Dáil Éireann debate -
Tuesday, 19 Feb 2002

Vol. 548 No. 5

Written Answers. - Insurance Industry.

Charles Flanagan

Question:

67 Mr. Flanagan asked the Minister for Finance if his attention has been drawn to the call by the Irish Brokers Association to reconsider a rule requiring members to seek authorised advisor status from the Central Bank, if his attention has further been drawn to difficulties encountered by IBA members in complying with the new regulatory regime; and if he will make a statement on the matter. [3370/02]

Minister for Finance (Mr. McCreevy):

The Irish Brokers Association is a representative body for insurance brokers in Ireland. At its AGM in Kilkenny in May 2001, the IBA's members passed a motion to the effect that membership of the organisation should be confined to those who hold authorised advisor status or its equivalent. The authorised advisor category was introduced by the Central Bank following consultation with insurance industry representatives. Authorised advisors must give broad based advice to their clients including advice in relation to the products of product producers, or insurers, from whom they do not hold an appointment in writing. Therefore, authorised advisors must have a broad knowledge of the market and cannot concentrate on products from just a few insurance companies, thereby ensuring their independence.

The IBA's AGM took place during the period of consultation on the regulatory framework for insurance intermediaries initiated by the Central Bank. The regulatory framework agreed upon following that consultation process was not finalised until some time after the IBA's AGM when the Central Bank published various codes of conduct, or handbooks, for all insurance intermediaries. Arising from the publication of these handbooks, many IBA members felt that they might not meet the requirements for authorised advisor status. Some of them decided to seek classification as restricted intermediaries. Under the Investment Intermediaries Act, 1995, restricted intermediaries may only give advice in relation to the products of insurers from whom they hold an appointment in writing. In deciding to opt for restricted intermediary status, some IBA members were putting themselves at variance with the membership criterion established by the May 2001 AGM resolution. Clearly, this was an issue for the IBA to address.

An emergency general meeting of the IBA was held on 10 January to discuss a motion to permit restricted intermediaries to be members of the IBA. Although a large majority or 69% of the membership voted in favour of the motion, this fell short of the majority of 75% required to overturn the earlier motion. It is up to brokers to decide whether they want to be classified as authorised advisors or restricted intermediaries. As I have already indicated, the IBA's membership criteria is a matter for that organisation and I have no function in this matter.

I am aware that some brokers were unable or unwilling to meet the requirements set down in the Central Bank's handbooks. There will have been many reasons these brokers did not pursue the issue of authorisation with the Central Bank. For example, it may have been because they were tied agents, working exclusively for one insurance company. Possibly, the amount of commission being earned may have made meeting the requirements set down in the handbooks an unattractive proposition. There may be other reasons brokers cease to trade but I would not like to speculate further on that.