Insurance (Amendment) Bill 2011 [Seanad]: Second Stage

I move: "That the Bill be now read a Second Time."

I welcome the opportunity to address Dáil Éireann today on the Insurance (Amendment) Bill 2011, which was published on Tuesday, 13 September 2011. At the outset, I wish to outline the main reason it is necessary to have the Bill passed speedily by the Oireachtas. The joint administrators of Quinn Insurance Limited, QIL, hope to conclude the sale to Liberty Mutual Direct Insurance Company Limited, a joint venture between Liberty Mutual and Anglo Irish Bank on 4 October and they are to report to the High Court that day to give effect to this.

A key requirement which will have to be demonstrated to the court by the joint administrators is that there is a commitment in place from me, as Minister for Finance, to advance the necessary funds to the insurance compensation fund in the following weeks. A precondition of such an advance is a recommendation from the Central Bank that such funding is required. At present, there is €40 million in the fund, and the Central Bank has advised that in order for the joint administrators to be able to meet their financial obligations in the last quarter of this year, €280 million will have to be provided to the fund and has accordingly recommended that I make the necessary advance. However, as Deputies will appreciate, before I can make such an advance the proper legal basis has to be in place, thus explaining the urgency of the Bill. Approval from the High Court for the deal will complete an important milestone in the administration process, which will see the sale of QIL completed and ensure the future of the workforce is secure.

The main reason for amending the legislation is changes in EU law in the non-life insurance sector since the fund was last used. The Attorney General advised that our existing legislation was not compatible with EU law and should be amended. Accordingly, the Bill proposes to amend the Insurance Act 1964.

The Bill comprises ten sections, the main elements of which are set out as follows. Section 1 is the definitions section, and the purpose of this provision is to acknowledge that the principal Act is the Insurance Act 1964. Section 2 amends section 1 of the principal Act, which is the definitions section of that Act. The purpose of this provision is to introduce a number of new definitions to section 1 of the Insurance Act 1964 and update the existing definitions for "authorisation", "policy" and "insurer". These will allow the scope of the scheme to be extended to cover all insured risk in the State, except specific excluded risks.

Section 3 amends section 2 of the principal Act, which deals with the insurance compensation fund. This a technical provision and its purpose is to make a number of minor cross-referencing changes to section 2 of the Insurance Act 1964, consequential on the amendments made in this Bill.

Section 4 deals with payments out of the fund in respect of insolvent insurers. The purpose of this provision is to replace section 3 of the Insurance Act 1964 and to introduce a number of new sections. These provisions are designed to facilitate payments out of the fund to policyholders with regard to risks in the State where an Irish authorised or an EU authorised insurer goes into liquidation and the approval of the High Court has been obtained for such payments.

In more detail, section 3 provides context for sections 3A and 3B and also sets out the limitations to the payments which can be made from the fund. These limitations replicate what is contained in the existing legislation, the most important of which is that payment from the fund under a policy shall not exceed 65% of that sum or €825,000, whichever is the less, in the event of payments being made to policyholders after the liquidation of an insurer.

Under the new scheme, policyholders will be covered by the fund in respect of "risks in the State." The principal factors which will determine whether a risk is a "risk in the State" will be whether insured buildings are located in the State; whether insured vehicles are registered in the State; in the case of short-term travel insurance — whether the insurance was taken out in the State; and in most other cases whether the habitual residence of the policyholder is in the State or, in the case of legal persons, whether the establishment of the policyholder is in the State.

Section 3A provides for the liquidator to make payments from the fund to policyholders of Irish authorised firms.

Section 3B provides that if an insurance undertaking in another member state goes into liquidation and policyholders in relation to risk in the State are affected, that the accountant of the High Court can make an application to the High Court on their behalf and can distribute any sums due to such policyholders.

Section 3C provides for the continuation of the administration provision as set out in the Insurance Act 1964, but prospectively intends confining the availability of funding from the ICF to firms under administration which conduct a large percentage of their overall business in Ireland, that being, 70% averaged over the three years before the appointment of the administrator.

Section 5 is the repeal of section 4, grant to fund by Minister, of principal Act. The purpose of this provision is to repeal section 4 of the Insurance Act 1964 which the Office of the Attorney General has advised is obsolete as it relates to a specific insolvency in 1964, namely the Equitable Insurance Company Limited.

Section 6 is an amendment of section 5, advances to the fund by Minister, of principal Act. This is a technical amendment designed to make a cross-referencing change to section 5 of the Insurance Act 1964.

Section 7 deals with contributions to the fund. The purpose of this provision is to replace section 6 of the Insurance Act 1964. The section sets out the conditions for the levying of insurance companies in relation to the ICF. The key elements of this provision are: the Central Bank continues to be responsible for assessing the fund to determine if it needs financial support; the bank determines the levy to be placed on insurers where funding is required and notifies them; and it requires all insurance companies to be levied in respect of risks in the State under the new scheme.

Section 8 repeals section 31, the insurance compensation fund of the Insurance Act 1989. Section 8 of this Bill is a technical amendment and the purpose is to repeal section 31 of the Insurance Act 1989, which made amendments to section 3 of the 1964 Act. Those amendments are now obsolete as they are superseded by section 4 in this Bill.

Section 9 relates to saving. The purpose of this provision is to provide a saving mechanism and to ensure that any liquidations or administrations commenced before this Act comes into effect will continue to be subject to the old rules. This is the standard convention that a company under administration is protected under the rules that applied when the company went into administration. The effect of this is to ensure that Quinn Insurance Limited remains under administration as if this Bill had not been introduced.

Section 10 is a standard provision, which provides for the Short Title of the Act. I would like now to elaborate on the main reasons for the Bill. When the administrators were appointed their main task was to carry on the business of Quinn Insurance Limited as a going concern with a view to placing it on a sound commercial and financial footing by carrying out the necessary restructuring and setting in motion a process to sell the business. During this time they were also required to establish what the underlying financial position of the company was and in particular whether sufficient reserves had been put aside to meet its future liabilities. Consequently, by the time the announcement of the sale of Quinn Insurance Limited to Liberty Mutual Direct Insurance Company Limited, LMDI, was made on 28 April, the joint administrators were in a position to indicate that Quinn Insurance Limited had suffered losses of €905 million in 2009 due largely to operating losses in the UK market and a write down in the value of assets. Further related losses in 2010 are expected to be €160 million. At the same time the joint administrators indicated that there was likely to be a call on the insurance compensation fund in the region of €600 million. This figure has however been revised upwards to €738 million in recent weeks, because of an increase in the outstanding claims reserve which was required after the finalisation of the 2010 actuarial review by Quinn Insurance Limited actuaries.

Deputies should note that the increased call upon the insurance compensation fund concerned me in case the company's eligibility for insurance compensation fund funding might be leading to a less rigorous approach being adopted to the settlement and payment of claims. It was important that I be satisfied that the appropriate systems and processes were sufficiently robust to ensure that the call upon the fund is kept to an absolute minimum. In that light, I asked the State Claims Agency, which has specialist skills in the area of claims management and reserving, to undertake a review of the processes at Quinn Insurance Limited and in particular to have a look at the claims management process. The State Claims Agency has almost completed its review and in its interim report has reassured me that the claims management process is operating effectively. It indicated that reserving had improved considerably since the joint administrators took over the running of the business, but there was potential for improvement in some other areas. In summary, it felt that the increased call upon the fund, as a result of various actuarial reserving reviews, was appropriate.

Currently, under the Insurance Act 1964, all policyholders of Irish authorised firms are covered by the insurance compensation fund whether they are located in Ireland or in other EU member states. The legislation also provides that all such companies are required to be levied whenever there are insufficient funds in the insurance compensation fund to meet a particular demand such as the Quinn Insurance Limited deficit.

However, because of changes in EU law since the fund was last used, it was necessary to get legal advice on this legislation, in particular the application of the insurance compensation fund levy on insurance companies. The primary issue we wanted clarified was whether Article 46 of the Third Non-Life Insurance Directive, 92/49/EEC, which precludes a member state from applying an indirect tax or parafiscal charge on insurance risks outside of its jurisdiction was relevant to the application of the insurance compensation fund levy. The Attorney General concluded that it was relevant, and that any levy which was applied on insurance companies in terms of risks outside of the State in the context of an administration or a liquidation would appear to infringe Article 46.2 of the directive. In light of this she advised that a levy can only be applied in respect of those risks located in the State. The outcome of this advice is that we cannot apply the insurance compensation fund levy to international risks, and as a result our legislation must be changed thus explaining the amendments being made to Article 6 of the 1964 Insurance Act in this Bill.

I have also decided to amend the scheme so that, as far as possible, risks outside of the State are no longer covered by the fund. Failure to do this could result in Irish policyholders having to fund a deficit resulting from the failure of an Irish authorised insurance company which conducts the bulk or all of its business outside the State. In addition, I have decided to use this legislative opportunity to broaden the scope of the insurance compensation fund to cover all insured risk in the State. That will protect policyholders in this country who take out cover with companies authorised in other EU member states and who are not currently covered by the existing scheme and therefore ensures that all domestic policyholders have the same level of protection in a liquidation situation, whether the policy is taken out with an Irish authorised firm, or a firm authorised elsewhere in the EU.

For the moment, I have decided to exclude health insurance from the scope of the scheme, because the main player in the market, VHI, is not authorised by the Central Bank and is therefore outside the scope of the general body of insurance legislation. In addition, the placing of an additional 2% on health insurance premiums at a time when there has been a significant increase in people not renewing their policies because of the difficult economic climate concerns me.

It should be noted that I propose to maintain the administration provision as set out in the Insurance Act 1964, but prospectively intend confining the availability of funding from the insurance compensation fund to firms under administration which conduct a large percentage of their overall business in Ireland, that being 70% averaged over the three years before the appointment of the administrator. The purpose of the restriction is to prevent Irish policyholders being burdened with paying for the administration of an insurance business which conducts all or the bulk of its business outside of the State, in circumstances where it is not possible to levy the premiums of foreign policyholders because of Article 46 of the third non-life directive.

In conclusion, I reiterate the importance of the swift passage of this amending Bill, in order to ensure that I can advance the necessary funds to the insurance compensation fund in the next couple of weeks. It is important to keep in mind that any advance by the Exchequer to the fund will be classified as a financial transaction and as such is not seen as expenditure, and therefore does not affect the general Government deficit and our targets under the EU-IMF framework. Indeed, an appropriate market rate of interest will be applied to this advance which means it will marginally improve the general Government balance. I commend the Bill to the House.

I welcome the opportunity to make a contribution to this debate on the Bill. I am dissatisfied with the way in which the legislation is being handled. We have to rush it through both Houses of the Oireachtas over a short period because of the High Court date on 4 October. The sale of Quinn Insurance Limited to the Liberty Mutual-led joint venture was announced back in April, yet here we are on the eve of an important court date putting through the necessary legislation to ensure that the insurance compensation fund is adequately recompensed to deal with the losses on Quinn Insurance's books. Essentially, the levy is proposing to put a charge somewhere in excess of €700 million on policy holders. In truth, however, it is an open-ended commitment because we do not know for sure what the full extent of the losses are on Quinn Insurance's books. The Department's briefing note refers to this legislation facilitating a levy of up to 2% on the insurance industry, but it is a levy on policy holders. We all know that so we should call it as it is. It is a bit like saying the pension levy is a levy on the pensions industry when, in all cases that we are aware of, it is being passed on to pensioners and future pensioners. If this particular levy is approved by the Oireachtas, it will land on the doorsteps of ordinary policy holders through the renewal of their motor, home and other policies.

I have read the report of the Seanad debate which took place two weeks ago. The Minister's contribution then was most interesting, as were the contributions of Senators. It is fair to say, however, that the level of awareness — not just among public representatives but also among the general public — of this impending 2% levy is very low. It is a matter of concern that people are unaware that this is coming down the tracks and will hurt them. The cost of policy renewals is rising and this levy will only make the situation worse for those who are already struggling to make ends meet. The Attorney General has advised the Minister that our existing legislation is not compatible with EU law. It is therefore necessary to amend the Insurance Act 1964 to change the scope of the insurance compensation fund from one which covers the risks of policy holders of Irish authorised insurance companies to one which covers all insured risk in the State except for certain excluded risks. In effect, under the legislation all insurance policies taken out in relation to risks in the State come within the remit of the scheme.

The legacy of Quinn Insurance Limited is at the heart of this Bill, as is, to put it bluntly, the mismanagement of Quinn insurance over a number of years. That has now landed the State and every policy holder with a bill that is unknown, but is currently estimated at €738 million. In the Seanad two weeks ago, the Minister indicated that it was only €720 million. When the joint administrators first announced the sale of Quinn Insurance Limited they estimated it would be €600 million. Even in that short period we have seen the overall bill increasing. The joint administrators are hoping to conclude the sale of Quinn Insurance Limited to Liberty Mutual Direct Insurance Company Limited- a joint venture between Liberty Mutual and Anglo Irish Bank — on 4 October. They need to report to the High Court on that date in order to give effect to this. As the Minister has said, they must demonstrate to the court that there is a commitment from the Minister on behalf of the Government to advance the necessary funds to the insurance compensation fund in response to a request from the Cental Bank, which is the competent authority. That particular fund currently has only €40 million and the Minister has outlined in some detail the scale of the losses that were incurred at Quinn Insurance.

I accept the need to put this debate in the context of job retention. We all want to see the jobs at Quinn Insurance retained, which is a policy priority for all parties in the House. Some 1,600 jobs are at stake and generally the employees welcome the sale of Quinn Insurance to the new joint venture as a means of preserving and protecting the existing jobs which are so important in the Border counties and elsewhere. We all support the need for policy holders to be protected. We do not want a situation where policy holders are loading claims with insurance companies in respect of incidents that happened some years previously and then find that the insurance company is not able to meet the requirements of a valid claim.

In April, the joint administrators indicated that Quinn Insurance Limited has suffered losses of €905 million in 2009 due largely to operating losses in the UK and a write-down in the value of assets in regard to the company's investment in Quinn Property Holdings. The 2010 losses are expected to be some €160 million. I read with interest the contribution of Senator Jimmy Harte in the Seanad about the business model that Quinn Insurance was pursuing, including the aggressive undercutting of its competitors' pricing policy for premia. He made the point that ordinary people were asking how Quinn Insurance could do business at a figure that was one quarter of what massive companies such as Hibernian, Norwich Union and AXA — which have been in the business for 200 or 300 years — were offering. That is a question for the regulatory authorities. To be fair, the Financial Regulator, Mr. Matthew Elderfield, identified and quantified the problem, and put a process in place to deal with the legacy of that. Just as with our banking system, however, we must ask the hard questions as to how this situation was allowed to develop. I would be the first to acknowledge that.

We also need to acknowledge the potential cross-contamination of Seán Quinn's investment in Anglo Irish Bank and the €2.8 billion that he and his family owe to that bank concerning the share gamble they made. For example, Quinn Insurance made a loan to the family to facilitate the purchase of some of those shares. There is an element of cross-contamination. While the losses we are examining are substantially related to operating losses, they are also attributable to the reduction in property values. Quinn's investment in the property sector has also impacted on the losses and has increased them significantly. At the time, the administrators felt the losses would be €600 million, then €720 million and now €738 million. People really want to know where this will end.

I am disappointed and disturbed to see that there is no sunset clause in the Bill to set a date by which we are committed to ending this levy. Quantifying the cost of future claims in insurance is an extremely difficult task because of the tail effect. Claims can come in many years after incidents have taken place. It is important to give people some direction or assurance as to how long this particular levy will be in place. If the deficit is in the region of €740 million, the Minister indicated in the Seanad that the levy will bring in about €65 million per year, so we are looking at this levy being in place for 11 or 12 years. That issue is at the centre of this Bill and it needs to be addressed.

I welcome the involvement of the State Claims Agency concerning the processes that were being employed at Quinn Insurance. The agency's feedback and reporting is very helpful.

It will have found what the administrator found on Quinn's books, that sufficient provision was not made for claims and hence, this levy is being proposed to cover claims in the system and future claims. We need to ask hard questions about the deal being proposed by the joint administrators for the sale of Quinn Insurance to the Liberty Mutual and Anglo Irish Bank joint venture. Is this the best possible deal for the Irish taxpayer? What is Liberty Mutual bringing to the table? I know it is making some investment and a commitment about job retention. However, I refer the Minister to his reply to a parliamentary question last May:

I have had no direct dealings with Liberty in relation to the transaction, including the issue of the future of all existing job-holders, however, I am informed by the joint administrators that aside from the redundancies in Manchester, all the 1,570 jobs in Quinn Insurance Limited have been protected for at least two years.

What is the status of that commitment from the Minister? It is a welcome commitment but even if it stands up, two years is not a long period of time. It seems that the State is underwriting to an unlimited extent all the losses incurred by Quinn Insurance. Liberty Mutual is making an investment and it is taking on board a company with a large customer base, even though many customers have moved on to other providers. The legacy liabilities of that business have been taken care of for Liberty Mutual. What is the upside, the benefit, for the State, in the event of that business becoming successful once again? Anglo Irish Bank has a minority shareholding and I presume if the business does particularly well — as is to be hoped — Anglo Irish Bank will recoup more of the money it lent to Seán Quinn and his family for the purchase of the shares. This is one benefit that is obvious but I am not convinced that we are necessarily getting the best possible deal. It should be put on the record of the House the exact details of what Liberty Mutual is bringing to the table and what are the explicit commitments it has made regarding the retention of jobs in the Republic and in Northern Ireland. In the event of the business succeeding, will there be any compensation from the company to bridge the deficit in the insurance compensation fund or will the bill be entirely laid at the feet of Irish policyholders? This is the key question.

What other options were considered for plugging the hole in the insurance compensation fund? The Minister has made a decision to pass on this cost to the insurance industry which will, in turn, pass it on to policyholders. We need to have a debate on whether any other options were considered. The 2% levy comes on top of an existing stamp duty levy of 3%. I understand that in 2010 that stamp duty levy took in approximately €110 million. Does the Minister intend to retain this levy and in effect, create a 5% levy on all insurance policies? This is an important question for which the public will want an answer. Has the Minister any plans to reform the insurance compensation fund? Is he giving the insurance industry a completely free hand as regards passing on this levy to policyholders, as was done in the case of the pensions levy? I note with interest his comments about the health insurance policies. For obvious reasons, he has decided to exclude health insurance policies because of the status of the VHI. Is this status subject to change or to be reviewed by the Minister in the short term? This would have an impact on many more people.

I look forward to engaging with the Minister on Committee Stage. I am disappointed at the short time allocated to consider this Bill which will impose a charge of somewhere north of €700 million but we do not know the full extent of the liability on the Irish policyholders and many hard questions need to be asked and answered and that is what we are here to do.

During the last Dáil, when Fianna Fáil tried to rush legislation through, there were loud protests from both Fine Gael and Labour and rightly so. It is unfortunate that despite all the promises of new politics and parliamentary reform from his party during the general election, the Minister is seeking to rush through this important legislation and this is not good enough. Good legislation requires good scrutiny and good scrutiny requires the allocation of adequate time to prepare, question, debate and amend what is put before us. When any Government attempts to railroad through legislation one must ask why the parliamentary process is being denied and why there is not adequate time to ensure the proposal is an appropriate and proportionate response to the issue at hand.

The cynic in me is always suspicious that the intention of the Government is to avoid scrutiny for fear of what it may reveal. This is particularly the case when it comes to the out-workings of the placing into administration of Quinn Insurance by the Financial Regulator.

A fortnight ago, Senators were given less than two days to read and absorb this Bill, all Stages being taken in a single session. Having read the Official Report of the Seanad debate, it is clear that no Senator felt able to comment adequately on or support the Bill.

The Government has proceeded with this legislation in an unacceptable and deeply undemocratic way. The treatment of the Dáil is little better. Amendments were to be submitted before the Second Stage debate had even taken place, a demand that is both procedurally inappropriate and politically unacceptable. When one considers the financial implications for the taxpayer and for hundreds of thousands of insurance policyholders across the State, this cavalier approach by the Minister to the parliamentary process is outrageous.

It has been widely reported in the media, and referred to by the Taoiseach and the Minister today, that the Minister is under pressure from Liberty Mutual and Anglo Irish Bank to ensure this Bill is fully enacted by 4 October, in advance of a High Court appearance by Liberty Mutual and Anglo Irish Bank to close the sale of Quinn Insurance. This is a reckless way to treat legislative process and it is certain to result in bad law and a bad result.

The entire Quinn Insurance saga is littered with bad practice and questionable behaviour. My colleague from Cavan-Monaghan, Deputy Caoimhghín Ó Caoláin, will deal with this matter in more detail during his contribution. However, I wish to place on record Sinn Féin's view that serious questions need to be answered regarding the way in which the Government, the Financial Regulator and the administrators have handled the issue of Quinn Insurance. Already, some 1,000 jobs have been lost in a region of the country with a history of high unemployment. These jobs were lost on the watch of the Financial Regulator and his appointed administrators. There is a need for a short public inquiry into the manner in which both the administrators and the Financial Regulator behaved, if we are to ensure any level of public confidence in the outcome of this saga.

This Bill raises more questions than it answers and at this stage, Sinn Féin is not in a position to support it. Sinn Féin is not, in principle, against amending the current shape and size of the insurance compensation fund and nor are we, in principle, against the imposition of a levy on all insurance risk in the State in order to fund future requirements. However, in determining whether to support this Bill, it is important to understand the background to its drafting. Following the placing of Quinn Insurance Limited into administration by the Financial Regulator negotiations between representatives of the administrator and the US insurance giant, Liberty Mutual and Anglo Irish Bank, commenced. The sale of Quinn Insurance has been agreed in principle and will be subject to a High Court hearing on 4 October. If the sale of Quinn Insurance to Liberty Mutual and Anglo Irish Bank proceeds, the insurance company will be split into two entities. The first entity, comprising of the Irish policy book of the company, will continue as an ongoing concern run by Liberty and Anglo.

The second entity, comprising of the policies held in the North of Ireland and Britain will be administered by Liberty Mutual but funded with a payment of up to €720 million from the insurance compensation fund. The fund will pay the policyholders who are outside the State. The request for this money was made by the administrators to the Central Bank. However, as the compensation fund currently only contains €40 million, the Government is proposing changes to its size and operation to meet the request by the administrators. Officially €720 million — this figure may increase — is to cover payments on policies to customers of Quinn Insurance in the North of Ireland and Britain. However, like so many aspects of this story, things are not that clear. It appears that assets from Quinn Insurance of more than €400 million were used as security against loans for the same value from Anglo Irish Bank for other commercial activities pursued by the company. As a result, bondholders with Anglo Irish Bank effectively have a hold on this portion of Quinn Insurance's insurance book. Liberty Mutual, seeing this as a liability, is insisting that the Government and the insurance compensation fund fill the gap. Happy to oblige, the Government is seeking to place a 2% levy on all non-life insurance policy holders in Ireland to fund the capital requirements of Quinn Insurance.

In order for the Anglo Irish Bank bondholders to relinquish their claim on the €400 million of assets at Quinn Insurance, they have been offered a pay-off of €200 million. Put another way, €200 million of the €720 million requested by the administrator will effectively be used to pay off senior bondholders in Anglo Irish Bank, after the compensation fund moneys are lodged and become part of the general assets of the company. As the compensation fund currently only holds €40 million and the proposals in front of us to day will only raise €65 million a year, the Government proposes to advance €400 million, of money it must borrow from the EU and IMF, over the next two years plus a market interest rate to the compensation fund. At no stage, even up to now, has a rationale been provided to this House for the request for these funds or a justification as to why the Minister is acceding to this request.

Why is this money not being provided by Liberty Mutual as part of the purchase of Quinn Insurance? Why are the Government and the directors of Anglo Irish Bank not exploring burden-sharing, if not outright burning of the bondholders in Anglo Irish Bank who have a hold over the assets of Quinn Insurance? Why are taxpayers and, ultimately, insurance policy holders being asked to foot the bill to pay off senior bondholders who lent recklessly to Anglo Irish Bank, which in turn lent recklessly to Quinn? No matter what sophisticated financial semantics are used to describe this sorry affair, it is hard to see it as anything other than yet another bailout by the public to a toxic bank, its bondholders and a major US insurance company. If this is not the case, then the Minister has a responsibility to outline in fine detail why this money is required and why the only source of this money is the taxpayer and policy holders with other insurance providers? There is no guarantee in any of this that €720 million will be the maximum drawdown required as a result of the Liberty Mutual-Anglo Irish purchase of Quinn Insurance. Nor is there any guarantee that the State will recoup the entire €400 million cash it will advance in 2011 and 2012.

I am also concerned about the involvement of Anglo Irish Bank in all of this. Like most people, I understand that Anglo Irish Bank is no longer a trading bank, but an empty shell holding and servicing its toxic debts. Can the Minister explain the involvement of Anglo Irish Bank in this enterprise and why, as I understand it, the bank will retain a 24.5% share in the company after it is sold to Liberty Mutual? I am also unclear as to the impact of the technical changes to the insurance compensation fund. The legislation proposes to apply a 2% levy on all non-life insurance policies in the State. However, if my reading of the Bill is correct, only companies with 70% or more of their business in the State could apply to the compensation fund while in administration. What level of risk does this represent to policy holders with companies that have less than 70% of their business in the State? Why does the Bill provide cover for all policy holders in the State if their provider goes into liquidation, yet restricts access to the compensation fund to only certain providers if in administration? It is important that there is clarity on this matter as those who will be contributing to the fund through the new 2% levy have a right to know whether they will be able to benefit if their provider goes into administration.

In addition, while we are being told that the increased contributions to the compensation fund are to cover future eventualities in the insurance industry, the reality is that the first €720 million will be used to repay the State and cover directly the requirements in Quinn Insurance. This means that for anything up to ten or 11 years, the compensation fund will not be in a position to service any other insurance company that faces difficulties. This means that policy holders with other insurance providers will have to pay an additional 2% on their premium for the next ten years, during which time they will have no protection via the compensation fund if their provider falls into difficulty.

I want to repeat once again that the way the Minister has brought this legislation to the House is deeply unsatisfactory. Both the origin of the legislation and its content beg a litany of questions which must be answered before the legislation passes into law. Worse that this, however, is that the Minister is trying to present what is nothing more than a bank bailout under the cover of a measure that he says is designed to protect ordinary policy holders. Some would say that this is downright dishonest.

Sinn Féin will support any Bill that protects policy holders in Quinn Insurance or any other insurance provider. At a time of great economic uncertainty and volatility, people have a right to know that their policies are protected to the greatest degree possible. Sinn Féin will also support any Bill that protects the employees and policy holders at Quinn Insurance. However, we are not opposed to the sale of Quinn Insurance if all other options have been carefully assessed and shown to be without merit. Nor are we opposed to the reform of the insurance compensation fund, as long as it meets these crucial objectives. However, what the Minister has put in front of us today does not deserve support from any Member of this House. On that basis, Sinn Féin will oppose the legislation, unless serious amendments are made to it on Committee Stage. However, given the truncating of the debate, I understand that will not be permitted and that only approximately an hour will be provided for Committee Stage.

There are genuine questions that need to be answered. They have not been answered in the Seanad nor in the Minister's opening remarks. There is a lack of knowledge within these Chambers and outside as to what is happening and as to the untold story of the bondholder that has a part of the Quinn asset book. Basically, that bondholder is being paid off, using our money. This is money that will be borrowed by the EU-IMF to pay off the bondholder, but will be recouped through applying a 2% levy on every person with an insurance policy, other than a health policy, in this State. That is unacceptable.

I call Deputy Mattie McGrath on behalf of the Technical Group. I understand he is sharing time with Deputies Clare Daly and Catherine Murphy.

I too am appalled at the indecent haste with which this Bill is being proposed. I understand that this is to meet a deadline of 4 October, which was imposed by people outside of the House. This is an attempt to cover the losses that were accumulated by Quinn Insurance.

The levy of 2% is a significant amount. I am old enough to remember when the PMPA went bust and the levy for that was introduced and for how long it lasted. This 2% levy will apply to every person in the country with an insurance policy. This is a critical issue at a time of such financial stringency and lack of funds for businesses and everybody. The levy will affect those with car, house, travel and every other kind of insurance policy, but particularly business insurance. As a person with a small business, I understand that insurance costs have risen. We had 40 years to get them down, but over the past number of years the fat cats in the insurance companies have used every excuse, including the weather, the ash cloud and anything they can, to revert to previous charges. Prices have been increasing over the past number of years and this levy will be the straw that will break the camel's back.

Nonetheless, we must address the situation and the problems we face as a result of poor management by personnel and leaders of Quinn Insurance. I would also question the joint administrators. From information I have from the Border region, Liberty Mutual has been hovering over Quinn Insurance for a long time. It is not coming in to rescue it, but for the rich pickings. It does not care about other important parts of the Quinn group, parts which are important to the infrastructure and economy of the Border region. Liberty Mutual is in it for the rich pickings it can make for itself and is dealing with the scandalous rogue bank that created part of the problem initially with its funny games and movement of money and shady loans. We understood from news bulletins that this bank would be removed and would no longer operate in this country. The name was taken down from the bank's headquarters not far from this building some time ago, yet the Government is now applying a levy on taxpayers to protect Anglo Irish Bank and its senior bondholders once again. It stinks from the high heavens.

A report will be made to the High Court before 4 October. Legal opinion should be sought on whether that date can be put back because this is too serious an issue. The public cannot take any more. The Government's response is to fire another levy on them, raise taxes again and make more cuts to protect the rotten banks and businesses that ruined this country. We are walking blindfolded into this again. The former Minister for Finance, Deputy Brian Lenihan, was criticised in the House for decisions he made. We were all part of those decisions and we have seen where the indecent haste got us. I compliment the Minister and the Government on renegotiating interest rates downwards but they should make haste slowly and investigate properly. As Deputy Doherty said, a swift inquiry should be held, possibly by the Oireachtas rather than a tribunal, because we will become an even greater laughing stock in Europe and the public will be even more angry otherwise.

We do not know when the levy will cease because we have not been given facts and figures. We do not know how much will be needed. A sum of €700 million has been mentioned but there is only €40 million in the pot. The fund will increase through this levy but the Government could increase the levy again next year if it is not coming up to scratch. It will drive people out of business and policyholders will be unable to renew their insurance, which will create more problems down the road. All the while, Anglo Irish Bank, that despicable bank, lurks in the background sucking more of the lifeblood out of taxpayers. This is outrageous. The Quinn Group was eager to go after the rich pickings in the insurance industry for a number of years. It got in and now we are told the insurance aspect will be the saviour.

However, this raises the issue of the role of administrators and receivers. It is a sorry mess and the administration is not delivering what it is supposed to. It is not fair, just or satisfactory in any shape or form. It must also be opposed. I am opposed to the Bill.

One of the key issues is the extension of the insurance compensation fund to deal with losses of the Quinn family. A large percentage of insurance losses result from speculative gambling on the property market by the family and, in effect, the legislation provides for the transfer of those gambling debts on to the shoulders of hard pressed taxpayers and working people who need to insure cars, homes and so on. As previous speakers pointed out, this is the third time a private company has been bailed out by the State — Equitable Life in the 1960s and PMPA and ICI in the 1980s. The original levy was not discontinued when PMPA's historical liabilities were run down but, instead, was replaced with a stamp duty to which the Government proposes to add a Quinn Insurance levy. Clearly, that is a disgrace and should be condemned by all.

I would like to concentrate on one aspect of the legislation. It proposes that the insurance compensation fund would cover all insured risk in the State with the exception of a number of excluded risks. It then defines one of those as a risk relating to a building in the State. Will the Minister address the Homebond issue in this regard? He may be aware that householders will take to the streets tomorrow to protest outside Homebond's offices because it has opted out of its liability under a structural guarantee against major defects and has said it will not honour offers made to residents in that regard. Is this an insurance policy or not, given it was sold to people on that basis? Were people tricked into taking up this policy? Payments come out of the insurance compensation fund for insolvent insurers and, therefore, this issue is relevant.

People bought their houses in the belief that Homebond offered them a structural guarantee against major structural defects for ten years. The homeowner had no choice in that regard as he or she was obligated to go down that route. He or she did not have the option of choosing the insurance route. It was provided to the developer and the Irish Home Builders Association. It is a consequence of the light touch regulation that existed. The banks legitimised Homebond by mandating that people to whom they were giving loans had to have a Homebond guarantee before they were able to avail of the mortgage. Warnings were issued repeatedly from 2000 onwards that the company was significantly underinsured. The Law Society issued a warning in 2000 while Grant Thornton and others produced reports in which they warned the society that this was a potential major liability, yet nothing was done.

I would like the Minister to address this because between 30,000 and 50,000 houses have fallen victim to heave inducing pyrite, a defect that costs between €40,000 and €50,000 per household to repair. A claim would result in a liability of between €1 billion and €1.5 billion. If Homebond is deemed to be insolvent and the pre-2008 insured members are deemed liable for heave inducing pyrite resulting in major structural damage, who will pay the bill? Is the Minister exposing the State by bringing this under the insolvent insurers scheme? If not, why not? He can offer a compensation fund to Sean Quinn and his family to defray their gambling debts but the victims of Homebond who did nothing other than a buy a home in good faith that they thought was fit for purpose have to pay the cost of heave inducing pyrite. There is no compensation fund for them.

This more than anything else exposes the Government's record and the double standards it is applying. The Minister is rushing this legislation and that is not on. It will be exposed in the eyes of the public for what it is.

When the debate concludes, there will still be many unanswered questions and that is a dangerous way to proceed. Bills will drop through people's letter boxes following the Bill's enactment with a levy on them. That will then result in the same reaction a similar measure produced in the 1980s. I recall the failure of PMPA and the constant reminders in my bank statements year after year that I was paying a levy to bail out a private company. The credit union movement has done good work assessing the amount of disposable income available to households. A significant number of households have a tiny amount of disposable income and they are cutting out costs such as home insurance. The difficulty is that a levy such as this will push those who are on the brink over the edge.

Individual policyholders will pay for this and I do not understand how history is repeating itself. I recently looked back over newspaper reports from the 1980s and 1990s. Reference was made to administrators and so on. A Fine Gael-Labour Party Government was in power in the mid-1990s and it is interesting that the Minister for Jobs, Enterprise and Innovation is present because his brother reported to the House on the issue at the time. The PMPA administrator estimated in 1994 that the company could cease to be dependent on the compensation fund based on an existing annual 2% levy within a certain number of years. Each family paid on average £100 in insurance levies. PMPA was estimated to have a shortfall of £200 million. Doing even a rough assessment one could say that over the lifetime of the levy fund for this insurance company alone it will be somewhere in the region of €400 per family. It was interesting that the Insurance Corporation of Ireland, ICI, liabilities were not known. So much of what is happening now is history repeating itself. Asked at a press conference if the State was not simply baling out a private company, the then Minister for Finance, Mr. Dukes, stated that the Government was insuring against major disruption in the insurance market. The tone was the same against ICI in that if the Insurance Corporation of Ireland, a wholly owned subsidiary of Allied Irish Banks, had gone into liquidation, that could have had consequences for the bank itself. It is a pity it did not. They were saying that a bank would have an inability to borrow if it was exposed in this particular way and that if a wholly owned subsidiary of the bank collapsed, the terms on which the bank itself could then borrow money could be immediately affected. The same threatening language was used then in terms of trying to rush legislation through and creating a sense of fear and insecurity. Clearly, the workers in Quinn are being used as a softener to rush this Bill through the House to ensure there is some certainty about their jobs.

The key point is how this keeps happening. Why were there not adequate funds in this insurance fund? My understanding is that insurance companies employ actuaries who do assessments and make sure these things can be avoided, yet that industry is the one we are talking about.

Debate adjourned.