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Seanad Éireann debate -
Wednesday, 19 Oct 1983

Vol. 102 No. 2

Insurance Bill, 1983: Second Stage.

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

I would like to thank the House for the spirit in which they have accepted the legislation which is before us. I am very conscious that they have accepted the sense of urgency which accompanies this Bill.

The purpose of this Bill, which is of general application, is to amend existing insurance legislation by adding to the range of actions which can be taken to deal with situations arising in the event of uncertain solvency of non-life insurance companies.

In 1964 the Oireachtas accepted the principle that the State should not be responsible for the failure of private sector enterprises engaged in the non-life insurance market. At the same time it decided that it would be desirable to establish a compensation fund, to which all companies would contribute in accordance with their share of the market, and out of which eligible claims could be met in full. The details are set out in the Insurance Act, 1964. Subsequently, the United Kingdom Parliament introduced legislation to much the same effect, and similar arrangements now exist in other parts of the world.

While leaving the basics of the 1964 legislation unchanged, and it has worked quite well in the case of the collapse of the Equitable Insurance Company, we are now proposing a number of significant amendments. The House will recall that at the time of the Equitable episode, the view was accepted that, while arrangements should be made to compensate people who had claims for injuries or damage to property, those who had simply paid premiums and were going to be out of pocket only in respect of the unexpired period covered by the premium could be left to fend for themselves. With the greatly increased cost of insurance I feel that a different view ought now to prevail on this question and that people who have paid premiums should, in the case of a company being wound up, be entitled to present claims in respect of the unexpired period of their policies just the same as other claimants on the compensation fund. That principle is now enshrined in this Bill.

There is, however, an even more important consideration which arises in this connection, and, again, Senators will recall the experience of the winding up of the Equitable Insurance Company. At that time my predecessor secured an order of the High Court for the winding up of the company as it was clear that its affairs were beyond all hope of redemption. I do not think that any other solution would have been possible at that time. Nonetheless we must recall what the effects of the winding up order were. The position is that as soon as such an order is made, the policy holders, leaving aside entirely the position of persons having claims against the company for accident, etc., are no longer effectively insured and are thrown upon the insurance market to do the best they can in seeking replacement cover. Even in the case of a small company like the Equitable Insurance Company this caused considerable dislocation, and in present market circumstances it is clear that the consequences of the winding up of an insurer would be very serious indeed. Nowadays, insurance of certain classes is not something which is immediately available for the asking over the counter. Members of the insuring public are often, because of the cost and other considerations involved, obliged to make diligent enquiries to secure the best deal for themselves. We cannot contemplate the possibility of very large numbers of people, including many of whose livelihood depends on having insurance cover, left without insurance through no fault of their own, being sent from Billy to Jack with, possibly, the consequences that a significant increase in the number of uninsured drivers on our roads is brought about, a situation which, as the House is aware, places intolerable demands on all concerned.

It is primarily to deal with this problem that the present legislation has been designed. Its object is to ensure that while the affairs of a company in difficulty are brought within the purview of the High Court in much the same way as those of a company being wound up, its business can nonetheless be continued without interruption on a going concern basis by an administrator appointed by the court. It is a basic principle of company law that in an insolvent winding up the board of directors becomes defunct and its powers are assumed by the liquidator. This is in recognition of the fact that it is those in control who have the power to do harm. Their removal is therefore almost invariably an essential preliminary to any remedial action, and such removal automatically occurs on liquidation. In this Bill we are proposing to apply this and other winding up principles in the case where an administrator is appointed by the court, and it follows therefore, that, for so long as an administrator stands appointed, the powers of the directors will cease. In applying the winding up principles we have been very conscious of the scope for conflict between some of them and the discharge by the administrator of his main duty to maintain the business as a going concern with a view to placing it on a sound commercial and financial footing. There are obviously certain winding up provisions which would impede the administrator in such a task and these are being adapted or repealed to remove any doubt there may be about the commercial credibility of an insurer under administration.

I think it is important to refer specifically to one particular adaptation, the effect of which will be that — contrary to the automatic consequences of a winding up — contracts of employment, transactions, debts, proceedings etc., will not, by virtue only of the appointment of an administrator, be avoided, cancelled, stayed or otherwise affected. The underlying rationale, and it is important that this should be emphasised and accepted, is that the administrator of an insurer from the outset should be able to carry on business with as much freedom as is reasonable and that as far as possible only normal commercial rules and procedures apply, subject of course, to the entire proceedings being within the domain of the court.

To facilitate further the attainment of the main objective of this Bill, the Act of 1964, as we now propose to amend it, will give the administrator access to the compensation fund so that he will have the resources to meet claims on the company and to place it on a better financial footing for the future. The general mechanisms of the 1964 Act will continue to apply, with the fund's resources being provided as before by way of levying contributions on all non-life insurers.

The limit of £1 million on the size of the fund established in the 1964 Act is being removed. This removal has been dictated firstly because its significance has been almost completely eroded by inflation in the intervening years and, secondly, it is considered inadvisable to pitch the fund at a particular level in general legislation when the circumstances in which the fund would be drawn upon could vary substantially from case to case.

In order to facilitate insurers in their task of providing for their liability to the fund, the Bill proposes that the contribution by insurers will be limited to a ceiling of 2 per cent of premium income in any year. The House will appreciate that a contingent liability of this size could create some difficulties for insurers. It is only right therefore that the insurance industry should not be prohibited from providing for any liability to the fund in the premium rates which they charge. This is a principle which has already been well established. I think it appropriate at this point to record that the behaviour of the insurance companies in regard to their obligations under the Act of 1964 has been exemplary.

The net result of the new provisions to which I have referred is that policyholders will not need to scramble around looking for alternative cover, as their insurance will be continued, and the rescue of the enterprise can be put in hand under new management with the least disruption to its ongoing commercial activity.

Many non-life insurance companies have connections with other entities, whether by way of subsidiary or dependent companies for property and other investment purposes or by way of other associated entities within an overall group structure. In endeavouring to deal with the fortunes of an ailing insurer it would be inconceivable that the administrator should not also be in a position to exercise control over the affairs of any such entities. The Bill provides, therefore, for the exercise of such control by the administrator as is considered necessary for the purpose of successfully discharging his primary duties. The ability to act in relation to such bodies and the degree of control to be exercised will be subject to the sanction of the court. The Bill also defines the connection in such a manner that action could only be taken in relation to a body which is significantly linked with the insurer under administration. I must emphasise, however, that the inclusion of this element in the Bill is not to be seen as a vehicle for the extension to such bodies of the appointment of the administrator, with a brief to maintain them as going concerns and return them all, if needs be, to a sound financial footing. That would be totally impractical and unrealistic, and it would be unreasonable to expect policyholders to provide funds to rescue enterprises outside the insurance sector. On the other hand, it seems safe to make the general assumption that where the main enterprise in a group is being rehabilitated, the effects on connected enterprises must be beneficial.

A series of other consequential amendments is being effected to the Act of 1964 for the purpose of facilitating the successful application of the scheme I have outlined. The opportunity is also being availed of to repeal certain provisions of the Act of 1936 relating to the ownership of shares in, and the nationality of directors of, insurers. The existing provisions are discriminatory in the light of our obligations under the Treaty of Rome, and while they have not been applied against nationals of other member states in recent years, their continued presence in the statute book is not warranted.

I think it only right at this stage to inform the House that it is my intention, as soon as this Bill becomes law, to petition the High Court for the appointment of an administrator to take over the management of a certain insurance company whose affairs are in a state of considerable disarray. Since these proceedings are imminent and the relevant petitions have already been prepared, it would be inappropriate for me to go into further detail at this stage, but there will, presumably, be other occasions on which this matter can be debated in the House.

When one looks at the recent history of insurance business in Ireland, one is, I think, entitled to ask certain questions. Indeed events now happening in other countries also have their relevance. In our own case we had in the late thirties the mismanagement of a number of life companies whose funds, on actuarial valuation, were shown to be inadequate to meet future liabilities to policyholders. To deal with that situation the Irish Life Assurance Company was established by the State and I think we are entitled to say that it has been a resounding success. In 1963 the Equitable Insurance Company collapsed and it was clear that the most serious offences had been committed in carrying on its business. The 1964 Act resulted from this. We are now faced with a third problem.

To be fair, I am obliged to say that the affairs of insurance companies are, by and large, managed by responsible people who are fully cognisant of their duties to the insuring public. They cooperate fully with the Department in filing the returns required by law and in answering any questions which arise in connection with them. This is all very well as far as it goes, but it has to be recognised that, so far as the supervisory authority is concerned, the system still depends largely on the competence and honesty of those who prepare these returns and, even more so, on those professional people who certify the returns. Unusual vigilance is called for and, partly because of the complexities of Irish law, the process is not an easy one. Directly and indirectly, the various powers provided by the Oireachtas in regard to the supervision of insurance companies have been availed of relentlessly by myself and my predecessors in office, and the case which is now pending is the end result of the exercise of these powers. One can, I think, take it as a certainty that if the supervisory powers had not existed and had not been used, we would in due course have been confronted with a disastrous situation which would have been extremely difficult to deal with. What we need now is effective remedies to deal with certain situations brought to light by the supervision process.

The Bill now before the House provides a very desirable addition to the range of options available to the insurance supervisory authority. It provides an option which avoids the disastrous consequences of winding up and, although confined to a large extent within existing winding up law, it creates an environment which should allow of the resuscitation of an insurer while carrying on business in a normal fashion.

I would now ask for your co-operation in carrying this Bill through the House. Although it is a Bill that is not large in physical dimensions, a great deal of work has been put into it and it meets the requirements and aspirations of all parties in the House. There are people out there at the moment who need to be looked after and the object of this Bill is for us to do our best for them.

There has been a considerable amount of speculation during the day as to which company might be referred to in the Second Reading speech. I have pointed out that I am not at liberty to elaborate on what I have said to the House. There is a considerable amount of concern amongst policyholders, not confined to any one company and the purpose and the main objective of this Bill is to ensure, unlike a situation under the present law which will exist until this legislation is passed through this House and signed by the President, that policyholders are protected. In the circumstances that exist the Minister — myself in this case — would have no alternative but to apply to the courts for winding up proceedings. In those circumstances people who had taken out insurance would find themselves through no fault of their own left without effective cover.

There is also the consideration of a number of jobs. All too often in the recent past we have seen situations where liquidations were necessary and the people who were most severely affected were those who had absolutely no say in the management of policy pursued by those firms. It is my determination that this will not happen in this case, and I am sure that determination will be shared by all Members of this House.

This must be regarded as a sad day. Any day a Minister can come to us with this type of emergency legislation must be seen to be a sad day for business in Ireland. Certainly that is the way I see it.

I saw the Bill this morning for the first time, having been told earlier that there was a possibility of emergency legislation, although I was not told exactly what it was until I read the Bill itself. I identified in my own mind the particular company and I can understand the Minister's reluctance to name that company. It is totally acceptable that he should not, for many obvious reasons. I have a company in mind. Its name has been mentioned already in the other House and I read it on the papers this evening. It may be speculation and I will wager that it is more than that. I am basing my remarks on the belief that it is a certain company.

Having read the Bill I saw it as appropriate to a particular problem today. Whilst it may continue as a permanent piece of legislation, I feel that the Minister has a specific once-off situation in mind and will act tomorrow morning.

A lot of questions have to be asked about this matter. I, like other Senators and Deputies, am hearing about this for the first time. I must compliment the Minister and his Department because in my opinion this was one of the best kept secrets of a lifetime. I can see the reasons why it had to be kept secret and I congratulate the Minister.

Having said that, I would still have to ask whether he is dealing with it in the right way. I do not know and I am not privy, as clearly the Minister is, to reports, whether they be from accountants, auditors or whatever. I know that in the blue book of 1981 the accounts of that company showed them to have an underwriting loss of X pounds and a slightly better investment profit of X pounds, which meant that they were OK. This kind of legislation that the Minister is now introducing is not for small amounts, and I am certain that the Minister is not introducing this Bill because of a few million pounds. It must be a lot more than a few million pounds. If in 1981 the accounts were all right, how 18 months later are we suddenly faced with crisis? A few things come to mind and maybe the Minister would give us some indication if he is allowed to do so. In regard to this particular company it was suggested to me many years ago that if the affairs of the company were investigated by the same people who investigated the Vehicle and General in England they might be asked to stop trading. That was eight or ten years ago.

I know that insurance accounts can be very difficult to present because an insurance company can have a lot of assets in every city in Ireland. They might have a building worth £20,000 if sold on the open market the following week, but it might appear in the accounts at £100,000. I know that the very serious business of underestimating motor claims and liability claims in general can be woven into an estimate very cleverly. In other words, the claimant's injuries might warrant £200,000, but the company might have inserted in their books a figure of £10,000 or £20,000. That certainly would put accountants on the beam, as it were. If that were the case would there not be some responsibility on the accountants to go into it and fine comb it before it was actually signed? I am working in the dark and the Minister knows the facts. I am only anticipating, seeing it as I do from my knowledge of the business. For the people who are insured, and I believe there would be over 300,000 policyholders in this company, it can be very serious and worrying.

The Senator seems to be putting emphasis on a company all the time. It is not the right thing to do.

I know, but the company was mentioned and I happen to think I am right in my approach. This whole area is one that needs to be looked at. I find that the problem is a difficult one and the former Minister, Deputy John Kelly, asked for an inquiry into the costs and methods of providing insurance. If that had been done many years ago and acted upon we would not be in the position we are in today, not just with the company concerned, but with insurance companies in general, because I know well that many insurance companies are running down their operations in this country. They are finding that the jury system, which is the kernel and the bugbear right through, is putting insurance companies in very serious financial straits. Liability insurance in this country is a very serious loss-maker at present. I suggest that this country is fast becoming uninsurable.

Whilst the Minister last week made some attempts, which I welcome, with the discs and with the extra fines to be imposed for uninsured vehicles, if we want to get realistic premiums then there is only one measure to be implemented, the elimination of the jury system. I am stating this as a factual situation. There is no question that the jury sympathy in all of these cases is absolutely and totally on the side of the plaintiff. The amounts of awards that are offered are often halved or divided by four on further appeal to the Supreme Court, which proves that this is the case. Ireland and Northern Ireland are the only countries in Europe who have this system. In England, for example, they can tell to within £20 what a particular injury is valued at. The greatest defect of the jury system is the inconsistency of the awards. No insurance man will dispute that. Any person working in the insurance industry, in the liability side of it particularly, will say that if the jury system was eliminated there would be reasonable premiums in this country. Not alone are they deciding the amount of the awards but they are also determining the liability, which is totally wrong.

When people know what company we are talking about they are, naturally, going to be worried. They will wonder what is going to happen. Will their insurance continue? Although the Minister has given the assurance that their insurance cover will continue, many people will still be worried. I believe that many of the customers of the company concerned will leave the company fast. No matter what exercise is engaged in to save the company — and I applaud that — people will not be happy and will feel that they should move. They will experience many difficulties in what is already a very difficult motor insurance market.

Despite the fact that we have nine Irish companies, 14 foreign companies and a few other Lloyds syndicates, very few of them are accepting motor insurance. None of them is going out looking for it. They are taking it as a gesture in many instances to the brokers and people of Ireland. Even allowing for that you will find company X will not take people who are under 30 on transfer with a full bonus. The car must be registered 1977 or more recently. Company B will not insure cars registered after 1977 and policyholders must be over 25. Company X or Y will not insure cars registered after 1978 and will not take transfers from another insurance company. Another company will only give a quotation for a car which is over 1978 and they must have a full bonus. The market is totally limited. We are going to have many customers leaving this company because their confidence has been eroded. The same company have been, in fairness, the only company that will accept young drivers, at colossal premiums. They were at least taking them whereas the other companies who were licensed with the Minister's Department will not accept young drivers as a risk. That situation will have to change.

The Senator is still mentioning this company.

The Minister will have to have to sit down with the other insurance companies and request them to take their fair share of whatever risk is offered to them in the motor business. It is very difficult to refrain from mentioning the company.

I was afraid it might come.

It is a very serious matter for the staff involved, a worrying time for them and for the policyholders. I hope that we can overcome this problem, and the Minister is right in doing it this way. I can remember the problems of the Equitable Insurance Company, and that was not a happy experience for policyholders at the time. This episode is going to have very serious repercussions for the insurance industry. It is a sad day for them. I hope the Minister gets on well with this legislation. He will have a fight on his hands because — knowing the company as I think I know them — they will not give up their company without a fight. The Minister can expect a tough battle in the courts because he is taking away the board of directors, directors are being deleted and Mr. X, an administrator, is being put in to run the company. For any company that is a huge worry and the administrator will find — I do not know who the Minister has in mind or who appoints him — he will have a difficult task in hand. There are many problems and I sincerely hope that you can bring this very important matter to a successful conclusion for the benefit of all.

I support the Bill. The Minister began his speech this evening by saying that the Bill is of general application. Further on, he indicated that the affairs of a company to a certain extent counter the urgency of this. I am not going to dispute your ruling and I am not going to mention a company.

Neither did I.

Since the Minister spoke in the other House this afternoon things have moved rapidly. Those of us who saw the 6 o'clock news this evening or who saw the evening papers have seen the finger pointed at a company. There is consent on all sides of the House to let this measure through, to achieve certain things, to secure the position of policyholders and the employment of people involved. In some way we have to convey that that security is being provided to policyholders and to the people employed by whatever company is involved. In the light of the reports in the media, it is essential that the action of this House and the other House and the Minister's urgency in relation to it are recognised and known.

Senator Fallon complimented the Minister on a well-kept secret. I join in that, but I should like to add that the Minister is to be congratulated for being prepared and being ready to move in this situation. He deserves our congratulations on the speed with which he has moved, and with a measure that will bring security to the categories of people I have mentioned.

When the Bill is passed, the Minister will then be in a position to enter the High Court, apply for an administrator to be appointed and the administrator will take responsibility for the affairs of the company. The cover — and it is very important that policyholders would know this — will continue, their policy-holding will be protected and in that way what the Minister in the course of his speech described as the possibilities of a disaster situation arising will have been avoided. It is also important, but perhaps it has not got the same urgency in the context of where we are tonight, that the mandate of the administrator at the end of the day will be to rescue that company and to restore it to solvency, if that is possible.

On the more general aspects of the Bill, I accept the principle of an administrator being appointed by the High Court. I concur with the Minister that it is a more acceptable way of dealing with situations like this than, for example, bringing in a liquidator and winding-up the company. Indeed, the Minister pointed out very clearly the implications of that alternative. It will leave the policyholders with cover, the premiums are secured and, as the Minister stated, there will be no additional uninsured drivers. The method proposed by the Minister for installing an administrator, by petition to the High Court, is simple, straightforward and effective. I accept that the speed by which it can be achieved is necessary and that it is satisfactory. I also accept that the powers which the Minister proposes to confer on the administrator through this Bill are also necessary and satisfactory. However, in reading the Bill, the Minister's speech and the explanatory memorandum, there is one aspect of the appointment of the administrator that concerns me — perhaps the Minister will be able to clarify the situation — that is, the extent of the powers the administrator will have in relation to subsidiary or dependent companies or groups within it. I know I will be sailing close to the wind but I will stay away from the shore if I say that the group some of us have in mind are reputed to be a combination of 74 companies. As I understand it, access or control by the administrator to subsidiary or dependent companies is more or less at the discretion of the High Court. Some of these subsidiary companies — and I want to emphasise that I am speaking in general terms now — could perhaps financially be very healthy but their financial health could be related directly to the level of funding that was diverted to them from the insurance company with the problem. Therefore, I am concerned that access of control by the administrator to the affairs of these subsidiary companies could be delayed by a protracted legal battle in the High Court, so that valuable time and, perhaps more significantly, valuable resources could be lost during that period. That is the only point that I am uncertain about, but I hope my uncertainty will be clarified by the Minister in due course.

I welcome the assurance given by the Minister in relation to contracts of employment, debts, transactions, proceedings and so on. With regard to the Insurance Compensation Fund, the Minister proposes to remove the limit of £1 million set 19 year ago and to raise it to more realistic levels. That is acceptable and there is no reason why we should have reservations on that score. I accept the point the Minister made that it is inadvisable to pitch the level of the fund at a particular level, and I think the ceiling of 2 per cent is reasonable.

I also welcome the fact that the Minister is availing of the opportunity to repeal the relevant sections of the 1936 Act in relation to the nationality of directors. We are doing no more and indeed the Minister is doing no more there than fulfilling our obligations under the Treaty of Rome.

The Minister implied in his speech that were it not for the effective use of the supervisory powers that he and his officials in his Department had, a very difficult situation could have emerged, or at least a situation which it appears could be difficult would not have been observed as early as it was. I should like to conclude by saying that the Minister and his officials or whoever was responsible for finding the apparent difficulties deserve not alone our congratulations but the congratulations and thanks of the people who will be preserved from a disastrous situation by the passing of this Bill and I support it.

Having listened to the Minister and the other speakers, I appreciate the urgency in relation to this Bill and to having it passed here tonight. While we may be bound by anonymity, this legislation will mean the virtual nationalisation of a particular company tomorrow morning. While questions have been asked and most of them have been answered, the policyholders, the staff and claimants in relation to this company or a particular company in the future would like it spelled out as to where they will stand when the situation as envisaged by the enactment of this legislation will arise, be it tomorrow or in a year's time. Senator Howard touched briefly on how the situation has arisen at this particular level, be it a well-kept secret or not. I should like to know if the Minister explored all the avenues to help this company to keep it solvent and will all avenues be explored in the future to help to keep companies solvent who are on the verge of disintegrating financially? The company should be given the opportunity to solve their own problems.

What amount of discussions were held or will be held in the future at all levels to help to save a particular company, its employees and its subsidiaries, should such subsidiaries exist? We would all naturally be concerned about the large number of policyholders who are customers of any company and how their cover will be protected. The Minister has explained this but what guarantee have we if, for instance, a court case should arise, and delays should occur? Will the premiums be State-guaranteed as a result of a company being taken over under this Act and will their premiums be increased? It worries me that as a result of this legislation here before us this evening we might have other panic applications for increases in insurance premiums in general across the board.

Senator Fallon referred to the fact that there are obviously a very substantial number of policyholders involved, who are naturally concerned. We are showing our concern by being here tonight to see how they will be affected by the legislation before us. Will the employment of companies' staffs be guaranteed? Will the subsidiaries of this company be wound up or will they be made solvent? The Minister referred to that in his speech but there are many questions that we would like answered here tonight. Will they be kept as on-going concerns or will they be just investigated and if they are not paying their way, will they be discharged to offset the liabilities of a particular company?

I shall be brief because I know that the Minister wants to come in and reply in about 15 minutes' time. However, it would be inappropriate if, on behalf of the Labour group at this side of the House, I did not put on record our appreciation for the manner in which the Minister has so speedily and courageously dealt with what is a very urgent problem. In the brief discussions we had with him today, each one of us complimented him, because there is no point in closing the door when the horse has bolted. Many Ministers have been accused from time to time over the last number of years of being inactive when the national interests were at stake. It can be said tonight of the Minister that not alone was he not inactive but he has been most active in this field since this problem came to his notice and he was prepared to come to the Houses of the Oireachtas on the first sitting day of the Dáil with this emergency legislation and to do so in a forthright manner. Although some Senators seem to be obsessed with who the company may or may not be, I am only interested in the principle involved in this. This principle which we are now enshrining in this legislation can be applied in the national interest to people who, through no fault of their own, could find themselves, in spite of having paid their premiums, uninsured almost overnight. The Minister is to be complimented on behalf of all the workers tomorrow who want to drive to work in the knowledge that they are insured, having paid their premiums, whether it was six or three months ago or yesterday, or whenever it was. If any company abdicates their responsibility to insure drivers overnight — and we have reason to believe that it might happen — the Minister was prepared to initiate legislation in the House that protects the ordinary common good. We are very proud that the Minister saw fit to bring in legislation like this. Not alone does he protect and reassure drivers to go to work tomorrow or even to go home tonight but he is reassuring the employees within the insurance industry who would naturally be concerned about their jobs because other companies have folded up.

The last person to have a claim on any winding up of a company is the worker engaged even if he has PRSI contributions, redundancy payments or any rights that workers might have in an industry. I am sure the workers in this industry would be pleased tonight to know that there is a Minister capable of initiating legislation as quickly as this.

We must also remember the small-time savers who put in their money on the advice of economists to this kind of savings on the basis that it was not a risk-saver, that it could be a valuable asset to their income by putting their small savings into it. Those people are also protected. So we have a three-fold insurance in this Bill for people who want to go to work safely, who are working within the industry and who have invested their savings in the same industry. So from our side of the House we want to congratulate the Minister. We will assist him in every way. I hope his petition to the High Court to appoint this administrator will also be successful and that the principle has now been enshrined in this House that we are prepared to take action where the common interest is at stake.

I join with other Senators in welcoming the Bill in the circumstances in which it was brought in. Clearly, this is in the nature, in a sense, of a fire brigade action which must be taken in order to protect policyholders and employees of the company involved and to protect the public generally. Quite obviously, as the Minister said, we do not want a similar situation arising as arose in the case of the winding up of the Equitable Insurance Company when a large number of people who have paid for insurance to cover them, say, for the coming year should suddenly find that they are uninsured, particularly in such a dangerous area as motor insurance.

The Bill raises rather larger questions about the whole area of motor insurance. It is not just the question of us being able to rescue people when a company gets into trouble. It is a question of looking at the whole background of this type of insurance and the difficulties that arise in it by its very nature. Some of these have been touched on by Senator Fallon.

The difficulties that arise in motor insurance are often due to the combination of a number of factors, first of all, the fact that for very obvious reasons such insurance is legally compulsory and, therefore, all motorists must be insured. Obviously this has to be so, but it does mean that companies who are taking on motor insurance basically ought to be willing to take on the bad risks along with the good. We have reached the position in this country where there are certain motor insurance companies operating in a system where they only want to take the good risks and the people who have large no claim bonuses already — the people who are regarded perhaps like ourselves as being respectably middle-aged and unlikely to have accidents. They do not want young people. They do not want high risk people, so that any company willing to take on perhaps the high risk people is, therefore, put at risk itself.

There is also the position — I am not going into the rights and wrongs of the jury system here — that high awards make for high premiums at the other end. Again, because the thing is on one side a statutory compulsion for an insurance, on the other side we expect private companies to provide this insurance, and we have the situation arising where accounting practices can, to some extent, conceal what is really going on in the background.

This has a number of end results. First of all, it has the end result that has been seen in some of the Minister's announcements in recent days that the premiums for motor insurance can be so high that a great many people will risk driving without insurance and risk the kind of fines that are provided against them because they feel they simply cannot afford the premiums and it is worth the risk. Second, we get the situation in which companies must try to recoup underwriting losses by investment profits.

As Senator Fallon pointed out, we have this situation in which a company, and it is not the only company which might be in this position, was trying to offset underwriting losses by investment profits and perhaps by diversifying its interest and to use the cash flow funds as profitably as possible to offset these losses. Problems can arise, particularly in a difficult economic situation, when one has not got the kind of assurance that if one invests money properly it will turn out a profitable investment, because one cannot be sure what one is doing. There are also difficulties in rendering clear accounts about what is happening.

In recent days the Minister announced new methods of cracking down on the uninsured driver. Anybody who knows the plight of the person who has had his vehicle damaged by an uninsured driver realises how important it is to stop uninsured driving, However, the imposition of bigger fines and higher penalties or this type of fire brigade legislation that we are having today will not solve the basic problem of motor insurance. Though we should welcome and pass this Bill today, it is necessary to look into the whole background of this very difficult question.

While I appreciate this is a Second Stage speech and that the Minister wants to get the whole thing through together, there are a couple of queries I would like to put to him. Section 6 is one of these usual sections giving the Minister power to make regulations. Perhaps the Minister will be able to tell us what type of regulations he is envisaging. Second — perhaps this is an unfair question but I think it is one of the questions that must arise in Senators' minds and in the minds of members of the public — when the Minister is bringing in this Bill in connection with whatever company it happens to be, is he doing this by agreement with this individual company or is he doing it unknown to the company so that it will come as a surprise to them that he intends to prosecute a petition in the High Court in the morning? Is he doing it against the wishes of the company? Will he be going into the High Court to fight them rather than to rescue the operation by agreement? I do not know whether he will be willing to answer this question but it is one that is bound to arise in people's minds.

I do not want to take up the time of the House — I know we want to finish this debate quickly — but I would come back to the fact that this kind of legislation and the kind of measures the Minister announced a few days ago really stem from the basic insecurity problem of motor insurance here. Until we have solved the underlying problem we will continue to get this kind of thing happening.

I will not be long because I know other Senators wish to contribute. First of all, I would like to say that the Bill has my enthusiastic support. Senator Howard has already expressed a similar view on behalf of the party. It is an extraordinary Bill by any interpretation. The amount of power that is being given and the creation of a new type of legal operation in a piece of emergency legislation such as this, pushed through the Dail and Seanad, understandably in such a short period of time, will present some extraordinary problems for the Members of the Houses of the Oireachtas who depend to a large extent on advice which they can receive from specialists who are not available to them at such short notice.

It behoves the Minister, therefore, to take particular notice of the points that will be made here this evening so that some kind of review procedure of this legislation, after an appropriate period, would be initiated so that any difficulties which might arise could be tackled in an organised and calm fashion. After an appropriate period, the Minister on his initiative, in the other House, or ourselves, on our own initiative in this House, might ask an appropriate committee, for example the Committee on Legislation, to review the provisions of the Act, which the Bill will become, so that any problems which might have arisen could be dealt with in another piece of legislation, or the matter could be tidied up.

That is not to suggest that there is anything in this Bill that will not work. However, it is inevitable that when a new type of operation, a new kind of insolvency control system is being applied for the first time in Ireland, it seems inevitable that problems will arise. The Minister should be willing voluntarily to submit the Act at a later stage for a more leisurely and critical examination by a committee representative of both Houses. That is the main point I want to make.

Second, the provisions which the Minister is making are very wide and sensitive and it is important that we should preserve this structure so that he can say calmly in due course what he wants done with it, that is, the structure of any company which might be in difficulty. A structure of the size of an insurance company should not be abolished overnight. The office of administrator will enable the Minister and other people to look calmly at any situation which may arise and make a decision which will be appropriate in all circumstances.

There are four problems I have identified with this. They are not problems which I am seeking to have solved this evening but they are the kind of problems to which, at a later stage, we can address our minds calmly. The first problem is what are the long term arrangements we can make so as to ensure the smooth transition from the administrator to the more normal form of operation, whether that is ownership by the State, the shareholders or by anybody? The circumstances in which this is likely to come about are provided for in the Bill, but realistically speaking the paying back of any money might not be a realistic proposition. The Minister should give further consideration to that point.

The second point deals with the provision whereby a receiver cannot be appointed over any of the company's assets. This seems to be a considerable restriction on the rights of anybody who might have advanced money to a company to which an administrator has been appointed. This is a considerable restriction on the rights to the security which a charge over a specific item of property normally gives that person, because it will not be a receivership or a liquidation but something different and because, during the course of that administration, a receiver cannot be appointed except with the approval of the court. That section itself does not give the court any indication as to what criteria it should establish in deciding whether to appoint a receiver, because it clearly states:

No receiver over any part of the property or undertaking shall be appointed without the prior sanction of the court.

The Minister will have a big problem with regard to subsidiaries because to appoint an administrator and automatically to have that person appointed an administrator over all subsidiaries or connected organisations would be very extreme, and the Minister has not done that. The idea of a separate application in respect of each subsidiary will be very difficult, very time consuming and a waste of the administrator's time. More important, who will control the subsidiaries in the period that must elapse between the appointment of a provisional administrator and the actual application by the provisional administrator for powers to control the subsidiaries under the provisions of the Act? There could be a period of weeks during which I would assume that the directors of the subsidiaries would continue to be in control of the subsidiaries. That is a considerable temptation to people who might be dissatisfied with regard to the action over the main insurance company. It appears that the control of the subsidiaries will remain with the directors of the subsidiaries in the period between the appointment of the provisional administrator and the period in which the administrator will decide to make a separate application to the court in respect of the individual subsidiaries. I do not see why hearings should be otherwise than in public. I understand why the maintenance of confidence might be important, but I suggest this provision will give rise to difficulties.

The Minister can depend on our good will and co-operation in solving these and any other problems that might arise. Bearing those things in mind, the scheme is an imaginative one which will meet the real needs caused now or in the future by the sudden insolvency, or other such problem, of a main insurance company in the Irish market.

I congratulate the Minister on the speed with which he acted in bringing forward this legislation. It is emergency legislation and anything done in a hurry is bound to carry a certain amount of weakness.

I agree with Senator O'Leary. I was going to make the same point, that the Minister would consider, and indicate to the House if he is in a position to do so, that matters of insurance legislation will be dealt with in the near future. That will be essential as a protection to the Minister, who did an excellent job in bringing forward this legislation in such a rush. He needs the protection of this House. There are many people who will set out from the start to be non-co-operative, who will try to find the loopholes in this rushed legislation, even though they agree it is essential.

There is something very new in appointing an administrator. It is certainly new to me. I am particularly happy that the Minister has seen an alternative to the liquidator.


Hear, hear.

Never, in all my years of business in the city, have I seen anybody benefit by a liquidation except the liquidator. Anybody who knows the Minister is aware of his concern for workers. Nobody will dispute that. I am particularly pleased that he is taking steps to help the many workers who may be involved in an insurance company. Often it is easy to bring in a liquidator. With all due respect to the civil service in Departments, we have seen Ministers, having washed their hands of a problem putting it over on somebody else and saying: "It is no longer my problem — it is somebody else's." But in this case they have appointed an administrator instead of a liquidator. There are a number of questions that must be asked and I ask them in a spirit of co-operation. If the Minister is reluctant to answer them I am not going to insist on it because I appreciate the emergency that exists. When the Minister gets time to think he will have to bring in legislation again, because even though this is emergency legislation it is permanent until such time as it is repealed. I am quite satisfied it will come back to the Oireachtas, for the Minister's protection if for no other reason.

What is the function of the administrator? Is it to examine the company, to manage it and bring it back as a going concern? The ideal situation would be that the administrator goes in, examines, manages the company and brings it back as a going concern. What happens then when it is brought back as a going concern? Does he step out of the way and hand it back to management?

Senator O'Leary made one point that is not relevant to this debate. When he was talking about restricting the powers of the receiver he said that creditors need to be protected and that bringing in a receiver gave them that protection. If Senator O'Leary had to think of that he would not have been quite as positive about it because he would have accepted the point that receivers only do well for themselves.

At present, throughout the country there are a number of people who have claims listed for hearings in the courts and I would expect that there is considerable concern among such people. I am talking about people who have been injured and who have been waiting three to four years to have their cases heard. Are we to have a situation in which the administrator will postpone the hearing of these cases?

It is important that that should be made clear. What are the implications of the current situation for premiums in the industry generally, and does the Minister foresee any increases in the company's premiums? If this Bill is brought in because of any one company — I do not know — is the Minister going to have companies suffer who did everything the right way in all their years of existence? Does the Minister foresee any tightening up of reporting procedures to the Department as a result of what occurred? I think that is important.

I am sure the Minister is prepared for my next point — I do not know if he can give a positive clearcut reply: he will probably merely indicate his attitude on this one. What would his attitude be if there is a delay on the part of the court of the appointment of an administrator? That is a serious one. In the event of a refusal by the court to appoint, what are the options open and what would the effect of such options be?

The Irish Life Company has been very successful. It was established in the thirties. I understand the company is owned 97 per cent by the Minister for Finance, that is, he holds the shares for the State in that company. Has the Minister given any thought as to whether the State should adopt a similar approach to the question of general insurance? Seeing that motorists are required by law to be insured, would it not seem reasonable that the State should ensure that cover which motorists are bound to have by law would be provided by the State?

I do not want to delay the House. I hope I will be given another opportunity to speak on insurance in this House. I hope the Minister will take into account what has been said by Senator O'Leary and myself. We open up a whole new thing by the appointment of the administrator. We could have started something very worthwhile even though this has been rushed and even though it is an emergency. Perhaps I can look forward to the day in this House when we might be discussing legislation for an administrator in the place of a liquidator. Forgive me for straying slightly from the point, but it was raised and I want to say a few words about it. I feel it might be worthwhile for the Minister to note that there is acceptance of what he is doing. The appointment of an administrator is a new thing as far as I know. The Minister has done the right thing, the wise thing, all he has ever claimed, he has looked after the interests of the workers. I hope that in the future some Minister, preferably Deputy Cluskey, will introduce legislation to provide an alternative to the liquidator, under whom nobody wins but the liquidator.

I concur with Senator Hanafin, who said that the only person who profits from receivership is the receiver. I join with him in congratulating the Minister for showing imagination in dealing with the problem he proposes to deal with tomorrow morning.

I rose primarily to say that in the age we live in, one of widespread cynicism about politicians and the House of the Oireachtas, it is very edifying, to say the least, to see the rapid response of the Department, the Minister and his officials on the one hand, and the generosity of the Opposition on the other both in this House and the other House today. The absolute co-operation given by the Leader and members of Fianna Fáil should be noted. It is to their credit that it is possible to take this Bill in both Houses in such a short time.

I am extremely pleased that the formula which the Minister proposes and the way he intends to proceed will have the direct benefit of securing the jobs which would otherwise be lost as and from the application that would be made in the courts to wind up this company under the normal procedures and practices that we adopt here in this country. If something is wrong — we have seen it before — you dispose of the problem rapidly by sending in now probably one of our best-known public figures, a receiver, and you wash your hands and say goodbye. I am delighted that a Minister from my party has decided that there are other and better ways to do things.

I was a bit disappointed when Senator Fallon said that the public will lose confidence in whatever company is in trouble, because in his opening speech the Minister refers to the ability of the administrator to have access to funds which quite conceivably are not available to any of that company's competitors. Therefore, I submit that the company that will be the subject of tomorrow's hearing could be in a much better financial situation than most of its competitors. I will go back to what Senator Hanafin said, if this is a new way of approaching company failures in Ireland, then it is up to us to say to the public that under this system they are not at risk. It is very important that that message would be carried by the media tomorrow. Otherwise you may as well send in the liquidator and finish it.

Therefore, I appeal to those people who at present express a lack of faith, that the obvious rebuttal of such a lack of faith is contained in the Minister's opening speech. Because it is emergency legislation and one cannot talk forever, I simply finish up by congratulating the Minister and the Department and, as I have already said, the Opposition both in this House and in the other House for their generosity.

I thank the House for its constructive contribution on Second Stage. Members of the House on all sides have taken a constructive attitude throughout the debate on this piece of legislation. There is, I am very glad to see, an awareness of the necessity for a sense of urgency. The debate has been remarkable for the absence of any attempt at party political advantage in the approach to it. It has been extremely encouraging to see that the potential problem that has been presented to the House is being approached in this manner.

A considerable number of questions were asked during the course of the contributions and I might not have the opportunity to deal with them all individually. One of the observations made by Senator Fallon in his opening remarks was that this legislation — and this was referred to also by a number of other speakers — is being dealt with in a short period and it does not give an opportunity for the full discussion that one would like to have on legislation of this nature. That is something I agree with, and I have considerable sympathy with the House in that respect. I might also say that I find myself, because of certain inhibitions which of necessity are there, without the full range I might wish to have in replying to the House. I am sure the House has accepted that while Members may speculate as to what company may be involved, that is not a luxury I can afford. In all my remarks and replies I will keep to the provisions of the Bill and their general application.

Senator Fallon said that a lot of questions would have to be asked about this at possibly some future date. He referred particularly to returns that were made on the financial position of companies as they are required by law. This is an extremely important aspect of the present situation. The Minister and the Department have responsibility for supervising the insurance industry with particular reference to whether companies are solvent. In order to do that effectively it is necessary that one must rely on the competence, the integrity and the honesty of professional people who make certified returns in respect of accounts which have to be furnished to the Department. It would be a matter of very serious concern to the House if there were any reason to believe that all of these necessary requirements were not complied with. It would most certainly be a matter of serious concern to me. If a situation of that nature revealed itself, appropriate steps should be taken, because unless one can rely on that very important supervisory link in that chain the whole situation would become impossible. If there was any departure from the standards that one would be entitled to expect, suitable sanctions would be imposed. I accept that that is an extremely important aspect of it.

As Senator Magner and a number of other speakers have indicated, what is most important at this stage, having regard to speculation in the media and to discussions all over the country, in pubs, at wakes, weddings and bridge parties as to who is involved and what the consequences are, is that we get it across that if this legislation is passed here tonight, and if the necessary procedure for early signature is passed and if the court, under the terms of this legislation appoint an administrator — and I have no reason to believe they will not — there is no need for concern on the part of anyone holding a policy in the non-life area with any insurance company who may be the subject of an administrator being appointed.

As I indicated in my Second Reading speech, all obligations, transactions, policies and commitments, including contracts of employment, will be observed as normal and that no action or default on any legitimate commitment would cease to be an obligation solely by virtue of the fact that an administrator had been appointed. Many people are extremely worried and we have an obligation to reassure them.

Senator Magner raised other questions, too. He said that I might end up with a fight on my hands with regard to applying to the courts for the appointment of an administrator. He was speaking in terms, I understand, of a particular company. I have no company in mind. I am speaking about the general application. I have had several fights on my hands in my time but this is one I do not anticipate having in that I am not looking on this as a fight. Neither am I looking on it with any degree of relish. It is not an action that anyone in his right mind would lightly undertake. The circumstances as they present themselves to me left me with two alternatives. I could apply to the courts for a winding up of the company with all the subsequent disaster that that would entail for a great many people, or I could adopt this approach and with the co-operation of both Houses of the Oireachtas be in a position to take a different approach in the courts. After the necessary formalities are dispensed with by way of petition, affidavit and presentation to the court, it is for the court to decide. It is not my fight. It is a presentation to the court under the responsibilities I have by virtue of my office and the matter is then in the hands of the court. I am quite confident that the court will take an objective and responsible view of the matter and that every-one's rights will be taken into consideration.

The question was raised as to the position in the event of the court not agreeing to go along with this. All I can say is that we certainly would be no worse off than we were this morning in the circumstances that have arisen. We are taking the only feasible approach open to us. But the court, under the legislation, if it so wishes, and by way of an ex parte application without hearing anyone else, will have the power to appoint a provisional administrator until such time as they have had an opportunity of going into all the relevant facts. I have no fears in that regard. The information made available to me left me with no other course of action. I have every confidence in the court's ability to deal impartially, objectively and in the public interest with the facts as presented to them irrespective of what company may be involved.

Senator Howard and others, including Senator O'Leary and Senator McGuinness, spoke about the major legislation being taken in these circumstances. I am in agreement with that view. It is not the most desirable way to have to deal with legislation. There is no doubt that this legislation is of major importance so far as insurance law is concerned. It is a radical change in the situation prevailing up to now. Some Senators have indicated that to change now is justified because of a certain set of circumstances and it might be subject to review. I do not accept that, because I see it as a very desirable change which should be permanent legislation in this sphere.

There is a limited range of action open to a Minister who finds himself in a position where he is trying to fulfil his obligations so far as supervising an insurance company is concerned. Some of the options open, were one to take them, would in fact precipitate the very consequence that one was trying to avoid. A predecessor in a Fianna Fáil Government illustrated this earlier today when he indicated that there were certain avenues open to a Minister under the existing law, that he could, for instance, send in an inspector. If a Minister has reason to believe that there is something wrong with a company's finances which justifies sending in an inspector, the very fact of doing so can put that company under. As Senator Fallon well knows, the insurance world is not that big, word gets around fairly quickly. A lot of business is done through brokers by way of inter-business, re-insurances and so on, so while there are theoretically certain powers to insure supervision, the reality is that if one utilises those powers, one can put the company over the brink and into an insolvent position.

This legislation is extremely useful because it gives an alternative to seeking the winding up. That is not to say that I do not agree with the point that has been made. Maybe it is time for us to have a much more comprehensive look at the whole insurance area. That might be a very useful exercise indeed. It would be my intention to go into this in considerable depth. At the moment this legislation is necessary to get through all Stages tonight. I shall try in a general way to deal with the many questions that have been asked.

First, most of the questions are ones that would normally come up at Committee Stage, but as we are not likely to reach the Committee Stage in any detail here tonight, I will try to deal with them in a more global way. The situation is that I would apply to the courts for the appointment of an administrator. The courts, if they so decide, would appoint that administrator and he would not be answerable to me. He would be answerable to the courts. He would be totally independent of me.

Would the company concerned be allowed to attend court and make a defence?

If one were seeking to have a provisional administrator appointed, under the terms of the Bill that could be done without the other party being present, the provisional administrator being put in for a limited period of time. Then the court naturally would arrange a full hearing with all the interested parties having access to the court and being able to make their case before the courts. I have no doubt and I am sure the House would have no doubt that so far as the courts are concerned they would ensure that the rights of all parties are taken into consideration in determining whether an administrator should be appointed. While the court, under this legislation could appoint a provisional administrator for a limited period of time to enable them to go into the thing more fully, everyone would have their day before a final decision was made.

Is the Minister going in ex parte tomorrow rather than on any kind of notice to the insurance company?

That is a matter on which I would be subject to legal advice. The way that that would be handled would be the way that my legal advisers and the people who would be representing me in court would see as the most appropriate way of dealing with it. Any of these approaches is a matter of legal opinion and legal advice but in the ultimate it is the court that decides. That is the safeguard we all have.

Are you saying that now at 9.48, the company concerned just do not know that tomorrow morning they will be named in the High Court?

These questions might be answered much better on the next Stage of the Bill.

The Minister did state that because some of these questions could not be answered on the Committee Stage, he would be dealing with them now.

I was talking in terms of time available to the House. The agreement is that all Stages would be passed by 10 p.m.

If the Senator is not satisfied with the answer I will allow the question to be answered on the Final Stage.

In view of there being questions to be answered, I suggest that we extend the sitting.

There is an earlier signature motion to be taken so it would not be appropriate to extend the sitting unduly since the President will be requested to sign the Bill tonight. If it were a matter of 15 to 20 minutes, I am sure the Minister would be able to accommodate the House.

We are not going to extend the sitting or to delay the passing of the Bill, but given the Minister's very patient approach to the matter, if there are questions that need to be answered perhaps we could extend the sitting for a reasonable time after 10 o'clock, perhaps for ten or 15 minutes.

We should make a distinction in our own minds between discussing the legislation which is before us and any application which subsequently might be made under the legislation. We should discuss only the legislation as it is before us and not any application which might be made.

We are not talking about specifics. We are talking about the Bill as it is presented, and there is a very wide divergence as to what Senator O'Leary has said and what I have said relating to the Committee Stage. There may be specific questions that need to be asked on specific parts of the Bill on the Committee Stage, and if there are people who need to ask questions perhaps the Minister would oblige us with a reasonable period of extended time.

The Minister has concluded his Second Stage speech so perhaps we could take Committee Stage now and finish at 10.05 p.m.

I accept what Senator Harte says. We have an agreement that we would finish at a certain hour. There are certain matters that need to be raised but this is not the proper time to raise them. The Minister will have representations made in court tomorrow on his behalf. To raise certain matters now might prejudice the case before the court tomorrow. If there is an indication from the Minister that that might be so, then the House should drop its request for further time, and just deal with the matter as arranged.

Question put and agreed to.
Agreed to take remaining Stages today.