Wednesday, 27 March 2019

Questions (103)

Peadar Tóibín


103. Deputy Peadar Tóibín asked the Minister for Finance if an emergency support package will be provided to children's soft play centres until a functioning insurance market is developed here in view of the imminent closures of a large number of profitable children's soft play centres and in further view of the lack of material change to the insurance industry (details supplied); and if he will make a statement on the matter. [14292/19]

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Written answers (Question to Finance)

My understanding is that the main reason for the difficulties being faced by the play centre sector is due to a lack of capacity in the insurance market which I understand has been driven to some degree by the overall claims level in the sector. In determining their willingness to enter into or remain in a particular sector of the market, insurers will generally make an assessment of what they consider the overall risk to be. Therefore, part of their assessment of what premium level to charge, or whether to offer cover in the first place will be based on what they consider the general likely trend for claims in the sector will be, based on their overall past experience.

In a recent meeting with Insurance Ireland, I understand that the Minister of State with responsibility for Insurance, Mr. Michael D’Arcy TD, raised the issue of the difficulties play centres currently face in securing insurance. In response, Insurance Ireland highlighted the problems that Irish insurers encountered in this sector regarding claims and specifically the high amounts being paid out. Having said that, Insurance Ireland agreed to relay Minister D’Arcy’s concerns to its members taking into account some of the implemented and proposed Cost of Insurance Working Group reforms, including the proposal to implement the recommendations of the second Personal Injuries Commission Report.

As the Deputy will be aware the Cost of Insurance Working Group (CIWG), which was established in July 2016, has undertaken a detailed examination of the factors contributing to the cost of insurance in order to identify what short, medium and long-term measures could be introduced to help reduce the cost of insurance for consumers and businesses.

The CIWG has produced two reports and a number of quarterly progress updates on the various recommendations made by CIWG and endorsed by Government. The difficulties facing the consumer, voluntary and small business sector from the high cost of insurance premiums are recognised. In addition, it is also acknowledged that in some cases the survival of a business as a viable entity is being put at peril because of insurance pricing. One of the key areas raised by various stakeholders to the CIWG is the level of awards in this country compared with elsewhere. As a result, the Working Group established the Personal Injuries Commission (PIC) and commissioned it to examine this issue amongst other things. The PIC reported in September 2018 and concluded that soft tissue injuries are significantly higher here than in the UK and recommended that action be taken to address this disparity through the establishment of the Judicial Council. The PIC recommended that this body would become responsible for preparing the guidelines on personal injury award levels, and would replace the Book of Quantum. In doing this, the PIC believes that the Judicial Council will, in compiling the guidelines, take account of the jurisprudence of the Court of Appeal, the results of its benchmarking exercise etc.

The current position with the Judicial Council Bill is that the Minister for Justice and Equality has recently advised of his intention to further this Bill with a view to having it in place as soon as possible. Alongside this, the Law Reform Commission has included the subject of capping damages in personal injuries litigation in its draft 5th Programme of Law Reform and this work will begin in the next couple of weeks. It is hoped that if there was a significant move in this area, it could have an impact on insurance pricing and could also help attract new entrants into the market. Such outcomes would be of benefit to all concerned and in particular to small businesses such as those in the play centre sector.

Finally, while I am very conscious of the difficulties being faced by the play centre sector in obtaining insurance and that a number of such centres face closure if they are unable to get cover, I believe that the work that is being done to address the cost and provision of insurance to such businesses is where the real solution lies. It is likely that the provision of any support package would amount to the State in effect becoming an insurance provider. Such a step would likely be in breach of the Solvency II Directive and as it would involve the State providing preferential support to one part of the economy over another, it would run the risk of being considered State Aid and contrary to EU State Aid rules. In addition, if a package of Government support, contained or otherwise available more generally to businesses, was put in place, it is also likely that such a measure could result ultimately in insurers withdrawing from large parts of the overall market. This would end up being counter-productive and bad for small businesses in the longer term.