Insurance Bill, 1983: Committee and Final Stages.

SECTION 1.
Question proposed: "That section 1 stand part of the Bill."

Under section 1 "an administrator" means a person appointed, whether under subsection (2) or (4) of section 2 of this Act, to perform the functions conferred on an administrator by this Act. If the application for the appointment of administrator is delayed by the company involved, if they contest the appointment of an administrator and this is debated in the court for a number of days, what is the legal situation? Surely we are on very thin ice with a possible collapse of the whole deck of cards. Can people with motor insurance receive an assurance from the Minister that they will continue to be covered?

The court may decide — and this is allowed for in the Bill — that on the initial application they may appoint a provisional administrator and they may say he can carry on in that capacity for a limited period of time until they have gone into the matter further and made a decision on whatever time was needed to have the administrator. Any act by him in his capacity as a provisional administrator would be valid and could not be made invalid after his provisional period had expired. People would be continued in their cover.

The administrator could be in for a week and then out again, and the board of directors of a particular insurance company could have their functions back again in a week. That is in theory. I am not saying it will happen, but it is as well to examine it.

I am confident that this Bill will pass through both Houses of the Oireachtas. On the advice available to me I am also confident that the application on the basis of the submission which will be made will be successful in the court. On the question of the very very remote chance of what the Deputy mentioned, nothing could happen which would be worse for the insured people and the people in employment than what exists at the present moment, nothing.

Have the shareholders any rights?

The rights of all parties concerned would be a matter for the court to determine. The application is to the court for the appointment of an administrator. The court would appoint the administrator and determine in many cases what scope of action he had. He would not be answerable to the Minister. He would be answerable to the court.

Would the Minister not accept that, if the contingency postulated by Deputy Burke were to arise, the only option open to the Minister would be to wind up the company with the very serious consequences in that regard? In those circumstances would the Minister not be so openly confident of the outcome of the application, particularly as there is a possibility — I do not know — that the application will be contested? The courts would like to feel that the ultimate decision by them is a matter on which they would make up their own minds. There can be no certainty in advance as to how they might decide. The suggestion put forward by Deputy Burke is a possibility. It is not an impossibility. It would be a pretty horrendous one. The Minister would be well advised to have some contingency plan to cope with it.

I accept entirely that the final decision as to whether or not to appoint an administrator or to accept the application made in my name is strictly a matter for the court. I was explaining to the House in reply to Deputy Burke that the legal opinion available to me, having gone into this thoroughly, is that this application, on the basis of the presentation made, would be conceded by the court. As the Deputy said, this is a matter for the courts, and I would not attempt to usurp their jurisdiction or authority. That is the advice available to me.

As Deputy O'Malley points out clearly, the alternative would be to approach the court for a winding up. That would be a disaster, in my opinion. I do not anticipate having to do that. As far as contingency plans are concerned, I can assure the House that when I was presented, not very long ago, with the present situation, after a great deal of thought and a tremendous amount of work by the officials of my Department in particular and by legal people, we came up with this legislation which would diminish very greatly the catastrophic effects of just proceeding along the lines open to us under the present law.

On a point of order, with what section are we dealing?

Section 1, which deals with interpretations.

This seems to be a fairly broad debate. There are a number of points I want to raise and I wonder if I should ask about them under this section.

As this is a limited debate I am taking this opportunity to expand on particular interpretations.

In view of what Deputy Molony said, if we were to discuss this legislation section by section the Deputy could raise the issues at the appropriate time.

There are only 50 minutes left.

May I ask one question? Earlier the Minister was asked if it was a good idea that there should be negotiations between the Minister as supervisory authority and the company involved, no matter which company it is. Forget about tomorrow and thinks of 12 months hence when this legislation is still in force. Will the supervisory authority — the Minister — have discussions with the company involved and then proceed to the court? Have there been discussions in this particular case? Has the Minister had discussions with the board of the company involved?

I answered that when Deputy Flynn raised this point earlier.

I did not hear it because I missed the beginning of the Minister's reply.

Deputy Flynn made the point that if an administrator could make a going concern of this enterprise over a certain period, surely the people now involved in the company could do the same. My reply was that there were two reasons I did not believe that could happen. First, the company must accept some responsibility for the present situation, and second, they would not, should not and could not have access to the compensation fund which would be available to the administrator, which would be an essential element in restoring the company to a viable position.

I agree they would not have access to that fund.

Question put and agreed to.
SECTION 2.
Question proposed: "That section 2 stand part of the Bill."

Under this section the Minister will petition the court. I take it that in petitioning the court the Minister will have to produce evidence of a case against a particular company to convince the court that the petition will succeed. Do I take it that the recommendations of the various reports which lead the Minister to take that step will be available in the court tomorrow morning?

Section 2 (1) refers to the appointment of the administrator. The general public would be concerned to know what kind of administrator the Minister has in mind. Will he have considerable experience and expertise in the motor insurance field, or will he be a member from an accountancy firm, or what? Section 2 (1) says "notwithstanding that there is or may be another remedy or course of action available to him in relation to such insurers." That being the case, and irrespective of whether the Minister believes today that there was a possibility that an alternative option might have been successful, he still has power to proceed in this way. I take the view that in the petition to the court if the insurer can establish that he has assets capable of dealing with any commitments he might have to face, this section could not succeed.

It appears to me that this matter could not have arisen overnight. In my Second Stage speech I referred to the question of supervision which is directly under the control of the Minister. The great disparity between the commitments now facing that insurer did not happen overnight. It might be difficult to convince the High Court that the petition should succeed in those circumstances.

Deputy Flynn raised a number of points. First he asked if the course of action open to the Minister was the only one, and, if there were other courses open to him, would he still adopt this one and look for an administrator to be appointed by the courts. He also asked about the presentation that would be made to the court. As I said in my Second Stage speech, a petition which will include affidavits will be made to the court tomorrow and any relevant information the court requests to enable it to make a judgement will be made available.

I do not appoint an administrator. I apply to the court on the basis of evidence I have that a company is no longer solvent. I have direct responsibility under law to do that, but it is for the court to decide if my assertion is valid. After considering the petition, the affidavit and other relevant information it may request, the court will make that decision. If it decides to concede that the application is justified, under the present legislation it can do so by appointing a provisional administrator for a limited period which would enable him to go further into the matter and allow other interested parties to make their presentation. In the ultimate it is the court that will decide. If the court decides to appoint an administrator that person will not be answerable to the Minister but to the court. That administrator will also be answerable to the court and have, under certain circumstances, to go back to the court for permission to exercise certain of the rights he may have, if the court decided to make the appointment.

Will a provisional administrator have the same powers under the Bill?

A provisional administrator will have all the powers of an administrator who was ultimately appointed on a more permanent basis.

This being the key section of the Bill I should like to avail of the opportunity of complimenting the Minister on bringing in the legislation and his officials for tackling the matter in this way. I should also like to congratulate Deputy O'Malley who as Minister suffered considerable abuse from a set of directors in one company. I was Minister of State in his Department and I am aware of many of the details of the company, assuming it is the company involved. I congratulate all concerned with bringing in the legislation to protect the interests of the policy holders. The Minister told the House that the administrator would be responsible only on the insurance side. If the company concerned is the one I am thinking of it is a deck of cards in that there are 74 different companies involved. They will be key to the success or otherwise of the task of the administrator. How can an administrator separate the operations of the companies bearing in mind that they are all financially interlinked? Will the Minister explain that?

We are hopping from one section to another and I am doing my best to cope with the questions raised although the relevant sections are not mentioned. As I understand it a number of insurance companies have subsidiary and related bodies. They can have property and other businesses. There is provision in the Bill for the administrator to exercise control over subsidiary bodies but there are other related bodies. In the case of them it depends on the degree of relationship between them and the insurance company, on the type of operation involved. It is important to note that the administrator would have power in the event of any subsidiary body, or any other body, doing anything detrimental to him in the exercise of his main function of carrying on the business as a going concern on a day to day basis, or trying to prevent him doing something, to apply to the court for an order. If I read the relevant section it would be more helpful to the Deputy.

We should wait until we reach section 4 to deal with that point.

I understood the Minister to say that the court could only move where an insurance company was insolvent. It appears that under subsection (2) (a) there are a number of options.

The Minister has a number of options.

A company would not have to be insolvent?

Question put and agreed to.
SECTION 3.
Question proposed: "That section 3 stand part of the Bill".

I am looking for an assurance on this section. In dealing with an insurance company of a large size there may be thousands of court proceedings in existence at any one time where the company is indemnifying the defendant in such proceedings. I should like an assurance from the Minister that there is not any question of those proceedings being affected. I should like an assurance that where judgment is obtained by a plaintiff in such proceedings there will be no difficulty presented to the plaintiff in executing. There is a prohibition against execution of a judgement written into section 3. Some provision will have to be made to cover this, but I am concerned that the courts will be blocked up with people making applications under this section to cover, perhaps, a personal injuries action worth, perhaps, £500 or £600. I would be grateful if the Minister would reassure me on that point.

Other applications can be made to the court. I believe that under section 76 of the Road Traffic Act 1961, where there is a difficulty or a question raised by an insurance company over their policy of insurance it is open to an aggrieved or injured party to make an application to the High Court to nominate the insurance company concerned as defendant in the proceedings. How will situations like that be dealt with?

In the event of an administrator being appointed all the normal functions of the company will be carried on. That administrator will conduct the business without any restraint except the normal restraint imposed by commercial and business practices. I do not foresee any difficulty in that regard. I have pointed out that any obligations in regard to contract of employment, transactions, debts and so on will not be affected by the appointment of an administrator. There would be no change in their liability with regard to normal debts or business practices in the carrying on of the day to day business of the company.

I should like to draw the Minister's attention to subsection (2) (d) which provides that no attachment, sequestration, distress or execution shall be put into force against the property or effects. I am worried that in ordinary running down actions, of which there are thousands in relation to the biggest insurance company in the country, it may be necessary for plaintiffs to make a particular application under this subsection. If that is the case I can see enormous problems arising from the High Court in trying to deal with the numbers involved.

This matter is also related to section 222 of the Companies Act which is not being applied. Proceedings of this kind would not be affected in any way.

The same thought that occurred to Deputy Molony occurred to me. If one reads the subsection carefully one will see that the reference to attachment, sequestration, distress or execution is against the property or effects of the insurer, the company. One cannot distrain against it, but one does not need to distrain against it if the administrator pays the judgment, which he will do in the normal course of business. It would only be a case where the administrator thought it inappropriate that one would have to apply to the court for consent to levy distress.

The points made by Deputy O'Malley had occurred to me also. I wonder how quickly the administrator will be able to get in and say everything is to go on as normal? I realise the Minister is constrained in his freedom to discuss the affairs of the company in respect of which he proposes to make an application tomorrow. The organisation is massive. Could we have an assurance from the Minister that he is confident the administrator will be in a position on the day he is appointed by the court to say that everything will roll on without any stopping, or will the administrator have to examine the affairs of the company to any extent that would cause delay? That is the reason I see the danger of the problem to which I have referred.

As I explained earlier, a very large section of the Companies Act that would apply to a liquidator would also apply to the administrator, but there are certain modifications in that that would militate against him performing his main function, which would be to carry on the business and not to wind it up. In that regard, certain sections of the Companies Act do not apply. That would leave the situation as Deputy O'Malley has explained it.

The section deals with the powers of the administrator. Once this emergency legislation is passed it can be applied to any insurer, solvent or insolvent without further reference to this House. That being the case, it seems to me that these powers are quite extensive. While they may be necessary to deal with one particular case the Minister has in mind for the petition tomorrow morning, it might not be necessary to have global powers like this to deal with all other petitions. The range is quite extensive. It allows the administrator to sell off real and personal assets of the company without restriction on him as to the best time to do that. When one considers that the company I referred to would rely to a substantial degree for its realisable assets on its diversified interests and subsidiaries over the years — I cannot quantify what they might realise in hard cash now — it is giving an open hand to the administrator to do as he wishes in liquidating many of the assets of a particular company. While it might be acceptable in dealing with one isolated case named here, with the back-up of the reports before the House which will form the basis of the submission of the petition tomorrow morning by the Minister, at the same time these powers can be amended by order of the Minister without further reference to this House. It must be realised that this section is very extensive. It might lead to an attitude by another administration or another Minister that would be contrary to the attitude of the Minister present in this House.

Quite frankly, I find it difficult to follow the point made by Deputy Flynn. Surely he is not suggesting that we will zoom on one company? This legislation has general application. The fact that there is a company to which I think the legislation would be applicable is another matter. There has to be a clear distinction between the role of the Oireachtas and the role of the courts. The role of the Oireachtas is to frame legislation as a guideline, setting out parameters within which the court may operate and interpret the legislation. It is suggested that this legislation could be applied to any company, but I would refer the House to the closing remarks of Deputy O'Malley. I emphasise that he was speaking of a particular company but I am talking in general terms.

The Minister has not denied it.

The Deputy will be amazed at the number of things I have neither denied nor confirmed. Deputy O'Malley said that he told a senior member in the Department that when this bomb exploded he hoped he would not be in the Department. Is Deputy Flynn seriously suggesting that a Minister would initiate these kind of proceedings in the courts against a company just for the sake of doing that? It is not something one relishes having to do but it is necessary. Any fears that a Minister would do this because he felt bored and had nothing better to do are, to say the least, extremely remote.

Obviously the Minister misunderstood me. I was saying the Minister can apply the provisions of this legislation. The ideal way to deal with legislation of this kind is for the Minister to bring it in in a normal way and allow it to go through in the normal way and apply the terms of the legislation at a future date if that should be required. It seems to me that the Minister can utilise this legislation without reference to the Oireachtas in dealing with any company. Emergency means exactly what it says. The Minister wishes to have the legislation framed in this way to deal with a company that I named and which the Minister has not confirmed or denied. While we must, in principle, have legislation to deal effectively with matters, at the same time we must not be rushed into giving powers that can be varied by ministerial order without reference to the Dáil and without giving the matter due consideration.

It is worth drawing attention to section 3 (6) (a) which is extraordinarily wide. I should like to have some understanding of the Minister as to the extent to which it could ever be used. The subsection allows the Minister by order to modify any provision of the Companies Acts, 1963 to 1983, and any instruments made thereunder or any rules, or any rules of court relating thereto, which is just about everything conceivable and, of course, it has the effect of allowing Acts of this House to be amended by order of the Minister in private and without debate. In principle that is objectionable. That has been said in this House many times. If the House or the Oireachtas, generally after long debate, enacts certain Acts of the Oireachtas such as the Companies Act 1963, which took a very long time, it should not be lightly amended. It should be amended only by a further Act of the Oireachtas. I can see that there could be short-term emergencies as in the administration of this Bill, but will the Minister give an assurance that this power will only be exercised in relation not just to the Bill generally but in relation to a company which is the subject of an application under section 2?

In so far as I would not envisage having to use the powers conferred on me except in relation to a company that was under administration, I think the Deputy will agree this is not an unusual provision in legislation. It is already in existing legislation. It is modelled on section 395 and section 396 of the Companies Act, 1963. It also has the safeguard that any regulation made under this Bill must be placed before both Houses of the Oireachtas and it can be annulled by the Oireachtas at any time within 21 sitting days after being made. There are safeguards. The provision is not an unusual one. What I would envisage is a major radical change in insurance law. These are uncharted waters to some extent and there can be certain teething difficulties in its initial application on the appointment of an administrator which render it necessary to have these powers in order to overcome difficulties that might arise. I can assure the Deputy it is not my intention to use these powers except in cases of companies actually under administration.

Would the Minister give a similar type of assurance that it is not his intention now or in the future to use this Bill for the purpose of nationalising this or any other insurance company? He referred in his opening speech to businesses that had to be dealt with by direct ministerial action, which might suggest he had nationalisation in mind.

As far as nationalisation of a number of financial institutions is concerned it is my belief that such a policy might be extremely beneficial.

But not this one.

I assure the Deputy that my immediate concern is to ensure continuity of cover for those who have paid their premiums and to safeguard the jobs of employees by means of the alternative approach which is the only one open to me at the moment. That is my primary consideration. That is the purpose of this measure.

The Minister throughout his speech led me to believe that he does consider the particular company with an administrator, backed up by the resources of the compensation fund, can and will be substantial and that is the commitment given here to the insured.

While others can speculate as to which company they have in mind I am not in the business of speculation. I cannot afford the luxury of speculation. I am talking about a Bill that is of general application. In reply to the Deputy's question in relation to any company that might find itself the subject of a successful application to the courts for the appointment of an administrator, in my opinion it could not be successful and could not restore itself to solvency except under the provisions of the Bill which would, first of all, change the management and, secondly, would make available to it very considerable sums under the proposed compensation fund.

Lest the impression be given that the State is stepping in — I am referring to the question asked by Deputy Flynn about nationalisation — let it be clearly understood that the State is not stepping in here. This is being paid for by every insurance policy holder in the country. It is a considerable imposition on them and it will be very expensive. It talks of a minimum of £10 million a year for God knows how many years, and that is one of the reasons why I expressed hope of some termination date. This is going to be very expensive. It is not being paid for by the policy holders of a particular insurance company now in trouble but by those who were wise enough to go to other companies and, what is worse, it is being paid for also by non-motor policy holders. It will put up the cost of home insurance, personal accident insurance, fire insurance, theft insurance and all the other things which have nothing whatever to do with motor vehicles at all. There is great variety of insurance. We agreed pretty readily today that this is some kind of manna that has come down from heaven to solve the problem. The fact is that ordinary policy holders will have to pay through the nose because of the consistent mismanagement of one company. It is very regrettable that that should be so but, in all circumstances, I suppose it cannot be avoided.

I accept it will impose an additional burden on policy holders in the non-life sector but, quite frankly, I could not go along with the disastrous imposition implied by Deputy O'Malley. Let us look at it realistically. The maximum will be 2 per cent on the premium. I discussed in general terms the provisions of the Bill with a colleague today and he told me his insurance was costing him £320. He was with this particular company for six months. As the law stands the only course open to me is to put a particular company into liquidation. In that case this man's policy is gone. The unearned premium has still six months to go. If the maximum is applied it would cost him approximately £6 for the year. If the Bill does not go through it will cost him £160. That is that aspect of it.

On the other hand, talking about non-life, there are also advantages in so far as the maximum an insurer can be asked to pay is 2 per cent on the premium; but, if you are placed in a similar situation, you have access to the compensation fund not only for motor insurance but for other non-life insurance which may be covered. It is not all losses. There must be a certain degree of security in the minds of insured people if this legislation goes through. While I accept that there would be some imposition on the insuring public in the non-life area it is not as dramatic or as draconian as has been suggested. There are certain pluses involved in that also.

I have no doubt that the legislation will go through. I am not as convinced that the powers will get as easy a ride as the Minister suggests.

Question put and agreed to.
SECTION 4
Question proposed: "That section, 4 stand part of the Bill".

Deputy Burke raised a number of queries and it was suggested that the Minister might reply to them on this section.

Is it that the application may be applied for?

It is the position of the connected bodies, as they are called in the section. This phrase is broadly cast because it is not just a question of subsidiaries. A lot of them are related to the insurance company concerned in the form of a relationship which is not that of subsidiary.

Section 4 (1) provides that on the application of the administrator the court may make an appropriate order in respect of anybody connected with the insurer if it appears that the affairs of the body concerned may jeopardise the interests of the insurer or those connected with it or it is advisable that the affairs of the connected body should be curtailed in some way to safeguard the insurers' interests or any part of the property of the connected body should be controlled and to do so would be just and equitable and would be in the public interest. Those are the circumstances in relation to the connected bodies.

It is reasonable that the administrator would have the powers. Is it envisaged that he will exercise the powers for the benefit of the insurance company solely? Will he run down or sell off the assets of some of these connected bodies like industrial and provident societies, building societies, friendly societies and other bodies of various kinds that are the owners of properties of various kinds? Will he sell those off, run them down and pay the funds back into the insurance company for the benefit of the policy holders and the third party claims in order to reduce the amount by which the administrator would otherwise have to have recourse to the compensation fund? Surely his obligation is to minimise his calls on the compensation fund and he has no obligations, moral or legal, to seek to benefit the connected bodies? It is the insurance company that this legislation is about.

Under the legislation the administrator would have very wide powers that would normally be given to a liquidator. He could in certain circumstances sell off property that was subsidiary or connected with the company. When I was speaking on the Second Stage I mentioned the question of related companies. I made it clear that while the primary responsibility of the administrator would be to run the business on a day to day basis with a view to restoring it to solvency — that is his main responsibility — and that the funds from the compensation fund could not be used in respect of related or subsidiary companies or businesses, that it was only reasonable that while the parent insurance company was secure and was being managed prudently, that that would have a beneficial effect on other related companies that might be in danger.

It is conceivable that because of the inter-relationship between a number of insurance companies and other subsidiary companies that they have, property companies and so forth, that one of these companies could owe the insurance company a considerable sum of money. The administator would be in a position to demand the immediate return of that sum of money and pursue it, but he would also be in a position to take the view that if he did that it would put that related company out of business and cause unnecessary hardship and unemployment. This would be a matter he would have to determine. He would also, in relation to these matters, have recourse to the courts. He may find that there are certain circumstances which arise in which he would like the guidance of the courts and that he could apply to the court for such guidance. The main thing is that he would have free scope to act as he determined in the best interests of his primary consideration, the insurance company, and that the only restraints that would be put on him would be the normal restraints that would operate in a prudent commercial enterprise.

I know that. While what the Minister has said is right and is expressed in very general terms it might be no harm if it were known to the House that if the administrator were in doubt he should give priority to the interests of the insurance company.

That would certainly be his main responsibility.

If the Minister would bear in mind that he is appointed as administrator to the insurance company only the powers in this section are merely subsidiary because in the case of a particular company there is a very large number of connected bodies.

There is no doubt that his primary responsibility — he would be charged with that responsibility — would be to the insurance company and to restore that to a solvent position.

And as between the conflicting claims of the creditors of the insurance and the creditors of an industrial and provident society that was connected, the creditors of the insurance company must come number one.

That is right. Also related to this is that any money that was drawn from the compensation fund by the administrator for the benefit of the insurance company in an endeavour to restore it to a healthy financial position would have to be repaid by the insurance company to the fund before it would be considered to be taken out from under administration.

Is section 4 agreed?

That is interesting. That opens up a very long-term possibility. The administrator will be a miracle worker if he ever repays any of that money——

He might be able to.

——in the circumstances of the can of worms he will find himself in tomorrow morning.

He will certainly draw a pension out of administration if that provision is to be complied with.

The length of the administration will be directly connected with the magnitude of the problems which he finds.

Was Mr. Mills not lucky that he did not get this job?

As Deputy O'Malley said himself, was he not lucky?

Question put and agreed to.

I must now put the question: "That the Bill is hereby agreed to and is reported to the House, that Fourth Stage is hereby completed and the Bill is hereby passed."

Question agreed to.

The motion is carried. The Bill will be sent to the Seanad.