt with by the World Trade Organization, which aims to create a level playing field in global trade.

Mr Trump has made taking aim at what he views as unfair trade practices that disadvantage the US a key goal of his presidency, and tariffs are his favoured tool for doing so.

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Services sector makes up for weak manufacturing activity – PMI

Services sector makes up for weak manufacturing activity – PMI

The country’s services sector continued to grow sharply in June, according to a new survey.

The growth more than made up for weak manufacturing activity, which shrank for the first time in six years over the same time.

The AIB Services Purchasing Managers’ Index stood at 56.9 in June compared to 57 in May.

That is far above the 50 mark that separates growth from contraction, as it has been since 2012, when a rapid recovery in the economy began to take hold.

While the corresponding survey for manufacturers showed that activity fell marginally below 50 due to the slowdown in global trade and uncertainty over Brexit, output in the sectors taken together was unchanged at a solid 54.4.

The growth in services, which was driven by stronger demand from customers, was also well above the flash PMI readings recorded in the US and the euro zone as a whole, AIB’s chief economist Oliver Mangan noted.

“It suggests the Irish economy is continuing to expand at a good pace, driven by strong growth in the large services sector. Furthermore, firms in the sector remain very optimistic on the outlook for their businesses,” Mr Mangan said.

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19 new Rent Pressure Zones across 11 counties

19 new Rent Pressure Zones across 11 counties

There are 19 new locations designated as Rent Pressure Zones following a change in the criteria.

The announcement of the additional RPZs takes effect from today, following reforms to the Residential Tenancies Act.

The areas are located across 11 counties and include all of Meath and Louth, as well as Limerick’s metropolitan area.

It means rent increases are limited to a maximum of 4% each year, with around two-thirds of renters now covered by RPZs.

The data shows that between the start of January and the end of March, the average rent stood at €1,169 per month.

The move comes as new figures from the Residential Tenancies Board show that nationally rents were over 8% higher during the first three months of the year, compared with the same time in 2018.

The figure represents an increase of €90 or 8.3% on the same period a year earlier.

When compared with the previous quarter, rents rose by 2.1%, reversing the fall recorded between the start of October and the end of December.

It was also the highest rate of annual price inflation in the rental market since the second quarter of 2016.

The RTB has said there was “continued growth in rental inflation and affordability issues in the sector”.

The report shows the average rent for new tenancies is €1,245 per month, compared to €984 for renewed tenancies.

The highest average rent is in Dublin at €1,662, while Leitrim is the county with the lowest average rent at €537.

Meanwhile, rents in Waterford city recorded the biggest annual increase between January and March, up by 13.7% to €826, compared to the same time the previous year.

The Residential Tenancies Board has also been given new powers to address improper conduct by landlords under the Residential Tenancies Act.

The RTB can now directly investigate and sanction in cases where there are specific breaches of Residential Tenancy Law in relation to Rent Pressure Zones, false or misleading notices of termination and the non-registration of a tenancy.

Anyone found in breach of the legislation could face sanctions that range from a warning to a fine of up to €15,000.

The new legislation also requires that all notices of termination where the tenancy has been ended are required to be notified and copied to the RTB within 28 days of the tenancy ending.

Director of the Residential Tenancies Board Rosalind Carroll welcomed the new powers for her organisation, saying it finally gives the RTB “a regulatory toolkit” to deal with some cases that they have not been able to deal with until now.

She told RTÉ’s Morning Ireland that the RTB will have strong investigatory powers and its objective is to achieve compliance.

“We have a full range of powers under this where we can ask people to provide us with their bank statements, tenancy agreements,” she said.

“We can even go in and search a property if we need to. So quite extensive powers that, I think, will give us what we need to get into that regulatory area.”

Ms Carroll urged tenants who think there has been a breach to contact the RTB.

The Chief Executive of Threshold also welcomed the move, saying it gives reassurance to renters.

Speaking on RTÉ’s Today with Sean O’Rourke, John-Mark McCafferty added that new powers given to the RTB meant that the rent pressure zone area of legislation will now have more teeth.

Mr McCafferty said a delicate balance between protection for landlords and protection for tenants needed to be struck.

However, speaking on the same programme, a spokesperson for the Irish Property Owners Association described the extension of rent property zones as “a mistake”.

Margaret McCormack said that rent control in Ireland was a very blunt instrument that did not take a number of factors into account, including the level of indebtedness of the landlord or the cost of provision of accommodation.

She said the problem with the homelessness crisis was supply, adding that the private rented sector was not responsible for the social housing issue.

During Leaders’ Questions in the Dáil, Labour leader Brendan Howlin said the Government policy of increasing Rent Pressure Zones is not working as the 4% cap on rent increases has given a signal to landlords to increase rents by 4% each year.

Mr Howlin said that wages are not growing at 4% and affordability should be the benchmark on what is affordable to people.

Minister Richard Bruton disagreed and said the record of the Rent Pressure Zones is that they have helped to contain the growth of rents.

He said the key to the problem is increasing supply.

He added that there is evidence that year on year social homes, supported homes and private homes are increasing year on year.

Mr Howlin agreed that supply is the issue but he said that we cannot allow people be thrown out of their homes because of increases in rents.

He said that there needs to be an interim proposal of having a cap on rents and link it to wages across the State.

Meanwhile Solidarity/People Before Profit TD Richard Boyd Barrett has said that the

extension of Rent Pressure Zones to a number of new areas indicates that the housing and rental crisis is spreading around the country.

Speaking on RTÉ’s Drivetime, Richard Boyd Barrett said the RPZ measures do little to deal with the unaffordability of housing.

Mr Boyd Barrett said that a 4% increase in rent, as allowed under the RPZ legislation, makes a property 4% more unaffordable.

He also said that the continual increase in rents means that people are left in “limbo” as they cannot get affordable housing, rents are through the roof and those rents are now going up by 4% a year.

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New rules to require banks to open up their systems

New rules to require banks to open up their systems

Your bank account is set to get more secure – and more open – once new European regulations come into force in September.

The second Payments Services Directive aims to reduce fraud around online transactions. This will likely see consumers having to take more steps to verify their identity online.

But the rules will also require banks to open up their systems, so that other finance and technology firms can offer services to customers.

“Opening banking is a safe and secure technology that will allow customers and small businesses to get more value out of their banking data and their banking payments,” said Imran Gulamhuseinwala, head of the UK’s Open Banking Implementation Entity.

“Banks have historically made it really quite hard for consumers and small businesses to access their data, and also to make payments from their bank accounts,” Mr Gulamhuseinwala said.

“What this regulation really recognises is that there is tremendous value in people’s banking data – and crucially that that data belongs to them and not to their financial institution,” he added.

In practice this means that, by mid-September, Europe banks will need to offer a route through which other companies can offer their services.

This could mean, for example, that a user will be able to use an app to get an overview of multiple accounts.

It could also allow budgeting software to pull in information directly from a user’s accounts, rather than having to rely on that being done manually.

In reality, though, open banking is about creating a framework for new types of services – which means its actual benefits may not become apparent for some time.

“It’s a seismic change for the banking industry but it will take time for consumers to really realise the benefits of it,” Mr Gulamhuseinwala said.

“The reason for that is that open banking is an enabling technology that allows other new entrants into the sector – they’re often known as FinTechs – to build really exciting new propositions and products for customers.”

However some banks may be struggling to get to grips with the change – and that September deadline may prove difficult. For others, however, the shift should come a little easier.

Whether banks are actually keen on the new rules is another matter, however. “Part of the reason that the regulators are pushing on opening banking is precisely because they want to bring additional competition to the market, and of course additional competition doesn’t always serve incumbents well,” he said.

“The kinds of products we’re really expecting customers to benefit from, on one level, are enabling them to get better rates on mortgages, credit cards, overdrafts, better rates on savings… but of course that is something of an economic threat to the incumbent banks.”

But Mr Gulamhuseinwala is confident that it will improve competition, opening the door to new firms while also forcing traditional players to improve their offering.

A lack of competition is often cited as a major problem within the Irish consumer finance sector – as is the matter of culture within banks.

That is something that the industry is hoping to address through the Irish Banking Culture Board.

Headed by retired Court of Appeal judge, Mr Justice John Hedigan, the board is industry-funded but independently operated. It also has no regulatory powers, which is a different approach to the one taken by the UK.

“I think it’s really interesting, the initiative that is happening in the Irish market, and I’m very supportive of it,” said Mr Gulamhuseinwala.

“In the UK… we’ve separated out regulation. Conduct regulation sits with the FCA and then prudential regulation, which sits with the Bank of England.

“That separation really does allow the regulators to look very differently at those two elements. Sometimes they can actually be in conflict and I think it’s very important that the culture in the industry recognises some of the inherent conflicts,” he added.

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Germany, Italy drive euro zone economic sentiment down to 3-year low

Germany, Italy drive euro zone economic sentiment down to 3-year low

Euro zone economic sentiment dropped to its lowest point in nearly three years in June as confidence fell markedly in the bloc’s largest economies – Germany and Italy – European Commission data show.

The Commission said that its main indicator of economic confidence dropped to 103.3 points in June from 105.2 a month earlier, reaching its lowest level since August 2016.

June’s large fall capped a quarter in which sentiment dropped in each month, except May, sending another stark warning over the health of the euro zone economy which is grappling with weak growth and low inflation.

The fall was also bigger than market forecasts of a fall to 104.6.

The largest falls in confidence were recorded in Germany, the biggest economy of the bloc, and Italy, its third major economic power, the data showed.

The indicator in Germany fell by 2.9 points, and in Italy by 1.5 points. Confidence decreased also in France, the Netherlands and Spain.

Sentiment in the industry sector plunged by 2.7 points, the largest drop in about eight years, equalled only by a similar fall in April, the Commission said, as the export-driven sector suffers from global trade tensions.

Business managers were also pessimistic about the euro zone’s services sector, which posted a drop of 1.1 points.

Consumer confidence went down by 0.7 points, but did not affect sentiment in the retail trade sector, which instead rose by a point.

In a separate release, the Commission said that its business climate indicator, which helps point to the phase of the business cycle, declined to 0.17 in June from 0.30 in May for its fourth consecutive monthly drop.

Economists polled by Reuters had predicted a more limited fall to 0.23.

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Debt costs up for business despite ECB rate-cut talk

Debt costs up for business despite ECB rate-cut talk

Borrowing costs for small and mid-sized businesses in Ireland increased in the first three months of the year, despite the wider speculation in the economy that interest rates will fall.

Irish SMEs already pay some of the highest borrowing costs in Europe.

The latest Central Bank data on credit for small and medium enterprises (SMEs) indicates that firms remain extremely cautious about borrowing.

Despite Ireland having one of the fastest-growing economies in the EU, gross new lending to Irish-resident SMEs slowed to €1.1bn in the first quarter of 2019 from the previous quarter’s €1.5bn flow.

Debt repayments exceeded new lending to all Irish SMEs by €397m in the period.

Nervousness ahead of Brexit, originally scheduled to happen on March 31 is likely to have been an issue, according to Investec Ireland chief economist Philip O’Sullivan.

“When set against the backdrop of heightened Brexit uncertainty and international trade spats, it is not a surprise to see that Irish SMEs adopted a defensive posture with regard to leverage in the opening months of 2019,” he said.

Of the 15 segments of SMEs tracked, only three saw an increase in new lending activity.

Even so, the credit data suggests the economy is performing highly despite continuing to deleverage, he said.

Borrowing costs are rising, however.

The weighted average interest rates on outstanding SME loans increased slightly in the first quarter of this year to 3.51pc.

New lending rates are higher, and now stand at 4.14pc for new drawdowns with the highest costs in sectors including agriculture and transport/storage that are likely to be on the economic front lines in the event of a no-deal or crisis Brexit.

The rise in the cost of debt for businesses is in contrast to the declining cost of credit to lenders.

The ECB’s indication that monetary policy is set to become even looser, with potential interest rate cuts on the way, has pushed down borrowing costs on capital markets.

Borrowing costs were already low for the banks.

Last year the main banks stopped using the State’s Strategic Banking Corporation of Ireland (SBCI), which was set up to channel low-cost finance to SMEs, because the lenders were able to access cheap money in their own right.

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Bank of Ireland’s chief finance officer to step down

Bank of Ireland’s chief finance officer to step down

Bank of Ireland has announced that its chief financial officer, Andrew Keating, is to leave the bank.

Mr Keating, who has worked at the bank since 2004, is set to take up a “senior finance role” in an “international organisation outside the financial services sector”, the bank said in a statement.

It said he would step down as CFO and executive director of Bank of Ireland Group by the end of the year, having served in the roles since 2012.

Bank of Ireland said a process to appoint his successor would now begin.

In its statement Bank of Ireland’s CEO Francesca McDonagh said Mr Keating had “demonstrated a strong track record of successful financial leadership” during his time as CFO and had “built a market leading finance function” within the lender.

“I wish to acknowledge Andrew’s strong support to me in my role as Group CEO and wish him every success in the next phase of his career”, she added.

Bank of Ireland chairman Patrick Kennedy said Mr Kenny had “been a key member of the Board and Group Executive team” in recent years and wished him well for the future.

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Ireland runs risk of austerity-era spending cuts, economist to warn politicians

Ireland runs risk of austerity-era spending cuts, economist to warn politicians

Politicians will be warned today that Ireland runs the risk of austerity-era spending cuts if it continues with existing expenditure plans.

Stephen Kinsella, Associate Professor of Economics at University of Limerick, will address the Budget Oversight Committee on the same day as the Government publishes its Summer Economic Statement.

In his opening remarks, Mr Kinsella will call on politicians to introduce fiscal tests to deal with volatility in tax revenues.

He will tell TDs and senators that: “Ireland risks replaying the 2007-9 period of dramatic cuts to public expenditure on its current forecasted path of spending increases.”

Mr Kinsella will call on politicians to introduce automatic rules that would set “ceilings and floors” on spending to deal with increased volatility.

He will say that the “time to implement this methodology is now when the State’s finances are strong”.

Ireland needs a more robust fiscal system to withstand economic shocks, Mr Kinsella will say.

This system should comprise a medium-term strategic arm, an accounting and verification arm, and the annual budget cycle.

“One key tool in discovering where we are weak is the fiscal stress test.”

Such tests examine the effect of spending increases at the same time as drops in tax revenue and calculate the additional amount the State will have to borrow.

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Government to borrow to cushion impact of hard Brexit

Government to borrow to cushion impact of hard Brexit

October’s Budget will involve a package worth €2.8 billion, Minister for Finance Paschal Donohoe said as he published the Government’s Summer Economic Statement.

However, €2.1 billion of that is already committed to current and capital spending plans, which leaves just €700m to be allocated on budget day on 8 October.

This is three weeks before Britain is due to leave the European Union.

The Summer Economic Statement also targets a budget surplus of 0.4% of GDP as being appropriate to an economy at the top of an economic cycle.

However, the Budget also has to account for the possibility of a disorderly, or no-deal Brexit, which is expected to deliver a severe economic shock to the economy.

In that case, the Government proposes to spend more on social welfare provisions and targeted support schemes.

Along with the loss of revenues associated with an economic shock, the Government is planning to borrow funds to pay for extra spending.

This would result in a deficit on between -0.5% and -1.5% of GDP, depending on the size of the economic shock.

A decision on which case will become the central scenario for planning October’s budget will be taken in September, when more information will be available to the Government concerning the Brexit situation.

“The external environment is becoming increasingly challenging, and at this point in time a disorderly Brexit is a real possibility,” Minister Donohoe said.

“That is why I am setting out two budget scenarios in this SES – the first involving an orderly Brexit occurring, while the second involves a disorderly scenario.”

The Summer Economic Statement said the “appropriate budgetary strategy must be to avoid further inflating the economy and, concurrently, build up resources which can be deployed in the event of the UK leaving the EU without a trade agreement at the end of October”.

“In summary, the economy is caught between possible overheating on the one hand and the very real possibility of a disorderly Brexit on the other hand,” it said.

It added that budget policy must take account of the fact that “the virtual attainment of full employment means the budgetary policy must lean against the wind, it must be counter cyclical so the mistakes of the past must be avoided”.

The Minister for Finance said the Government this year was targeting a surplus of 0.2% of GDP and a surplus of 0.4% for next year.

Speaking at today’s press conference, he said the Government was outlining two different scenarios for the country, but one Budget.

Mr Donohoe said the first scenario outlines what the economy will look like in the event of an orderly resolution to Brexit – an extension of current arrangements for the UK’s trade relationship with the EU.

He said that will result in an environment of continued growth.

The second scenario outlines what will happen in the event of a no-deal Brexit and Mr Donohoe said this builds on the Stability Programme Update published in April.

He said from an economic point of view we would have an economy that instead of growing 3.5-3.75% next year would grow by just 0-1%.

He also said the Government believes the early years of Brexit would result in 50,000 jobs being lost, which he described as a major challenge.

To respond to this, Mr Donohoe said the Government would allow its finances to move into a deficit position to deliver two really important goals.

The first of these is to ensure that we have the resources to meet the needs of citizens who lose their jobs as a result of Brexit, the so-called Automatic Stabilisers.

He said the type of supports that are available through our social welfare and taxation system will be maintained.

The second goal is that the Government will ensure that the parts of the country and economy that need resources will have them to get through the Brexit period.

He said the resources available will be along the lines of those suggested by the Fiscal Advisory Council.

This would put in place resources for demographic change, commitments to public servants and money to go ahead with a planned increase in capital spending next year of €700m.

The minister said the Government this year increased capital spending by 24%.

“We will increase that investment by a further €700m to continue the work we have started to ensure our economy gets what it needs and ensure additional spending at a time of an economic shock,” he said.

That will leave €700m of unallocated resources and it will be up to the Cabinet to allocate that sum, and indicate how that sum could grow if it introduces further tax measures to raise revenue, he added.

“If we have an orderly Brexit we will target a surplus of 0.4% of GDP. In the event of a no-deal Brexit we will run a deficit to be determined on Budget day,” the minister stated.

“We are giving our best judgement at this point in time of the scenarios we will have to grapple with in the autumn. The budget parameters I believe are the safest parameters for dealing with those scenarios,” he added.

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