Insurance (Amendment) Bill 2018: Second Stage

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

The Minister of State, Deputy D'Arcy, is welcome as always.

I welcome the opportunity to address Seanad Éireann on this Bill, which is important and pressing legislation. At the outset, I express my appreciation for the willingness of both Houses to prioritise the speedy enactment of this Bill, which will provide the legal basis, among other matters, for the full compensation of Setanta Insurance and Enterprise Insurance third party claimants.

I also wish to acknowledge the work of the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach in its scrutiny of the general scheme of the Bill. I thank its members for their detailed consideration of the proposals. Senators will note that many of the committee's recommendations have been taken into account in drafting the Bill. For example, provisions have been made for the recovery of costs by the agencies involved - the Motor Insurers Bureau of Ireland, MIBI, the Central Bank and the State Claims Agency - and a mechanism provides the flexibility to change the levy in response to the amount held in the fund and other relevant regulatory considerations.

I am sorry to interrupt, but I wonder whether there are copies of the Minister of State's speech.

That is fine. I was wondering whether we would get them.

We will arrange to have them distributed.

I will take any questions on issues raised in this group in the report. The Bill stems from the review of the framework for motor insurance compensation Ireland report and seeks to implement the recommendations of that report, which was approved by the Government in July 2016. As Senators are aware, the review was triggered following the failure of Setanta Insurance, a Maltese incorporated company, in 2014 and the uncertainty that followed over compensation arrangements for third party claimants, which highlighted weaknesses within the current insurance compensation framework in Ireland. Following the placing of Setanta into liquidation, legal proceedings were commenced between the Law Society of Ireland and the Motor Insurers Bureau of Ireland, MIBI, in order to establish who was liable for the payment of compensation to third party claimants. In September 2015, the High Court held in the Law Society's favour and found that MIBI was liable and the Court of Appeal upheld this decision in January 2016.

This was the context of the review of the framework for motor insurance compensation Ireland, which was carried out in 2016. The review made a number of recommendations which are addressed in the Bill. The key recommendations are that the level of compensation from the Insurance Compensation Fund, ICF, for third party motor claims be increased from 65% to 100% in line with that currently provided by MIBI; and that the increased coverage of the ICF be funded by a direct contribution to the ICF from the motor insurance industry via MIBI to the value of 35% of the third party motor insurance claims. Subsequently in May 2017, the Supreme Court overturned the decision of the High Court and the Court of Appeal and found that the Insurance Compensation Fund was liable for payment of compensation in Setanta third party claimants. The major effect of this was that Setanta third party claimants who had previously thought they were going to receive full compensation were now entitled to 65% of the claim, or €825,000, whichever was the lesser. As a consequence, the Minister for Finance after appropriate consideration agreed that Setanta third party claimants will receive 100% of a claim, subject to a limit of €1.22 million in the case of claims for property damage. This decision is reflected in the Bill.

As noted above, a key recommendation of the review of the framework for motor insurance compensation in Ireland was the decision that industry pay an additional 35% compensation. The question of how this should be done was subject to much discussion. The insurance industry opposed the idea of paying the 35% contribution directly from MIBI as it believed it would create an open-ended exposure as it would not know what its obligations would be from year to year. In simple terms, it could be 35% of a very small amount or 35% of a very large amount, depending on the size of the insurer that went into liquidation. The industry believed that would create more uncertainty and unpredictability and would lead to higher capital charges. To resolve this issue, the industry proposed the establishment of an ex ante fund into which it would make a contribution equivalent to 2% of the gross written motor insurance premiums. Such a fund once built up would allow the industry to meet its obligations and would provide it with the necessary certainty as to the extent of its exposure.

Prior to the publication of the general scheme of the Bill, a number of policy options were examined in the regulatory impact analysis, including the joint committee's proposal of the State funding the additional upfront 35% cost. On the basis of this exercise, the preferred option was to accept the industry's proposal and establish an ex ante industry fund into which insurers contribute an amount equivalent to 2% of gross written motor insurance premia to be used to meet any future obligations in respect of motor insolvencies. The rationale for this approach over the other approaches was that it was felt that it best struck the balance between protecting third party claimants affected by an insolvency and minimising the exposure of the Exchequer, particularly in the event of an insolvency of a large insurer, while at the same time ensuring that Ireland remains an attractive place for insurers to conduct business through the provision of as much certainty as possible to insurers operating in the State.

It is important to note that this 2% contribution is not a levy on policy holders' premia, which has been reported extensively today. However, as Senators are aware, the Minister for Finance is prohibited under Solvency II from interfering in the pricing of insurance products and therefore he will not be able to compel insurance companies through legislation to absorb this additional cost rather than passing it on to policy holders. What the Bill provides is a legal framework that will allow companies to choose to absorb this additional cost. Therefore, instead of legislating for a levy to be applied to insurance companies, the Bill provides for a contribution equivalent to 2% of the gross motor premia to be paid to an ex ante fund. With this approach, the decisions rest with the insurance companies as to how they finance this contribution, either through absorbing it themselves or passing it on to policy holders. If a more competitive insurance market can be generated, and this proposal is enacted, then some companies may choose not to pass it on to the policy holder.

I will now outline the main elements of the Bill, which comprises 17 sections. Part 1 deals with preliminary matters including the Short Title of the Bill, definitions of terms used in the Bill and the authority for expenses incurred in the administration of the Bill. Separate commencement of Part 4 is included to allow the MIBI adequate time to put arrangements in place for the new motor insurers insolvency compensation fund. This Part also provides for the transfer of functions relating to the administration of the ICF from the office of the accountant to the High Court to the Central Bank and relevant functions in respect of applications to the High Court to the State Claims Agency where liquidations are already in progress.

Part 2 deals with matters relating to the transfer of the administration of the fund, such as the preparation of final accounts of the Insurance Compensation Fund, the payment of any moneys in the ICF to the Central Bank and the transfer of records from the accountant to the High Court to the Central Bank and the State Claims Agency. Section 8 amends some of the existing definitions contained in the Insurance Act 1964 and inserts some new definitions. Section 9 amends section 2 of the 1964 Act to provide that the Central Bank of Ireland takes over the functions performed by the Accountant to the High Court in relation to the administration and governance of the ICF. It provides that the accounts of the ICF be given to the Office of the Comptroller and Auditor General not later than six months after the end of each financial year to be audited and thereafter laid before the Houses of the Oireachtas by the Minister for Finance.

Section 10 amends section 3 of the 1964 Act to disapply the current limit of 65%, or €825,000, whichever is the lesser, to be paid to third party claimants from the ICF in the case of the failure of a motor insurer. This amendment provides for the payment of personal injury claims in full and to a maximum of €1.22 million for injury to property in the case of third party motor insurance claims, in line with the amounts paid by the MIBI where a driver is unidentified or uninsured. It also provides that in such a scenario the ICF will be able to recoup the balance - over the limits mentioned - from a new motor insurers insolvency compensation fund to be established under section 16. These amendments implement the key recommendations of the review of the framework for motor insurance compensation in Ireland. Finally, this Part facilitates the payment of 100% compensation to third party claimants for existing motor insurers that have gone into liquidation since 30 September 2011, namely, Setanta and Enterprise Limited.

Section 11 amends section 3A of the Insurance Act 1964 to provide that applications to the High Court by a liquidator in the case of an insolvent insurer authorised in Ireland for approval of payment from the ICF must be accompanied by a report by the State Claims Agency following its assessment and verification of the claims. A provision is also included in this and the following section to ensure that any moneys recovered from the liquidation of a motor insurer be repaid on a pro rata basis to the ICF and the motor insurers insolvency compensation fund.

Section 12 amends section 3B of the Insurance Act 1964 so that in the case of an insolvent insurer authorised in another member state, the State Claims Agency will make the application to the High Court. Before doing this, however, it will have assessed and validated claims on the basis of information provided by the person appointed to perform the functions of a liquidator in that other State.

The amounts approved by the High Court will be paid by the Central Bank of Ireland from the Insurance Compensation Fund, ICF, to the State Claims Agency for disbursement to individual claimants. This section also shortens the time limit for making applications in the High Court for payments from the ICF for no more than once in any six month period to more than once in any three month period to allow payments to be made more frequently.

Section 13, which amends section 3C of the Insurance Act of 1964, deals with companies in administration to provide that any application to the High Court for payment out of the ICF shall be accompanied by a report prepared by the State Claims Agency confirming that the methodology for estimating claims reserves and for assessing liabilities applied is appropriate and in line with generally accepted accounting principles or practice.

Section 14 amends section 6 of the Insurance Act of 1964 to update the existing regulatory powers of the Central Bank of Ireland to take action in the event of an insurer failing to contribute to the ICF. Section 15 repeals section 14 of the Insurance Act of 1964 which provides for regulation-making powers for the Central Bank in relation to the Act. This is because the Central Bank already as appropriate regulation-making powers under section 48 of the Central Bank (Supervision and Enforcement) Act 2013.

Section 16 provides a legal basis and sets out the arrangements for motor insurers operating in the Irish market to contribute an amount under normal circumstances, equivalent to 2% of gross written motor premiums, GWP, to an ex ante fund to be held by the Motor Insurers Bureau of Ireland, MIBI, to be known as the Motor Insurers Insolvency Compensation, MIIC, fund. The contribution rate will be subject to an annual review by the Minister and may be varied between 0% and 3% depending on factors such as the amount held in the MIIC fund and the likelihood of a call on that fund in line with the following parameters: an amount equivalent to 2% of GWP until the MIIC fund reaches €150 million; reducing to a contribution equivalent to 1% until the MIIC fund reaches €200 million; and contributions to be then suspended until such time as there is a call on the fund. In the event of a significant call on the MIIC fund, and there being insufficient moneys in the fund, the contribution can be increased to the equivalent of 3% of GWP until the fund reaches €50 million, after which time a contribution equivalent to 2% of GWP would again apply.

It also sets out the circumstances in which payments will be paid out of the MIIC fund to the ICF and in the event of an insurer failing to make a contribution to the MIIC fund, the MIBI may seek to recover the debt and refer the matter to the Central Bank for regulatory action if deemed appropriate. Section 17 amends the National Treasury Management Agency (Amendment) Act 2000 to provide the statutory basis for the State Claims Agency to carry out the additional functions provided to it under this Bill.

I would like to reiterate the importance of the swift passage of this amending Bill to ensure that the full compensation can be paid to Setanta and Enterprise third party claimants who have been waiting a long time for the resolution of this matter and I commend the Bill to the House.

I thank the Minister of State, Deputy D'Arcy. I call Senator Horkan, who has six minutes.

I thank the Minister of State for his very comprehensive opening statement and I do not intend to repeat everything he has said. We will be supporting the Bill and I am glad that it has finally got here. I accept that there are reasons, which the Minister of State outlined. I read the Dáil speech last week on this matter and know some of the reasons it has been delayed. It is nonetheless 2014 since Setanta went wallop, and more than two years since the publication of the Report of the Review of the Framework for Motor Insurance Compensation in Ireland. There are still 1,577 open claims, of which 771 have not received one cent of compensation, and another 826 have received the 65%. In some cases, these are very significant amounts, and these people have had to put their lives on hold. We are more than happy to support this Bill and I am not going to delay its passage through this House. I hope the Minister of State will be able to outline when this Bill will be passed and enacted, so that we can proceed with the business of dealing with these people.

I will not get into a debate about it but we have discussed motor insurance in committee, both when the Minister of State was on this committee and since he was appointed Minister of State with responsibility for insurance, and not too long ago we talked about a Garda fraud unit. I want to put on record, as I did this morning on the Order of Business, that I welcome the activity of Hertz in pursuing people who are making fraudulent claims and investigating them. I welcome the judge's decision to pursue those fraudsters for the €23,000 in costs that it cost Hertz to investigate their claims. That said, those people should be in jail. They should be convicted, charged and fined far in excess of the cost. We need to have a deterrent for fraudulent claims because we are all paying for it. We may need to ensure people who are legitimate make a claim and get paid. However, we need also to ensure people who are engaged in insurance tourism, whether they are based in or are visiting this country or whether they are Irish or a different nationality, are pursued for fraudulent activity. We are all paying heavily for it. It is only when these cases come up that we realise how bad it is. We know that 92% of people who pay do not claim in a given year. Of course people are entitled to claim. Anybody can have an accident and that is what insurance is for.

We have seen cases in the hospitality industry, in pubs and nightclubs. Senator Mulherin organised a presentation in the AV Room couple of weeks ago with Allianz. We were shown clips of people throwing water on the floor of toilets, looking to see if there were cameras in order to avoid them and then making claims. It was only when they were confronted with the evidence that they walked away. However, there is still a cost involved and there is no deterrent in that they are still able to walk away.

I will not go into all the issues around motor insurance, including the NCT and older cars. The insurance companies are saying people are buying old cheap cars and crashing them. Environmentally, and for lots of other reasons, it is not a good idea for every car that is more than ten years old to be put off the road when it could have low mileage and have passed its NCT. We are not a car manufacturing country so every car we buy is coming from another jurisdiction. It is money leaving this jurisdiction to go somewhere else.

We need further work on motor insurance. I know the Minister of State is pursuing it as did his predecessor, the Minister, Deputy Eoghan Murphy. The Minister of State will say the CSO figures are down from the peak but they are up over 30% on 2012 and are up very significantly for many people. For everyone who seems to have had a drop, I know of many people who have had significant increases and have not seen a drop yet. We need the national claims information database. We need much effort on fraud and far more transparency and data from insurance companies. I have no doubt that we will be tackling insurance again with the Minister of State.

The Minister of State said this is not a levy. While it may not be a levy, it is going to become one. I take the point the Minister of State made that he cannot stop insurance companies. However, if they are going to have to collect 2% of gross written premiums somewhere, they are going to pay it out of their profits or they are going to add it on to the price. Realistically, I think we all feel they will add it on to the price and put it into this fund to pay for the activities of Setanta and its bad practice when it was and its insolvency.

We are already paying a levy for Quinn and we will now pay another levy. I know the Minister of State will say it is not a levy but if insurance companies are going to have to collect 2% of gross written premiums to put into a fund, which will reduce, I admit, to over 1% when the fund reaches a certain amount, somebody is going to pay for it. The insurance companies are not going to pay for it out of their profits, particularly when they are telling us that they are not making money in the first place. We also have 3% stamp duty. A significant amount is being added to motor insurance.

I read the transcript of the debate last week and every issue under motor insurance was covered, from rural roads to the NCT to various other things. In regard to the Minister, Deputy Ross, we will see road traffic legislation in this House later today. I think it is our last piece of business before we adjourn, but I do not intend to go into all of that.

The Minister of State is aware that the committee, of which I am Vice Chairman, has done a lot of work motor insurance as has the cost of insurance working group. However, fraud, excessive claims and deliberately fraudulent claims need to be tackled head-on and people need to know that there will be severe consequences. If one is caught robbing a bank, one will most likely go to jail.

If one is caught making a fraudulent insurance claim, one does not. One just walks away and says, "Oh well, better luck next time. I will try again." We all hear of stories in the newspaper where somebody happens to be very unlucky and has had 14, 15, 16 or 20 claims. We need to expose this. We need to ensure, in the long term, genuine people who are entitled to insurance payouts get them, and that everyone else does not because, ultimately, we all pay for it. The Minister of State acknowledged that high payouts mean high premiums. There should not be high payouts in many cases. That would and should reduce out premiums. I commend this Bill to the House. I thank the Minister of State for his contribution and I wish the Bill a speedy passage through this House today. Will the Minister of State revert on when it will be enacted?

I welcome the Minister of State. I welcome this Bill on behalf of Sinn Féin. It should have been before the Houses sooner. We want this Bill passed as quickly as possible. As the Minister of State acknowledged, this issue is time sensitive as there are people desperately awaiting payments to which they are entitled, and the fact that this issue remains live means insurance premiums continue to increase.

The recent conviction of David Drumm shows where the majority of deception, criminality and blame for premium hikes lies. He was convicted for offering illegal loans worth €450 million to ten wealthy businessmen. Those loans, known as the "Maple Ten", originated from the fact that Seán Quinn of Quinn Insurance was betting on Anglo Irish Bank and built up a contract for difference of 28%. As he admitted, he was chasing his losses so he took €280 million out of Quinn Insurance to try to cover them. Today, everybody who has a non-life insurance policy is picking up his tab and the tab of the bankers who facilitated such schemes, while those responsible walk away free. For the past number of years we have picked up the tab, the cost of which was €1.5 billion. Irish consumers will pick up that tab for many years to come and that puts the issue in context. We cannot continually revisit the fact that insurance companies are collapsing in this State because of dodgy regulation, criminal practices or alerts that should have been identified but were not acted on.

Every one of us has experience of our insurance costs continually rising, and receives representations from people and businesses which are crippled by ever-rising premiums. A recent report by the Joint Committee on Business, Enterprise and Innovation on the costs of doing business highlighted insurance costs as a major impediment to SMEs. It does not only affect businesses in terms of the cost of public liability and vehicle insurance, but it also affects workers who are quoted massive car insurance premiums, which puts pressure on their take-home pay. My colleague Deputy Pearse Doherty called for such legislation three years ago. It must be seen as an admission by Government that the continual rise of insurance premiums is not because of a massive spike in fraudulent claims.

The high-profile collapse of Setanta Insurance left many people high and dry. Not only did customers continue to take out policies from Setanta until January 2014, but many were waiting on payouts from accidents that were not their fault. Several claimants have received up to 65% of their payment but nearly half of affected claimants have received nothing. It is sometimes hard for us in the Leinster House bubble to understand the impact of delayed payments on the lives of people. If one good thing can come from this Bill, it will be that the insurance companies can no longer point to the likes of the Setanta debacle as the go-to excuse for ever-rising premiums. The excuse is now removed, and in passing this Bill the ball is now in their court.

I am uncomfortable with the planned funding of a unit of An Garda Síochána by the insurance industry. The proposal that the industry should fund a new Garda insurance fraud unit is not the way to go about this. There is a clear need for such a unit. However, it is the role of An Garda Síochána to form such a unit, which should be funded by the State. The insurance industry is under investigation by the competition authorities in the State and at EU level over anti-competitive practices. It is almost 12 months since dawn raids were carried out on certain insurers and Insurance Ireland as part of an investigation into anti-competitive practices. It is not appropriate for private business to fund bespoke sections of An Garda Síochána. The independence of An Garda Síochána is sacrosanct, and a direct funding relationship with private interests undermines that independence.

Insurance fraud is theft and must be pursued rigorously and prosecuted. More action needs to be taken to stamp out insurance fraud, including through setting up a Garda insurance fraud unit and introducing a new crime of insurance fraud. Only yesterday a ten-year sentence was handed down to a man who had set fire to his own business premises and then filed an insurance claim for hundreds of thousands of euro. While FBD welcomed the outcome as a turning point in attitudes towards insurance fraud, this case and others like it cannot account for the 70% increase in premiums over a three-year period. Recently, a judge also dismissed a claim by an Oireachtas Member. It is equally important, however, to challenge the insurance industry to stop settling suspicious claims, and to ensure claims found to be suspicious or fraudulent are reported and acted upon.

I welcome the transfer of administration of the fund from the office of the accountant of the Courts of Justice to the Central Bank, where the Insurance Compensation fund will now rest. This brings an accountability structure as funds that are under the courts are excluded from the scrutiny of the Comptroller and Auditor General. It is only right that such an important fund would come under the scrutiny of the State's financial watchdog. This is a massive fund. We now know the cost for Quinn Insurance is €1.5 billion and for Setanta Insurance is in excess of €100 million. However, if more responsibility is to be placed with the Central Bank, it must also be given the additional staff and resources that are required. The Central Bank often prefers stability to all other outcomes. It must have the back of the customer when it takes on this new role.

We welcome this Bill and will do everything in our power to hasten its speedy passage.

I welcome the Minister of State to the House and I wish him a good break over the summer. I welcome the Bill.

I remember the PMPA debacle. In more recent times, there was the Quinn debacle. On those occasions the insurance policyholders ended up paying for the sins and mistakes of the insurance companies. Setanta Insurance was regulated outside the State through prudential regulation in Malta, while operating and selling policies in the State under the common passporting rules of the EU.

The Minister of State made reference to the public discord on the 2% levy, and how we can ensure it is not passed on to the policyholders. The legislation has been amended and now tells insurance companies they are not required to pass it on, and they can absorb it into their costs. In policy disclosures, will they be required to make reference to the 2%? Can they show on the policy that they have absorbed it into the cost?

The Minister of State mentioned competition. It is incumbent on the insurance companies to make fully aware to policyholders whether they are passing it on by way of an insurance premium, or whether they are absorbing the cost. I ask insurance companies to absorb it. Based on reports, insurance companies are beginning to make profits again. It is something I feel strongly about.

On the positive side, I welcome the fact that the Insurance Compensation Fund will be under the control of the Central Bank. I also note the accounts will be looked at by the Comptroller and Auditor General, which is welcome. It will result in an annual probe in the public domain through the Committee of Public Accounts, which is also welcome.

When does the Minister of State expect the Setanta policyholders who are awaiting outstanding claims to be paid? When does he anticipate the payments will conclude? He referred to the 2% levy and how it will build up to €200 million over a number of years. He mentioned approximately seven years, while others have said three or four years. Will he clarify that? If a company refuses to pay in, as he referenced, what are the draconian measures that can be brought to bear on them to ensure the charge is not passed onto policyholders?

If we have a situation, a debacle, where an insurance company comes under pressure, claims are not being honoured and the fund has not got to €200 million, if it happens over the next year or two, who will underwrite that? Where will that fall? Who is responsible for the payout to policy holders? There is a period of time where we are looking to get to a critical mass of €200 million. What measures are there to ensure that something does not happen prior to getting to that level? This is the accountant coming out in me in respect of prudence. Is the €200 million figure actuarially based? What is the background to that figure? When we reach a critical mass of €200 million, will that be sufficient to deal with the requirements? How will we ensure that there is adequate funding there at any one time? We operate in an open market, a single market and an insurance market where we want competition.

The irony of this, in one sense, is that we had competition through Setanta. The level of regulation of Setanta - which was not conducted in Ireland - was clearly insufficient. I was a Setanta policyholder, not in more recent times but in the past. It was very competitive going through a broker and many people would have switched to Setanta unaware of how it was regulated. We have had the Central Bank before us in recent times. What additional measures could be introduced over time now that we have the Insurance Compensation Fund being built up and this additional 2% levy fund being built up? What can we do in respect of regulation to ensure that the fund becomes - for want of a term - a rainy day fund and not a fund used daily? Regulation is key. I refer to the regulation of any company, from the inside or the outside, coming in and operating in the Irish insurance market and ensuring it is properly regulated and prudential in respect of its financial structure.

I welcome the Minister of State. We are here today to deal with an essential item of legislation to mop up a problem arising out of the collapse of Setanta and all the third party claims. Some people are significantly out of pocket because where they could and ought to have been able to rely on an insurance policy, it was not there. There is a big fallout and ripple effect in society. We are also told this is affecting the motor insurance premiums people are paying and that it needs to be sorted out. It clearly does.

One disturbing thing is that, once again, we are going to policyholders. Notwithstanding all the calls that the insurance companies might absorb it, I do not think any of us is a fool when it comes to insurance companies. I have no great confidence that insurance companies will be absorbing anything. It will go back on the hard pressed motor policyholders - and they are hard pressed.

Is this going to happen again? How are we going to safeguard against that with a company registered and regulated outside this country? How will it be checked and made to operate in such a way that we do not find ourselves in this situation going forward and having to go back to the policyholders again?

I also have concerns about the protection of the likes of Setanta and other companies behind the corporate veil. They can get away with what they like. Senator Kieran O'Donnell said that at one stage he was with Setanta and it was very competitive. We know, however, that the big contractors and builders who were very competitive in this country were cutting costs. I would call it externalising the costs. At the end of the day somebody pays and it is not these companies. The personal assets of the people operating these companies are intact and their homes are intact. The people paying are the policyholders or, in the case of the big contractors, it is the subcontractors or "subbies" that are paying. I know there is a market and in many ways we let it run loose and to dictate prices. If at the end of the day, however, people are hiding behind the corporate veil and externalising the cost because someone else will pick it up if it all goes belly up, that is not a public good, it is not in the public interest and we have to intervene to correct the market that is allowing this sort of behaviour to continue.

I am concerned. We have had the report of the cost of insurance working group. I know the Minister of State put much work into it and this is a complex issue. We had a presentation last week, also attended by Senator Horkan, concerning the average person on the ground, particularly those with older vehicles. We were given shocking statistics. Vehicles aged ten years and older could not be insured. These are roadworthy vehicles with a national car test, NCT, certificate. Either an insurance quote was being declined by motor insurance companies or else they were being quoted such exorbitant prices that the vehicle had to be sold on. The figures we were given showed that vehicles were prematurely scrapped.

Why should the insurance industry be dictating that perfectly roadworthy vehicles should not be on the road anymore? That is what is happening. It is a major environmental issue as far as I am concerned. Worst of all, it is hitting people in the lower socio-economic brackets and younger people. Somebody emailed me because I raised this the week before and I spoke to the Minister about it. I received many emails, and other forms of contact, from people buying a car for €2,000 and the third party insurance was €4,000. I do not know the circumstances of those people but there is enough of a pattern there to be concerned. We are about to levy a 2% charge on all of these policyholders. I am talking about all the people not feeling the benefit of the cost of insurance working group and its recommendations.

We can add to that the problem of public liability insurance. We see public houses, shops, etc., not finding insurance a safety net or something they can fall back on but as something that is crucifying them and putting them out of business. Even if a claim is not successful, it is loaded for several years probably before it is concluded and that is never refunded. In my own county, a business has gone to the wall. It was a very fine business and on the face of it there was no problem. It was a public house that served food. It was very busy and very popular but could not cope with the public liability insurance. I suppose it had to be asked what were those people working for. It is the same in Galway.

We have to do something because these insurance companies are protected by us. Their shareholders are protected by us. They are not paying the price. It is the ordinary citizens who are paying. It is us as politicians who are concerned about these people and we have to go around cleaning up after it. I await the Minister of State's comments on regulation and this sort of scenario not repeating itself.

With respect to Senators, I am not going to take the general insurance issues. I will not respond to them. I am happy to come into the Chamber on some occasion, if it is facilitated, to take a general insurance debate. If people want to raise all sorts of everything I would be happy to do that.

It would be a bit like last week's Dáil debate.

It was not meant to be like that but it got there. This Bill is important for those affected. I say this most respectfully again. I just want to stay with this Bill. I am happy to come in and stay here for whatever number of hours the Members see fit. I will try to answer each and every question as best I can on that occasion, if that is okay with the Chair.

I thank all the Members for their contributions to this debate.

As Members are aware, the Bill went through the Dáil last week with great efficiency and I hope we can conclude all Stages of the Bill today. If we can do that, it will then be possible to send the Bill to the President to sign it into law in the next couple of days. We can then begin the final stage of bringing the Setanta insolvency to a close by setting in motion the necessary progress to ensure full payment of third party claims.

To date, there have been three applications to the High Court for payment of compensation from the ICF with regard to Setanta Insurance. Orders were granted in the High Court on 11 May 2018, 24 July 2017 and 15 November 2016. The total amount paid out of the ICF on foot of these orders was €14.6 million, being 65% of the total value of those claims settled.

The most recent update from the Setanta liquidator has indicated that at the last payment of 11 May 2018, there were 1,577 active claims of which 826 claimants have been paid compensation subject to 65%, or the €825,000 limit. It should be noted that there may be more than one claimant associated with each claim. It is important to note that only claims which have been settled can be included in applications to the High Court for payment from the ICF. The actual settlement of claims, however, is a matter for the individual claimants and the liquidator or for the courts and is something over which the Government has no control. I understand this process is in many cases still ongoing and is subject in some cases to complex negotiations between the relevant parties. It is hoped that in ensuring that third party claimants are compensated in full, the enactment of this Bill will encourage the speedier settlement of the outstanding claims. Once they have been settled, they will be included in an application to the High Court at the first opportunity.

It should also be noted that the preparation of this application will take a certain amount of time due to the need to verify and process claims but every effort will be made to ensure that this application and the ensuing payments can be made without delay. No date has been fixed for the next payment from the ICF but the liquidator has informed me that a further 117 claims have been settled since the last tranche was submitted to the State Claims Agency for verification. These claims will be included in the next application to the High Court and are to the value of €5.1 million, being 100% of the total value of the settled claims. Under a new regime, the State Claims Agency will make an application to the High Court in accordance with the amended legislation no more than once in every three-month period. This is a reduction from the current six-month period. Therefore, from a practical perspective, it is hoped that within three months of the Bill being signed into law, any third party claim that has been settled where 65% has already been paid will receive the balancing 35%. Any third party claims recently settled will receive their full settlement.

Three months after the enactment of this Bill. It is, therefore, important that any application is made at the optimum time in order to ensure that as many claimants as possible receive the compensation due to them with regard to the first application post-enactment of the Bill. There has been a lot of coverage in the newspapers today about the new industry contribution. First, it should be noted that this is not being introduced to cover the costs of Setanta and Enterprise. Instead, it is being put in place to cater for the additional 35% costs which may arise from any motor insurer insolvency.

It has been described as a third party levy on policyholders. This is incorrect as the Bill provides for a contribution equivalent to 2% of gross motor premium to be paid by motor insurers to an ex ante fund. The decision rests with the insurance companies as to how they finance this contribution. The Minister for Finance is prohibited under Solvency II from interfering in the pricing of insurance products and, therefore, is unable to compel insurance companies to absorb this additional cost rather than pass it on to policyholders.

The option for the State to advance the necessary funds to the ICF to cover the full 100% compensation for third party motor insurance claimants and to recover the money through the existing 2% levy over time was one of the options considered in a regulatory impact analysis carried out in preparing the general scheme of the Bill. It was rejected in favour of the current proposal given the longer-term cost to the Exchequer as money advanced to the ICF for an extra 35% could not be recouped quickly compared to the scenario where there is a Motor Insurance Bureau of Ireland, MIBI, fund from which the ICF can recover this additional payment within a short period of time. In addition, it would be inequitable to levy all non-life policyholders to pay for increased compensation for motor insurance for third party claims. It would also let insurers off the hook at the expense of the Exchequer. While it is accepted that insurers may pass the additional 2% on to policyholders, this will not necessarily be the case for all companies as absorbing it may provide certain companies with a competitive advantage in the marketplace. Therefore, the legislation is designed in such a way as to allow companies to absorb this 2% contribution if they wish.

In adopting this approach, the Minister for Finance is seeking to strike a balance between protecting third party claimants affected by an insolvency, minimising the exposure of the Exchequer, particularly in the event of an insolvency of a large insurer, and at the same time, ensuring that the industry shares the burden of the increased coverage of the ICF, creating predictability and certainty for the insurance industry as to what its exposure for financial insolvencies will be and maintaining the attractiveness of Ireland for new entrants.

In summary on this point, it can be argued that the real beneficiary of the ICF funding - 100% third party claimants - are the motor insurers and that over the medium term, it is at the expense of the taxpayer. Because of this, the Minister for Finance and the Government believe that the proposal to establish an industry fund for insurers to finance the 35% shortfall is the best way forward.

I will touch upon a number of the issues raised. Insurers generally make it clear where they are passing on State-type charges such as 3% stamp duty or the ICF 2% levy, so passing it on will almost certainly outline it in the renewed notice. Again, I want to put on the record of the House that on the basis that there will be no call on the fund prior to the building up of the target of €200 million, it is anticipated that the insurers will be required to make a contribution for seven years. A 2% contribution is expected to collect between €34 million and €50 million. It will be paid into it over four years to bring it up to €150 million. At this point, the contribution will be reduced to 1% and is then expected to collect approximately €17 million to €20 million for the next three years. At that stage, if the amount is €200 million, the opportunity is there to reduce it to between 0% and 3%.

What would happen if there were insufficient moneys to meet the figure of 35%? The first point to note is that it will have had no impact on third party claimants who will receive their payment in full from the ICF. What it means is that there will be a delay in the ICF recovering the 35% from the MIBI fund. In such a situation, it is proposed that the industry contribution of the outstanding fund would increase to an amount equivalent to 3% of the gross written premium until the ICF was repaid and the fund reached an agreed level of €50 million before reverting back to 2%. This approach is designed to provide industry with certainty as to what its contribution will be for any future motor insurance insolvencies. By increasing the contribution, it will ensure that the State is paid back as quickly as possible.

That is the general aspect of the Bill. I hope we can move this on to the next Stages and conclude it so we can get it to the President.

Three minutes after the signing of the Bill, it turns into an Act and people can then present for 35% unpaid on the basis of claims settled. Then the 117 cases that are agreed and concluded will be paid 100%. That is the objective.

Question put and agreed to.