Dáil Éireann Debate, Tuesday - 3 November 2020
415. Deputy Louise O'Reilly asked the Minister for Finance further to Parliamentary Question No. 194 of 20 October 2020, if he will expand on the way in which the possibility of the State acting as an insurer for artists and the live events sector would decrease competition and the way in which he considers it would affect pricing; and if he will make a statement on the matter. [32671/20]
View answerIn relation to my reply of 20 October in relation to the risk presented by the State acting as an insurer for artists and the live events sector, I would draw the attention of the Deputy to the following factors.
Specifically with regard to competition, the concern I have with such a proposal is that it could compound what some see as the ‘cherry picking’ of risk within the market by insurers. In turn, this could further decrease market competition for these or other sectors over the longer term, as some insurers may stop insuring specific risks, particularly if there is a view that a State company is willing to insure those lines of business that could be considered as being less profitable. While potentially having a negative impact upon pricing and possibly on supply, this could also create a large Exchequer exposure if significant losses were incurred.
Also of relevance to both competition and pricing is that any State insurer would be required to comply with the same prudential rules under the Solvency II Directive, as private companies. The Deputy will be aware that the Solvency II Directive is designed to allow for a level playing field across the European Union for insurers, not only in terms of market access, but also with regard to the level of supervision and tregulation. Accordingly, the Directive plays an essential role in facilitating competition in the insurance sector across the EU. Neither I nor the Central Bank of Ireland, could therefore direct the pricing or provision of insurance at a rate lower than other commercial operators for these market segments as it could be deemed as anti-competitive behaviour.
In addition, the cost of any insurance provided by the State would still have to reflect the risk involved. Consequently, there is no guarantee that cover could actually be provided, and if it were, there could be no certainty that it would be much cheaper than existing equivalent private insurance products. Finally, there is no reason to believe that a State run insurer could provide cover in a more efficient way than a private one.
In conclusion, any such proposals for State intervention, while well intended and which may appear as representing an easy solution, are likely to lead to unintended consequences, such as insurers withdrawing from further sectors on the presumption the State will insure loss-making risk. These outcomes would undermine the primary policy goal of decreasing the cost of insurance and increasing the availability of insurance to consumers and businesses. Accordingly, I am not convinced that a State-backed insurance scheme would be a solution to the cost or availability of insurance, either for the arts, entertainment and events industry or other market segments more generally.
