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

Question again proposed: "That the Bill be now read a Second Time."

Deputy Jerry Buttimer is in possession, and has two minutes remaining.

It is important that we acknowledge that it is regrettable that we are in this position as a result of the mismanagement of the financial sector. It is incumbent on Government to be responsible. There are 1,600 jobs at stake. I challenge the Members opposite who are present, and I am glad there is one person present, to set out the alternative. This is about securing jobs, and insurance. The Taoiseach made a comment about 4 October this morning. In his speech, the Minister stated that we must demonstrate to the court the Government's commitment to advance the funds to the insurance compensation fund. That is important because this is about ordinary people. We acknowledge the bad practice and mismanagement of the company but we are lucky we can proceed with the sale of Quinn Insurance to Liberty Mutual.

I wish to reiterate the points I made this morning on the flooding in Cork and the way in which insurance costs have increased and that some insurance companies have been refusing to insure properties until the subsidence of the property is addressed. It is important to look at the way insurance companies have been allowed to govern in the past number of years. It is important that the regulatory regime learns from this debacle and that it does not permit companies to take personal financial gambles, which may have dire consequences.

I am glad to have an opportunity to speak on this important legislation. I agree entirely with my colleague, Deputy Buttimer, that it is unfortunate that we find ourselves in the situation that the Government must step in to reassure and make good the deficiencies in the system. Failure to do so would be even worse. It would have a knock-on effect throughout the industry and the financial services sector and, worse still, would have direct consequences for employees of Quinn Insurance and the wider responsibilities of that company to the extent that it continues to underwrite. This is reminiscent of a similar case in the 1980s. There was much criticism in the years following that of why the Government of the day responded in such a fashion. Few people have given much consideration to the alternatives but we need to examine, assess and dissect them to try to come to a fair and unequivocal evaluation. For example, it is easy for Opposition Members to screech and roar, wring their hands, tear out their hair and stamp their feet in mock agony at the prospect of shoring up failed financial institutions. However, we need to consider the mock agony in a clearer way because people then need to ask themselves what are the alternatives.

The first is to have a bonfire and burn the bondholders. Let us send a message that we will not pay anybody anymore at local, national and international level and let us see where that takes us. In the past number of weeks, other jurisdictions have sought to go down that road with disastrous consequences. It could well be a great time for a bonfire and there would be great glee on the Opposition benches if the Government was irresponsible enough to go down the road of burning the bondholders and those who are dependent on them consequently. When we go back to the market at a later date seeking an accommodation, they might say they would like to burn the Government now.

Have Opposition Members fully assessed and evaluated the consequences of such action? It is easy to stand on a platform in a town or village down the country and say to a receptive audience that this is unfair. It has been unfair for the past ten years but nobody said a word. The unfairness continued when everybody was having a party. Many Opposition Members were in government then and they did not think anything unfair about it then. However, everybody in our society has to pay and, sadly, no amount of rhetoric will change that. If we burn the bondholders, let us be sure of what the consequences will be and let us be sure about who will gain most from them. Many people will not only in this country, but throughout Europe. The consequences will be negative and they could set the country back in its development and in working its way out of the economic crisis.

I pay tribute to the Minister for the Trojan work done over the past six or seven months to regain control and respectability in so far as our institutions are concerned in the international arena and for continuing the war of attrition to see who would blink first in the international debate. It was a difficult task but the taxpayer has gained several billion euro and the Minister's efforts will continue. Somebody should print a super charter for reference to Opposition Members. They all the say same thing. They want us to be responsible but they want us to return to our old ways. We borrowed irresponsibly in the past and now they want to us be irresponsible again and tell everybody we will not pay it back by burning the bondholders. They then want write-downs. Let us all go into a bank some day and say we will not pay back the money we borrowed last year and then tell the bank manager that we will borrow more money next year but will not pay back that either. Let us have a write-down anyway or a bonfire for bondholders.

I was in the House in the 1980s when emergency legislation was introduced to deal with a similar issue and if the Government of the day had not responded in that fashion, there would have been serous consequences. Similarly, there will be consequences from this decision. The only proviso I seek is that in the future it should be open to the Minister for Finance or another Minister to be able to intervene to have a direct impact on those who are facilitated if it transpires in the future that following the rescue package, there is some means of accountability. That is my only regret about the rescue in the 1980s. The Government, not the insurance industry, should have had a facility to monitor what was happening and a facility to intervene if it emerged at a later stage that the State had shored up what needed to be shored up at the time the shoring up was necessary and the time had come for the company to stand on its own two feet and not come back for more.

This was a problem for the previous Government parties, albeit they realised at a late stage that the party was over, the boat had left the shore and they were stranded. At that stage, they had to make a calculated decision as to whether to burn the bondholders and take the consequences or whether they should take control of the situation. They took the worst of all options by providing a written guarantee for everything, which was a mistake. If a more graduated response had been pursued, we would not be in as much trouble but we would still have a serious difficulty borrowing money on the markets because the crisis had been prolonged for three or four more years than it should have been and no action had been taken. I do not know why that was because nobody has ever told us why action was not taken. I can only believe that people drove along as if nothing was on the horizon. People said afterwards that nobody had told them. One should expect to be told if one is in public office, particularly in government. One should ask the penetrating questions about what is happening, why it is happening, at whose behest and who will gain or lose most.

To be responsible and accountable, we have to do what has to be done. It is not something we welcome, glory in or wish to repeat on a regular basis. It is not something that we should have had to do in the first place but it is something we are now forced to do because the alternatives do not stand up.

I thank the Minister for the Trojan effort he has made over the past six months on behalf of the public at a difficult time historically and it would be a mean person who would not acknowledge his work and the personal effort he is putting in, which we all appreciate. I am not purposely critical of anything when people are trying to do their best but I have grave concerns because the juncture we have reached is not new. We were here many years ago and I do not believe it is right or proper that the Irish people are being asked again to bale out not once but twice a group which, over a long period of time, acted recklessly. It is awful to think that people will be burdened for many years with the cost of that reckless trading on their shoulders. That comes back to Government and the regulator at the time. What was going on that allowed this to happen and get us into this position? It is frightening when one thinks back upon it.

We cannot look backwards, however. We must look forward and see how we will deal with the situation and one of the questions we must ask ourselves is whether a situation like this could occur again in the future. Everything that is humanly possible to achieve to ensure it will never happen again must be done. I would rely on the Minister to ensure that systems will be put in place and that this type of situation can never again happen.

In terms of my difficulties with the Bill, businesses and private individuals are finding it difficult to carry on and this further burden upon them could be the straw that will break the camel's back. As a small businessman I am aware that people are finding it difficult to keep businesses in operation and this extra cost which will be imposed upon them will not make their lives any easier.

I take note of what the Taoiseach said with regard to the 1,600 jobs in Cavan and that the Bill is necessary to save those jobs but what about the people who have already lost their jobs and who are trying to insure their houses and their cars? Will this Bill lead to a situation in the future where people may not pay their house insurance? We all know what may be the horrible consequences of that. Will it lead to a situation where people will be travelling on our public roads without adequate cover on their cars? If there are more uninsured people travelling on the roads the State could end up having to pick up the tab for accidents incurred by uninsured drivers.

I took note during the course of the debate of Deputy Sean Fleming's account, which I believe is correct, that the cost of protecting these jobs could be in the order of €500,000 per job. That must be examined.

I am upset that a Bill on an issue of such national importance is being rushed through the Dáil. I would like to have had more debate on it. I am no admirer of inquiries that took place in the past because of the enormous cost to the State but the public were entitled to see some form of inexpensive inquiry take place into what went on in Quinn Insurance over the years before this Bill was brought before the House and them being asked to bail it out once more.

Rushing this Bill through the House is doing a great injustice to the people who elected us here to represent their best interests. Every one of us are elected here to do our best on their behalf. This Bill is not in their best interests. We are doing this in the interest of people who gambled in the past and are letting down the electorate who elected us here.

Ultimately, this measure will cost the Irish public hundreds of millions of euro but the truth, and this is frightening, is that we do not know what will be the final cost. Are we writing a blank cheque for the future? That is another frightening aspect of this measure.

I do not believe we are acting in the best interest of the public. I would have liked more thought given to the Bill. I am not one of those people who criticises everything the Government does. That is not the way I think. I like to be constructive, highlight the best of what a Government is doing, support that, and compliment people on their work but I am against this measure. It is wrong and is a further burden on our society at a time when they will be unable to cope with it. It will have detrimental consequences for many families and businesses which are barely staying afloat, and I know the Minister is acutely aware of that. He is dealing with it in his own constituency every day of the week and is acutely aware of the problems business people are having, which are enormous. They are trying to keep the doors open and it is putting them to the pin of their collar.

We are where we are, however. This Bill will be passed, although not with my support, but I will be supportive in the future of measures to which I believe there are no other alternatives. Despite the fact that I am critical of this measure I sincerely wish the Minister well in his further endeavours because we all know he is doing his level best at all times.

I thank all the Deputies who contributed to the debate on the Bill. It was a fairly good debate. After his complimentary remarks about myself I am sorry that Deputy Healy-Rae will not be voting for the Bill but I might convince him to do so in the next ten minutes.

I can appreciate the concern many Deputies have that at a time when it is hard enough for many families to make ends meet there will be another imposition on their car and house insurance and that they will have to pay an additional 2% on their premiums but it is incorrect to state that the proceeds of the levy going into the insurance compensation fund will be transferred either to the Quinn family, the Quinn group or anything to do with the Quinns.

The money is put in to cover insurance claims that others of the Deputy's constituents would not get paid for if we did not provide for it by way of a levy. We are talking about the Deputy's neighbour who has a car crash and breaks his leg and cannot work for three months, his neighbour who has a fire in the house, the neighbour whose home is flooded or the neighbour who booked his dream holiday only to arrive in Bulgaria and find the apartment block was not built, and he has travel insurance to cover him. That is where the money is going. It is going to cover outstanding claims that Quinn Insurance had insured against and because Quinn Insurance became insolvent, those claims could not be met if we did not put money into the insurance fund to cover them.

The alternative was to let Quinn Insurance go bust and if it went bust not only would the insurance claims pending not be honoured but all the neighbours the Deputy spoke about would be driving around without insurance or would be off the road because the day it would go down, many people insured with Quinn would no longer be insured, and some of them would find it hard enough to get alternative insurance because we know that the Quinn group had a record of insuring young drivers at modest enough premiums compared to what the competition was doing in the market.

The primary purpose of what we are doing is not to save the jobs in Quinn Insurance. That was done as soon as the Liberty Group decided to put private sector money into Quinn Insurance and guarantee that the 1,600 jobs, all the way from the Border counties down to Blanchardstown, would be secured. It agreed also that it would continue to trade in the country as an insurance company with a view to expanding its market, not restricting it.

The Bill has been attacked on a false premise to many degrees.

The benefits are that people who were insured with Quinn and would not have their claims honoured will now have them honoured, and those who would no longer be insured if the company went out of business will continue to be insured. It also means the State is not carrying the full burden, because the Liberty Group is coming in. It is directed by a man from the same part of the country where the Quinn Group operated. He is an Irish American who originated in Armagh and he has been very successful in the insurance business in the United States, and he is coming in. The alternatives are that the company goes broke, there is no insurance for Quinn policyholders, no settlements, 1,600 people out of work, and a really bad situation. That is why we are acting. I know it is not ideal, and we could talk about the Quinn Group and all the rest of it, but the solution that is being brought forward achieves quite a lot. It ensures that people will have their claims paid, that people will continue to be insured, that 1,600 people in good jobs will continue to have them, that American investment money comes in to bolster a broke insurance company, and that it will continue to trade on a solvent basis. Indeed, the intention in the company's business plan is to expand.

I am sorry about the rush to get the Bill through, but it is being done so the final deal can be signed off between the administrators and the purchasers of the company. The matter has to be mentioned in the High Court on 4 October. We have to get it through because the question in the High Court will be whether the Dáil has made the legal provisions to allow money to be paid into the compensation fund so claims can be honoured. When the answer to that question and some associated questions is yes, matters will proceed. I wanted to put the issue in that context.

It is important to remember that the Bill is technical in nature. Its main purpose is to ensure that our domestic legislation is compatible with the third non-life insurance directive, as advised by the Attorney General. Deputies should note that the legislative amendment needs to be made immediately, as I said, to ensure it is done by 4 October. I appreciate the points Deputies made about the need for due process in dealing with legislation and I admit the situation is not ideal, but we were left in circumstances where we had to act against a fairly tight timeline. I hoped to bring the Bill to the Oireachtas in June, but I needed to get legal advice and, in particular, to consult the EU. The initial advice that I received from the EU was incomplete and we had to adjust the manner in which the Bill was drawn up when we received full advice.

A number of Deputies mentioned the need to strengthen regulation of the insurance sector or market. A number of developments have taken place in the past 18 months to do that. First, the Central Bank's staff resources in the insurance area have increased significantly, from fewer than 50 people to just over 100. Second, an authorised officer regime has been introduced that allows the Central Bank to appoint outside experts such as actuaries to go in and investigate a company on its behalf. Third, the obligation on the Central Bank to promote financial services has been removed. Those measures will help the regulation of the insurance industry and make it far more rigorous. Deputies should also be conscious of international developments on strengthening regulation of the insurance sector. The forthcoming EU solvency II directive represents the first stage of a major transformation of how the industry is regulated. The most essential features of the framework directive are the introduction of an economic and risk-based approach to the measurement of assets and liabilities and a much greater focus on quantitative issues such as governance and the role of the supervisor. Capital requirements will be determined by an evaluation of the company's level of risk using a consistent set of measurement principles, resulting in an appropriate level of capital for solvency purposes. The changes will impact on all companies in the insurance sector and are likely to take effect from 2014.

A number of Deputies asked why Liberty, an American insurer, was chosen as the preferred bidder. Members should be aware that the sale of Quinn Insurance Limited was a matter for the joint administrators. It is important to be clear that neither the Minister for Finance nor the Government had any input into the decision to select Liberty Mutual/Anglo Irish Bank as the preferred bidder. In assessing the bids for the business of Quinn Insurance Limited, the joint administrators were required to consider how the interests of policyholders could best be protected and how the company could be returned to a sound financial footing. Those were the criteria on which the decision to opt for Liberty Mutual/Anglo Irish Bank was made by the joint administrators under the powers given to them by the Insurance (No. 2) Act 1983. At the end of the sales process, there were only two companies left which were interested in buying QIL. The joint administrators concluded that the Liberty/Anglo Irish Bank proposal was the best because it protects policyholders and minimises the call on the ICF. An additional benefit of the proposal is that it protects the jobs in QIL, and it is a clean deal because the State does not have to cover tail risk. We have to introduce the legislation and the policyholders will have to pay in to the levy, but we will not cover any further tail risk.

As I said, I share Deputies' concerns about the increased call on the insurance compensation fund in the past couple of months. That is why I asked the State Claims Agency to go in and undertake a review of the processes at QIL and in particular to examine claims management and the reserving processes. In its interim report, it stated that the claims management process is operating effectively and that reserving has improved considerably since the joint administrators took over running the business, but that there is potential for improvement in some other areas. In summary, it stated that the increased call on the fund as a result of various actuarial reserving reviews was appropriate.

I thank Deputies for their contributions. I recommend the Bill to the House.

Question put.
The Dáil divided: Tá, 94; Níl, 43.

  • Bannon, James.
  • Barry, Tom.
  • Breen, Pat.
  • Broughan, Thomas P.
  • Butler, Ray.
  • Buttimer, Jerry.
  • Byrne, Catherine.
  • Byrne, Eric.
  • Carey, Joe.
  • Coffey, Paudie.
  • Collins, Áine.
  • Conaghan, Michael.
  • Conlan, Seán.
  • Connaughton, Paul J.
  • Conway, Ciara.
  • Corcoran Kennedy, Marcella.
  • Costello, Joe.
  • Coveney, Simon.
  • Creed, Michael.
  • Creighton, Lucinda.
  • Daly, Jim.
  • Deasy, John.
  • Deering, Pat.
  • Doherty, Regina.
  • Donohoe, Paschal.
  • Dowds, Robert.
  • Doyle, Andrew.
  • Durkan, Bernard J.
  • English, Damien.
  • Farrell, Alan.
  • Feighan, Frank.
  • Ferris, Anne.
  • Fitzgerald, Frances.
  • Fitzpatrick, Peter.
  • Flanagan, Charles.
  • Flanagan, Terence.
  • Gilmore, Eamon.
  • Griffin, Brendan.
  • Hannigan, Dominic.
  • Harrington, Noel.
  • Harris, Simon.
  • Hayes, Brian.
  • Hayes, Tom.
  • Heydon, Martin.
  • Howlin, Brendan.
  • Humphreys, Heather.
  • Humphreys, Kevin.
  • Keating, Derek.
  • Keaveney, Colm.
  • Kehoe, Paul.
  • Kelly, Alan.
  • Kenny, Seán.
  • Kyne, Seán.
  • Lawlor, Anthony.
  • Lynch, Ciarán.
  • Lynch, Kathleen.
  • Lyons, John.
  • McCarthy, Michael.
  • McGinley, Dinny.
  • McHugh, Joe.
  • McLoughlin, Tony.
  • McNamara, Michael.
  • Maloney, Eamonn.
  • Mathews, Peter.
  • Mitchell, Olivia.
  • Mitchell O’Connor, Mary.
  • Mulherin, Michelle.
  • Murphy, Dara.
  • Murphy, Eoghan.
  • Nash, Gerald.
  • Naughten, Denis.
  • Noonan, Michael.
  • Ó Ríordáin, Aodhán.
  • O’Donnell, Kieran.
  • O’Donovan, Patrick.
  • O’Dowd, Fergus.
  • O’Mahony, John.
  • O’Reilly, Joe.
  • O’Sullivan, Jan.
  • Phelan, Ann.
  • Phelan, John Paul.
  • Reilly, James.
  • Ring, Michael.
  • Ryan, Brendan.
  • Shatter, Alan.
  • Shortall, Róisín.
  • Spring, Arthur.
  • Stagg, Emmet.
  • Stanton, David.
  • Timmins, Billy.
  • Tuffy, Joanna.
  • Twomey, Liam.
  • Walsh, Brian.
  • White, Alex.

Níl

  • Adams, Gerry.
  • Boyd Barrett, Richard.
  • Browne, John.
  • Calleary, Dara.
  • Collins, Joan.
  • Collins, Niall.
  • Colreavy, Michael.
  • Crowe, Seán.
  • Daly, Clare.
  • Doherty, Pearse.
  • Donnelly, Stephen.
  • Dooley, Timmy.
  • Ellis, Dessie.
  • Ferris, Martin.
  • Flanagan, Luke ‘Ming’.
  • Fleming, Sean.
  • Fleming, Tom.
  • Grealish, Noel.
  • Healy, Seamus.
  • Healy-Rae, Michael.
  • Higgins, Joe.
  • Kelleher, Billy.
  • Kirk, Seamus.
  • Kitt, Michael P.
  • Mac Lochlainn, Pádraig.
  • McGrath, Finian.
  • McGrath, Mattie.
  • McGrath, Michael.
  • McGuinness, John.
  • McLellan, Sandra.
  • Moynihan, Michael.
  • Murphy, Catherine.
  • Ó Caoláin, Caoimhghín.
  • Ó Cuív, Éamon.
  • Ó Fearghaíl, Seán.
  • Ó Snodaigh, Aengus.
  • O’Brien, Jonathan.
  • O’Dea, Willie.
  • Pringle, Thomas.
  • Ross, Shane.
  • Stanley, Brian.
  • Tóibín, Peadar.
  • Wallace, Mick.
Tellers: Tá, Deputies Emmet Stagg and Paul Kehoe; Níl, Deputies Aengus Ó Snodaigh and Seán Ó Fearghaíl.
Question declared carried.