asked the Minister for Industry and Commerce if he will make an assessment on the implications for Ireland of opening up the insurance industry to insurance companies from the EC countries.
25.
Ceisteanna—Questions Oral Answers. - Insurance Industry.
12.
asked the Minister for Industry and Commerce if he is aware of the difficulties that the EC directive on Freedom of Services will pose for the insurance industry; the impact this directive will have on the industry; and the steps he proposes taking to minimise the likely problems arising.
I propose to take Questions Nos. 12 and 25 together.
Both questions essentially refer to the possible opening up of the Irish market in non-life insurance to EC insurers who would be permitted to write insurance risks here without having to be established in the State. This is usually referred to as the Freedom of Services Directive. As Deputies will be aware, EC insurers have been free to establish in Ireland to write risks here by way of branch or subsidiary in both non-life and life insurance under directives implemented in 1976 and 1984 respectively.
Freedom of establishment and freedom of services are rights under the Treaty of Rome. Freedom of services is covered by the draft Second Directive on Non-Life Insurance. This directive has been at EC Council working group level since 1976. Negotiations have temporarily halted since 1984, pending the outcome of proceedings brought by the Commission before the European Court of Justice against Ireland, France, Denmark and Germany in relation to the implementation of the 1978 directive on co-insurance. The ruling of the European Court, which is expected later this year, will have a major bearing on the further negotiations on the Non-Life Insurance Services Directive.
The Irish non-life insurance industry have been consulted on and kept informed of developments in the negotiations on the directive and in the proceedings before the European Court of Justice. The industry are well aware of the implications of the further competition which will result from the opening up of the Irish market to EC insurers operating on a services basis, that is, without having an Irish establishment. The industry have been regularly encouraged to prepare to face the challenge. In order to allow time for such adaptation, the Irish delegation some time ago lodged a request for a temporary derogation from the implementation of the directive. My Department will continue to assist the industry in their adaptation measures and communication will be maintained with the industry in further negotiations on the draft directive.
Have the insurance industry, or the union representing the 8,000 employees of that industry, made a submission to the Minister concerning the possible seeking of a derogation from this directive over a period of years?
As I said in my reply, my Department are in constant contact with the industry and, indeed, I met a deputation of one committee of unions representing workers in the area and the question of derogation was raised. In my reply I stated that the Irish delegation lodged a request for a temporary derogation from the implementation of the directive. However, should the court of justice give a decision against Ireland's position and against the position of other countries then we may not be in a position to get a derogation. It would be a court of justice decision rather than a Council decision. I have been trying to encourage the industry to face up to the fact that there will be liberalisation some time, perhaps sooner rather than later. There is a need to be competitive and to reach out and offer their services abroad.
Time is being sought so that the industry can gear themselves up to deal with this new competition. They have asked the Minister to seek a derogation. I impress upon him the need for it to protect jobs and also to protect a valuable source of income for State borrowing. If the Freedom of Services Directive comes into being companies will not have to maintain any of their premium income in the State.
That is not a question.
Will the Minister give a positive response to the request for a derogation for at least five years so that this industry can gear themselves up?
I stated in my reply that we have sought a derogation. I also stated in a supplementary reply that, if the court of justice decides on this case in a certain manner, the question of a derogation will to a certain extent be difficult.
Does the Minister support a derogation?
Yes, we have asked for it. This draft directive has been in existence since 1976. If the industry are not aware of its implications by now and are not prepared to take the necessary action to be competitive, then there is little I can do.
I am now moving to priority questions.