Of the 23 amendments before the House today, seven are purely technical and do not require that I make individual reference to them. These are amendments Nos. 3, 5, 8, 16, 19, 21 and 22. The following is the situation with the balance of the amendments.
Amendment No. 1 is simply a definition which is included for the purposes of clarity. Amendment No. 2 increases the level of fine under the Bill for conviction on indictment to a sum of £10,000 from the original figure of £5,000. This was suggested to me by Deputy John Bruton on Committee Stage in the Dáil and I accepted it. Amendment No. 4 was proposed at Dáil Committee Stage by Deputy Mervyn Taylor and I accepted that as a possible improvement and a means of serving documents on an individual under section 4. Amendment No. 6 consolidates the fees reference in section 7 and section 59 can, accordingly, be dropped. Section 12 (f) also has a reference to fees removed from it under amendment No. 7. The deletion under amendment No. 9 is to allow the Minister to fully monitor policy conditions and premium rates in the marketplace. Words which are superfluous to section 20 are deleted and we do that through amendment No. 10.
The former section 27 is being replaced by a completely new section. Under the Insurance (Amendment) Act, 1978, as amended by the Insurance (Amendment) Act, 1981, licensed banks are permitted in the course of their banking business to enter into or accept a bond or contract of suretyship or guarantee in specific instances. Under section 27 of the Insurance Bill, 1987 it is proposed to extend the same powers to the Industrial Credit Corporation and to Fóir Teoranta.
In their recent submissions to the Fifth Joint Committee on the Secondary Legislation of the European Communities and to the Department, the banks maintained that, first, the 1978 Act gave very limited freedom to banks in the area of suretyship necessitating the setting up of complicated and expensive mechanisms to accommodate routine bank transactions. Banks must continually refer to the 1978 Act to make sure they are not breaking the law in issuing guarantees. They specifically instance cases of import duty liabilities to the Revenue Commissioners and bonds for tour operators and travel agents which are statutory rather than contractual obligations, the legality of which is in doubt under the existing legislation. Secondly, the 1978 Act allowed banks to give guarantees for payment of moneys where the payment of money is a contractual obligation of the customer of the bank and not where the customer's obligation is a statutory one.
The Oireachtas Joint Committee recommended that amending legislation be introduced and the new section is intended, therefore, to substitute for the former section 27. Subsection (1) of the new section removes the restrictions on licensed banks under sections 2 (1) (a) (2) of the 1978 Insurance (Amendment) Act, as amended, and extends to the Industrial Credit Corporation and Fóir Teoranta the same powers as banks in the bond guarantee suretyship area. I have decided to leave the reference to Fóir Teoranta despite recent announcements by the Government; I made that decision purely for technical reasons and for tidying-up purposes. Senators may have thought that was out of place there but for technical reasons it is not.
Both ICC and Fóir Teoranta have represented that this extension is necessary to remove impediments to their ability to provide loans or banking services to clients through their not being able to give or accept guarantees in respect of loans and related financial services. Subsection (1) also extends to ICC and Fóir Teoranta powers to obtain and accept guarantees from foreign institutions to cover loans made by the ICC or by Fóir Teoranta. Subsection (2) defines certain terms used in subsection (1).
Amendments Nos. 12 and 13, both of which relate to section 31, can be taken together. Section 31 deals with the Insurance Compensation Fund. It proposes certain restrictions on who may benefit from the fund. The amendments proposed, which replace the existing sections 31 (2) and 31 (4) of the Bill, are of a technical nature only and do not change the original intention behind the section which, just to remind Senators, was to restrict claimants to 65 per cent or £650,000, whichever is the lower of the sum due under a particular claim. Legal advice received by my Department stated that a number of different interpretations were possible from the original text. Accordingly, the text has now been tightened up to avoid possible misinterpretation.
An amendment to (1D) of section 31 (2) ensures that an individual will be compensated even if he is liable to a corporate or unincorporated body. A new subsection (1E) requires that any amount paid out of the fund shall be passed on by the liquidator to the person to whom it is due. The new section 31 (4) (b) is designed to ensure that where the Insurance Compensation Fund is used to compensate a claimant, that claimant cannot receive more than 65 per cent or £650,000, whichever is the lower, of the sum due to him unless the fund receives from the assets of the insolvent insurer the amount which it, that is the fund, paid to the claimant. As previously stated, this was the original intention behind this section but as a result of legal advice it has been decided to make our intention more explicit. In any event, the likelihood of the liquidator of an insolvent insurance company being in a position to pay out more than 65 per cent of the sums due to a claimant is highly unlikely.
Amendment No. 14 is of a technical nature and follows from the amendment to section 31 (4) (b) above. The purpose of this amendment to section 32 is to ensure that the priority given to policyholders in so far as the technical reserves of the insurer are concerned does not override the priority given to the Insurance Compensation Fund in section 31 (4) (b). The substituted section 33 under amendment No. 15 is not different in substance from the previous draft of the section. The amendments involved are purely technical in nature and stem from legal advice received by my Department.
Section 36 is provided for by way of amendment No. 17. This new section provides that where the High Court sanctions the amalgmation of two or more insurance companies or the transfer of insurance business from one company to another, the court shall provide for the effective transfer of the property and the liabilities involved. I take the view that the sanction of the High Court of the amalgamation or transfer of insurance business has always had the effect of transferring all the assets and liabilities, including liability to policyholders of the transferer company to the transferee company. While the most recent case law supports this view, it has come to my attention that the earlier case law is inconsistent and might give rise to doubt in the matter. This, in turn, could raise doubts as to whether we have fully implemented the relevant EC directives which require member states to provide that a scheme of transfer once approved by the competent national authority shall affect directly the policyholders concerned. This section is intended to put the matter beyond doubt by providing that where the court has sanctioned a transfer or amalgamation it shall, by order, transfer the relevant property and liabilities and that any such order shall be effective in making such transfers.
During Committee Stage of the Bill in the Dáil, Deputy John Bruton put down an amendment to subsection (1) to insert the words: "having had regard to all the liabilities of the companies". This arose out of concern on the Deputy's part that the court, in deciding whether to sanction an amalgamation or a transfer of business, should take into account the liabilities of the companies involved. While I took the view that the section as drafted was sufficient as the court would naturally have regard to the liability of the companies involved, I did agree to accept the Deputy's amendment to make it explicit that account should be taken of the company's liabilities. The section also provides that details of the agreement and the court order be provided to the Minister.
Under amendment No. 18 the Minister is empowered to require, by regulation, that insurance agents as well as insurance brokers have professional indemnity insurance. This amendment was tabled in the Dáil by Deputy John Bruton and I accepted it. Amendment No. 20 brings new section 51 into being. The purpose and intent of this section is clear. Subsection (1) (a) and (b) prescribe the circumstances in which the intermediaries, be they brokers or agents, may accept money from a client in respect of insurance. First, an intermediary may only accept money from a client in respect of a proposal for insurance if it is accompanied by the completed proposal or the proposal has already been accepted by the insurance company. Secondly, an intermediary may only accept money from a client in respect of a renewal of a policy if such renewal has been invited by the insurance company. These are important requirements because their effect will be to oblige intermediaries to have an identifiable insurance company in mind in respect of proposals and renewals before accepting money from clients.
Subsection (2) gives the Minister power to expand on the requirements set out in subsection (1) to meet any new contingencies. Subsection (3) requires intermediaries to issue receipts in a specified form to their clients when they accept from them money in respect of proposals or in respect of renewals. The receipts will establish a clear link between the client, the intermediary and the insurance company involved. It is important that we establish that link clearly.
Subsection (4) is an important provision in that it will highlight to the client that the completion of a proposal accompanied by a sum of money does not, of itself, mean that he or she is on cover. In most cases, insurance companies will not have delegated authority to an intermediary to bind them in contracts of insurance and it is important for the consumer to know this. Usually it is the insurance company who examines the proposal and assesses the risk before deciding to go on cover and actually issue a policy.
Subsection (5) exempts intermediaries with binding authority from insurance companies from the receipting requirements. The policy document itself, of course, would constitute a receipt. Subsection (6) gives the Minister power to alter or add to the information to be provided in the actual receipt. Subsection (7) merely states that a receipt is a receipt unless proved otherwise and would, for example, put the onus on intermediaries, etc. to prove that a receipt was bogus. While the requirements of this section are new to this Bill they should already be common practice among reliable intermediaries.
The final amendment involves the inclusion of a new section at section 61. It was introduced by me on Report Stage in the Dáil as a more workable alternative to an amendment which had been tabled by Deputy Mervyn Taylor in relation to insurance contracts. This will enable the Minister, having consulted with representatives of the insurance industry and consumers, to make codes of conduct in relation to the disclosure and warranty aspects of insurance contracts.
I commend all these amendments to the Seanad today.