Vol. 363 No. 4
asked the Minister for Industry, Trade, Commerce and Tourism the persons responsible for the situation which arose in the PMPA; those responsible for letting that situation continue; those responsible for the situation which arose in the PMPS; those responsible for letting that situation continue; and if he will give an undertaking to meet a delegation from the PMPS Protection Group.
42.
asked the Minister for Industry, Trade, Commerce and Tourism in the annual accounts for the PMPA since incorporation, for what years did the provisions for outstanding claims prove to be inadequate and by how much for each year; when and for how long did the PMPA fail to meet the statutory solvency ratios for an insurance company; and when and for how long did the liabilities of the PMPA exceed the real value of its assets.
43.
asked the Minister for Industry, Trade, Commerce and Tourism if the many warnings given about the solvency of the PMPA over the years and in particular those given in an article (details supplied) were ignored by his Department; if so, the reason; the reason the findings of that article were contradicted by his Department on 14 October 1975; the reason his Department issued a statement to the press on 5 July 1982, which indicated that the PMPA were solvent; the reason in July 1982, his Department considered it desirable that the public should have confidence in the PMPA which at that time was hopelessly insolvent; if he agrees that his Department's statement of 5 July 1982, and the use made of it by PMPA—PMPS in their newsletter, "Private Motorist" on 16 July 1982 could have influenced PMPS depositors to leave their money with that society.
44.
asked the Minister for Industry, Trade, Commerce and Tourism when his Department had an administrator appointed to the PMPA in October 1983, the position of that company as regards liquidity; when his Department first realised that the PMPA had grave financial problems; when the Registrar of Friendly Societies first became aware that the PMPA had grave financial problems; if the Registrar was aware that if the depositors had realised that the PMPA had financial problems, they would not have put their money in the PMPS; when the Registrar first became aware that the deposits in the PMPS were at risk due to the fact that it was acknowledged that the PMPS was carrying on de facto banking activities outside the scope of the supervision of the Central Bank; and if the Registrar failed to use the very great powers given to him under the 1978 Act to protect the interest of the depositors, and, if so, the reason.
47.
asked the Minister for Industry, Trade, Commerce and Tourism when and for how long the PMPA failed to meet the statutory solvency ratios for insurance companies, and when and for how long the liabilities of the PMPA exceeded the real value of its assets.
48.
asked the Minister for Industry, Trade, Commerce and Tourism when his Department first became aware that deposits in the PMPS were at risk due to the fact that the PMPS was carrying on de facto banking activities outside of the supervision of the Central Bank; and if he will make a statement on the matter.
I propose to take Questions Nos. 41, 42, 43, 44, 47 and 48 together. In their role as supervisory authority of insurance companies, my Department monitored the affairs of the PMPA Insurance Company Limited very closely over the years since they were first authorised. In addition, several consultancy reports were commissioned by my Department from independent experts on aspects of PMPA's business.
The published accounts and statutory returns to my Department, as certified by both their directors and auditors, showed that the liabilities of the PMPA did not at any stage exceed the value of their assets and that the company at all times met the statutory solvency requirements for an insurance company. There was no evidence to the contrary until the result of a specially commissioned consultancy study was received in August 1983 and confirmed by a second expert opinion received in October 1983. This was followed immediately by the appointment of an administrator to the company.
A detailed investigation by the administrator into all the records of the company resulted, inter alia, in an adjustment of £146 million to the outstanding claims provision and the disclosure of a net asset deficiency at 31 December 1982 in the statutory returns for the company furnished by the administrator for the year 1983.
The statement issued in October 1975 in relation to the PMPA took account of all the available information, including the accounts and other data submitted by the company and the result of the Department's examinations. There is no evidence, even now, that the claims provisions in the 1974 accounts, dealt with in the article referred to, were inadequate.
The statement of 5 July 1982 which was based on the facts then known was issued following a press report which could have seriously damaged confidence in the company and hence put the interests of policyholders and claimants at risk. This statement dealt solely with the PMPA and did not refer to the PMPS.
The general problem of unsupervised deposit taking activities by industrial and provident societies came to public attention in 1974. The Government's concern about the activities of these societies was demonstrated by the enactment of the Industrial and Provident Societies Act, 1978, the main aim of which was to wind down the activities of deposit taking societies. The constitutionality of the 1978 Act was immediately challenged by PMPS and another person. In 1981, the High Court found in favour of the Minister and the Act. The Supreme Court confirmed the decision on appeal in May 1983. The dangers associated with this type of society were spelt out in the course of the court cases as they had been when the legislation was being promoted. The Supreme Court in its judgment drew attention to the High Court finding in 1981 that the reason for the prohibition in the 1978 Act was because the societies were operating a substantial banking business outside the control of the Central Bank without regard to the principle of sound banking practice and because the general public who placed money on deposit with them were at risk. These statements made in the Oireachtas and the courts would have been of more direct relevance to depositors in the PMPS than any statements referring solely to the PMPA and depositors and would-be depositors should have noted these statements.
The legislation to deal with unsupervised deposit taking sought to have such activity terminated within five years and to deal with a variety of problem societies engaged in such activity. For that reason, the 1978 Act gave the Registrar of Friendly Societies various discretionary powers, to be exercised according to the circumstances of each society as the Registrar considered appropriate.
In the case of the PMPS, apart from ceasing to advertise as a result of pressure by the Registrar, the management of the society sought to continue its activities undiminished throughout the period of its constitutional challenge to the legislation. The existence of this challenge, which was finally decided in May 1983, and the desirability of achieving an orderly winding down of the society's activities over a period were among the factors which the Registrar had to take into account in his dealings with the society. The Registrar was made aware of the financial difficulties of the PMPA when the Department received the relevant information from the consultancy studies in 1983.
In so far as responsibility is concerned for the situation which arose in the PMPA and PMPS, it is clear that primary responsibility lies with the directors and officers of the bodies concerned. Auditors also have an important responsibility in reporting on the financial position of such bodies. The functions exercised by the State in relation to the supervision of such bodies cannot be expected to substitute for failures on the part of directors, officers or auditors. It would be inappropriate for me to comment further on this aspect because of pending legal actions by the administrator of the insurance company.
In so far as a meeting with the PMPS Protection Group is concerned, I do not see that such a meeting would be productive at this stage as matters are now fully in the hands of the liquidator of the society.
