This report relates to life assurance and non-life insurance.
There were a number of matters raised and a good deal of concern expressed in relation to this matter. We also have an amendment.
Paragraphs 1 to 4, inclusive, agreed
PARAGRAPH 5.
Proposals Relating to Life Assurance and Non-Life Insurance.
One important point raised at the Sub-Committee was that existing companies—not through any legal binding obligation but by way of a gentleman's arrangement—keep approximately 80 per cent of their assets locally. These assets are used for the benefit of the State generally. It was felt that this was something we should endeavour to have carried on if outside firms came in here to set up an agency. Apparently the scope of the proposal is wide enough to enable the supervising authority of the Department to so insist and to make it a matter of law. That would be a desirable and satisfactory arrangement. I would not rely too much on a gentleman's agreement embracing nine Member States. There might have to be legislation or some regulation covering this. It is an important aspect of this report.
There is no provision to ensure that overseas insuring bodies would have to apply the same rates here as in their own countries. Is that correct?
The Deputy means a doubling of services.
I am advised that they would be subjected to the same constraints and be in the same position as existing insurance companies in the State. There is nothing compelling them to fix the rates at any particular level.
Some member also raised this point—that any multi-national company coming in here would play the devil with everything.
That point was raised more in the case of the non-life insurance proposal, the second one. It did not arise under life assurance. Certainly serious concern was felt about that aspect on the non-life side where it is a question of providing services from an outside base. It was said that such people could destroy companies here who were small by comparison. They might cut the rates in order to get business and put our people out of business.
That was the query.
Paragraph agreed to.
PARAGRAPH 6.
Then there was the question of composites. There are a number of companies—and this applies particularly to the United Kingdom—which do both life assurance and non-life insurance. It is suggested that anyone coming in here should set up in one business or the other, as is the case with our own people at present—life assurance should not be bolstering up indemnity insurance and vice versa, depending on what way the balance lies at a particular time—and particularly that life assurance should not be dependent on such uncertainties.
In the case of some countries favouring specialisation, would the absence of legislation make it difficult to see how we are going to get harmonised law on it? Correct me if I am wrong, but at the moment under our law do we have to specialise?
That is right.
Is there anything in this Directive which will affect the position except in so far as it provides that existing composite companies be allowed to carry on non-specialist business here and composite business if necessary? Under that Directive is it allowable for us to provide by legislation that they have to establish a specialist subsidiary? Is that what we are recommending?
That is what we are trying to get, but it may be difficult to achieve because of the existence of these very strong composite companies that do both types of business. The proposal is to allow the existing composites to carry on. The case was made that they should be phased out over a period, but I do not think that that is likely to be accepted.
This is a strange form of harmonisation. It would mean that the countries which permitted non-specialisation will have companies in existence which will be able to roam all over the Common Market without restrictions, whereas every other country will be prohibited from allowing similar——
If they were even saying that countries which did not have composites at the moment were free to have them, you could call that harmonisation.
Surely we should argue that they should be allowed to operate in their own countries but not in ours?
I think so. If I recollect correctly, the Department's officials told me the majority of the members of the Community are with us in this.
This is a harmonisation which is opening the door to composites which are kept out at the moment. Should we open the door in the name of harmonisation?
That is being recommended in the report. Paragraph 7 says:
The Joint Committee would prefer to see existing composites phased out over a period. It believes that if any composite wishes to undertake life assurance business in Ireland it should be required to set up a specialist subsidiary in this country.
Would that cover the Senator's concern?
Indeed the existing laws which so require it should be maintained.
Could we not change this?
I take it that there would have to be some adjustment of the Directive to permit that.
The important point was mentioned by the Chairman, that is, we should avoid a situation where life funds could get involved with industrial funds to the detriment of life assurance.
There should be no uncertainty about life assurance. I am sure that it would be possible to modify paragraph 7 sufficiently to make it acceptable to the wishes of the Members.
Paragraph agreed to.
PARAGRAPH 7.
I move:——
" Before ‘ it should be required ' to insert ‘ the existing Irish law should apply and '."
Amendment agreed to.
Paragraph, as amended, agreed to.
PARAGRAPH 8.
Then there was the question of the solvency margin. There was some discussion on that and how it could be calculated. It is to be 3.5 per cent, but half of that could be found by calculating in a certain way which would not mean providing any more cash but would involve a re-evaluation of assets. In that way the margin could be made up without providing cash for the full amount of 3½ per cent.
There are two aspects of the solvency margins. One concerns life assurance calculations. It was more or less agreed that they would be 3.6 per cent of reserves. Half of that could be called on the basis of the implicit reserves and the other half on the basis of the explicit reserves. As regards the solvency margins in non-life public zones, there was a considerable amount of worry on the part of the insurance associations because they were not too satisfied about the Directive's proposals as to how these could be calculated. They pointed out various practical difficulties in the insurance field regarding the calculation of the solvency margin in their end of the insurance business. There was agreement on the solvency margin regarding life assurance but the insurance people raised a number of very technical points regarding the calculation of the solvency margins in their business.
I think that we are trying to express in this draft report the points the Deputy raised. The insurance associations have been consulted about the actual wording of the report and they apparently agree with it.
They had reservations regarding re-insurance and so on which would have imposed a financial burden on them. With regard to life assurance there was a solvency margin of 3.6 per cent referred to. That was regarded as being all right. The solvency margin as proposed in the Directive was not satisfactory for the insurance people. It was set out adequately in paragraph 8 but the insurance people have very strong reservations about it.
There was no dispute about the 3.6 per cent in the case of life assurance, but there was a good deal of concern about re-insurance.
Paragraph agreed to.
Paragraphs 9 to 16, inclusive, agreed to.
PARAGRAPH 17.
Senator FitzGerald is particularly concerned about the Compensation Fund and has expressed that concern in his amendment.
I move:
After " Fund " at the end of the second sentence to insert the following:
It is not within the terms of reference or the competency of the Joint Committee to comment on whether the provisions of the Act relative to the Fund constitute an adequate safeguard for companies, which manage their affairs prudently, from the potential damage to their interests (and the interests of their policy holders caused by companies not so managed. But . . . .
Perhaps I might say a short word in explanation of my amendment. I know a number of insurance companies are concerned with the provisions of the Insurance Acts under which the Minister could look for contributions from them to cover insolvency situations. I do not think he has done so for many years. He had done so for a number of years and the amounts could be quite substantial. The ground for their objection is that they run their business on a commercial, prudent basis and only charge rates which they know their costs require. Business can be attracted away from them by a company or companies which may not have the same concern as they have. If these companies went wrong they—the ones who have kept quoting the right rates—would finally have to foot the Bill. The question even has arisen as to whether the very provisions of the legislation in regard to this are valid. There is doubt—and more than doubt—as to their constitutionality. I did not feel that in this report, if we are recommending that the provisions of the Act should apply to outside insurers, we should do so without some glancing reference and it would not seem we were adopting a section about which we had reason to have doubts. That is the background to my amendment. It is not our job to go into the insurance code beyond the way we have to but, if we are making this recommendation in regard to the outside companies, I think we should take in this point. I do not know whether other Members of the Committee feel this is the right thing to do. That is the background to the draft amendment, such as it is.
Do Members wish to comment on Senator FitzGerald's amendment? I think it is a worth-while amendment.
I think so too.
Amendment agreed to.
Paragraph, as amended, agreed to.
Paragraph 18 agreed to.
Draft report, as amended, agreed to.
Ordered: To report accordingly.
That concludes the business. Might I suggest that the next meeting of the Joint Committee should not take place until about the third week of next month in order to give us a chance to have a number of the matters dealt with in the meantime through the Sub-Committees, and to give us time to catch up: there was not sufficient time to catch up on the work for this meeting? Thereafter we could have a meeting each month. I am reminded that some Members of the Committee may be in Brussels. We must be careful not to have that clashing as well. We will leave the date open.
Could I have guidance for an uninitiated Member? This is the first meeting I attended of this Joint Committee and I have not much of a clue about what is going on because, up to now, its meetings have coincided with meetings abroad. We are here to examine proposed legislation. Our terms of reference are solely to react to proposals. We do not initiate them?
No.
Right. At what stage are they brought to our notice? They emanate from Brussels, or the the Commission, or somewhere. They are reported to a committee. We listen to them here and if they are OK we agree with them. If we have reservations about them or amendments to make, where do they go from there, or what is the chain of events? Who do we contact?
First of all we get them when they come out of the Commission and are sent to the Council. It is most unlikely that an immediate decision could be reached in the Council because the Council normally do not work that fast, but it could so happen that they would reach a decision in the Council before we got an opportunity of making recommendations.
Are we dealing then with a fait accompli in many cases?
Not in many cases. Very few cases. The machine works very slowly.
Is there any possibility that the proposals being discussed here still have to go through the European Parliament?
Not as far as the proposals we dealt with are concerned.
Are we dealing with legislation which will be dealt with in the European Parliament at all?
The ones we have dealt with here today have gone through the European Parliament. At least one of those has been around in one form or another for six years. It has not been adopted by the Council yet, however.
My thinking is this, and maybe it is completely wrong. We are all here as Irish people presumably with the interests of Ireland at heart. When we are looking at any legislation we are wondering what implications it has for Ireland. If we have certain hard and fast feelings about it, do we get to know this in time to inject them into the Committee we deal with abroad, so that the Irish thinking will go into it at an early stage and possibly colour the thinking in the legislation. It is easier to change something before the decision is made than to try to change it when the decision has been made. Is there any possibility of this Committee working in that fashion?
It is my personal opinion, and I may be wrong, that our work here is unlikely to have a serious impact on what happens in Brussels.
That is a poor show.
What Deputy Power is getting at is that we have ten Members in the European Parliament altogether. Most of those Members are attached to one or two committees. If this Committee had information or a viewpoint on some aspect coming from the Commission the relevant Member of the European Committee could bring it up there if there was time.
It is normal practice to pass material received from Departments and outside bodies to Members of the European Parliament as soon as it is received. It is, however, difficult to hold our Committee meetings before those of the European Parliament.
One thing about the proposals we have looked at is that these were on the agenda of the last Joint Committee in May and one of the problems is that it took from June until late December to re-establish the Joint Committee. Wherever the fault lies there, that was a great pity. From now on we should consciously try—I agree very much with Deputy Power—to look at important draft proposals early enough in the pipeline, report on them as quickly as we can and, if possible, synchronise them with the Committees of the European Parliament.
There will be no conflict among us here about what we want to do. We want to get to know it in time.
The only worry in my mind is are we wasting our time here?
We are learning.
We are learning all right. Are we getting at these items at such a stage that we can have the remotest influence on the ultimate result?
I have a copy of the terms of reference laid down in the Dáil and the Seanad of this Joint Committee:
. . . to examine——
(i) such programmers and guidelines prepared by the Commission of the European Communities as a basis for possible legislative action and such drafts of regulations, directives, decisions, recommendations and opinions of the Council of Ministers proposed by the Commission,
(ii) such acts of the institutions of those Communities,
(iii) such regulations under the European Communities Act, 1972,
(iv) and such other instruments made under statute and necessitated by the obligations of membership of those Communities,
as the Joint Committee may select and to report thereon to both Houses of the Oireachtas.
That is our function.
If having examined them and considered them to be important we invite the relevant Minister here to discuss them, there is no doubt we will have a much better possibility of making an impact at an earlier stage, of informing the Minister of our concern about proposals and the implications for Ireland. The Committee must play a more political role during this session than it did previously.
Certainly if we do not get in early we cannot make an impact and our recommendations will not have any effect anywhere. The only way is to try to get ourselves up-to-date. I can understand Deputy Power's concern that we do not meet simply for the sake of producing reports after the events. As far as possible we should express our views and opinions and communicate them to the people who can get closer to the decision-making body. That should be our purpose.
I agree completely with what Deputy Power and the Chairman have said. We should try to get in as early as possible but it would be wrong to say that we have been wasting our time during the past four years. We clearly and definitely influenced the final formulation of some Directives, even in the way we were dealing with them. We should remind ourselves of another aspect: we are a Committee of Parliament that is looking at the Executive implementing the Directives or Regulations. The way they do it is of importance to citizens here and it is for us to see that they do so. Many of our reports have criticised certain methods and we have had results. The civil service have responded to criticisms we made.
There is scope for variation in the way the Directives are implemented.
We had very good relations with the civil service and there has been good co-operation between this Committee and the departmental officials concerned.
This is set out fairly well in the report of the previous Committee on its functions which we were given earlier. On page 9 the value of the Committee's work is spelled out clearly. It makes clear also that from the six-monthly reports of the Minister for Foreign Affairs and other sources it has learned its reports have been taken into account in Government Departments and there is evidence that it has had an influence on the drafting of domestic statutory instruments in particular. There are various other aspects that go along the same lines as Senator FitzGerald has indicated.
In one sense it is helpful that the machinery works so slowly in that it gives an opportunity to bodies like this to make known their recommendations. We are told there is one recommendation before us that is six years old. In practice very little is settled within two years in the Community so there is a fair opportunity to express views before matters are finally decided.
Could the Chairman ensure that preference is given to legislation that is about to be enacted in Europe? Quite a lot of legislation is passed in Europe that has little or no influence on Irish affairs. Could the Chairman bring forward measures that are about to be passed and perhaps delay the others?
I am advised that from now on we will be dealing with current matters.
I agree with Senator FitzGerald that the previous Committee had considerable success. The failure was failure at the political level to alert both Houses of the Oireachtas and, more directly, the Ministers responsible, about the matters that affected us and that were being decided at European level. We have taken a decision today that may help. We have proposed to the Committee on Procedure and Privileges the adoption of orders to allow regular debate on the reports when the Joint Committee seeks to have them debated. That is a very good step. It will begin a political dialogue which we need to start because of the importance of some of the proposals and because of their effect on people.
There was a link with the Department concerned in that invariably somebody from the Department was present here at our meetings.
There were many such cases. There was good understanding between the Committee and the Departments and it worked well.
The Joint Committee adjourned at 5.30 p.m.