asked the Minister for Industry and Commerce if he will give information concerning the present financial position of ICI; and if the recent RTE programme on the ICI crisis was an accurate account of the company's position.
9.
Ceisteanna—Questions. Oral Answers. - Insurance Corporation of Ireland.
6.
asked the Minister for industry and Commerce the total estimated cost, at the latest date for which figures are available, of the collapse of the Insurance Corporation of Ireland; the amount of this which is likely to be paid by the Exchequer and the amount by the banks; if he is aware of a statement made by Lloyds' underwriter on RTE on 20 March that the final cost could go as high as £1,000 million; and if he will make a statement on the matter.
I propose to take Questions Nos. 6 and 9 together. A ministerial statement of 16 July 1985 set out the assessment by the administrator of the Insurance Corporation of Ireland plc of the company's financial position. Briefly, the estimated net balance sheet deficiency of the company amounted to £164 million after taking into account the profit on the sale of the Insurance Corporation Life subsidiary in June 1985.
The administrator is at present preparing the accounts of the company for the 24-month trading period to 31 December 1985. The exact up-to-date financial position of the company cannot be ascertained until such time as these accounts are completed and audited. I am given to understand that the administrator expects to publish the audited accounts of the company by 31 May.
The financing arrangements for the administration of ICI were announced by the Central Bank on 4 October 1985. These arrangements involved an advance of £100 million to the Insurance Compensation Fund for a period of 15 years. The cost of the advance, amounting in aggregate to £9 million per annum, is being met in full by Allied Irish Banks, the other licensed banks and the administrator. The Exchequer is not contributing to these financial arrangements. This is entirely in line with the Government's objective that none of the costs of the administration should be borne by the taxpayer.
I am aware of the content of the RTE "Today Tonight" programme of 20 March last on the Insurance Corporation of Ireland plc. I do not propose to deal with individual statements made during the course of that programme, other than to emphasise that in general they were totally at odds with the best information available to the administrator from all his investigations to date.
I thank the Minister for his detailed reply. Will he agree that the survival package agreed between the Government, the bank and the Central Bank was to accommodate a debt of £164 million? Will he indicate if the account as given by RTE on 20 March is accurate or even near accurate in that the amount might be £500 million? Will he reaffirm that the guarantee will still be in place, that the taxpayers will not have to incur any losses?
I do not wish to make any comment on any of the statements by the people in the insurance industry who were interviewed on that programme other than the statement of the administrator of the ICI. I refer the Deputy to the statement of the Central Bank issued on 4 October 1985. I should like to quote briefly from it:
The Minister for Finance has signified the Government's agreement to these arrangements and is satisfied that they will meet the Administrator's cash requirements and ensure that the company can trade on a solid basis.
I have every confidence in the administrator and in the arrangements made for the underpinning of the ICI. I am satisfied that the figures given in this House regarding the shortfall will be in the region of being correct, but I must await the administrator's accounts at the end of May.
All I want to establish is that the guarantee given by the Minister at the time of the package is in place and will stay in place in guaranteeing the taxpayer against any losses, should it happen that the alleged difference between the figures turns out to be a fact after 31 May.
I am satisfied that the package put in place is sufficient to enable the ICI to be brought back to a profitable and viable basis over the period and I stand over the statement of the Minister for Finance and the decision of the Government in that respect.
Would the Minister not agree that the statement made on the RTE programme by the underwriters——
Which underwriters?
I refer to the statement by the Lloyds underwriters that there was a possibility of a £1,000 million shortfall. This is a matter of serious concern. Would the Minister not agree that, given the nature of the guarantees by the Minister, it is likely that the taxpayer in the long run will have to pick up the tab?
I have particularly stated that I do not wish to comment on what was said by any of the interviewees on that programme.
Did the Minister see it?
I did. In relation to the underwriter who was interviewed I can only say that I do not wish to discuss his bona fides in this House. I do not wish to comment further other than to say that, on his own admission——
The Minister has shot him dead anyway.
——his comments were based on a currency exchange rate of 70p to the US dollar. That is sufficient in itself to dismiss his comments. I do not wish to pass further comment on that gentleman but perhaps the Deputy might check out his bona fides.
Have interim accounts been made available by the administrator of the ICI and when will the final accounts for the year be made available publicly?
I would expect to have the administrator's accounts for the company for the 24-month period to 31 January 1985 available to me by 31 May 1986. Of course the accounts will be published in due course. They will, in any event, form part of the blue book.
Would the Minister agree from his knowledge of the insurance industry, for which I understand he has responsibility in his Department, that it is of the very nature of the insurance business that the liabilities of an insurance company on risk take quite a number of years to come to fruition and to be determined and that consequently it is not possible to say at this stage what the ultimate liabilities of the ICI may be? Consequently the provisions which have been made could be regarded as no more than provisional. What has been the cost to the taxpayer via the Central Bank, which is the taxpayer, either in payments out or exposure of this issue to date?
I take issue with the Deputy. The administrator has taken all necessary professional advice for examination of the figures within the company — actuaries, accountants, legal advisers, reinsurance experts. The accounts for the two years will also be audited. I do not accept the Deputy's contention that we cannot estimate what the liabilities are. We are dealing with quite a number of insurance companies, year in and year out, who publish annual accounts.
You have come unstuck on some of them.
I reject that and I object to it. We have had two difficult cases, the PMPA and the ICI. I object to the Deputy's trend of questioning as if he is undermining confidence in the insurance industry. It is most undesirable that these types of irresponsible statements should be made in this House. They have effects abroad. I have confidence in the administrators of both the ICI and the PMPA in doing a professional job. I also have confidence in the other insurance companies operating within this country. My Department operate under EC directives. We have reserving policies and we have the accounts examined quite closely on an ongoing basis. This is a serious matter and I am entitled to reply in whatever manner I wish. I take objection to Deputies undermining confidence in the Irish insurance industry. There is no need to do so.
It is not conducive to the orderly business of the House to make long speeches in reply to supplementary questions.
It is necessary to ensure that we do not have any irresponsible statements made about the insurance industry.
Having regard to the fact that when an insurance company get into difficulty the consequences fall on the taxpayer, it is perfectly proper for me as an elected Deputy to probe and find out what is the true situation and whether there is any possibility or probability of liabilities for a company falling on the taxpayer. It is a proper thing for any Deputy to do on any side of the House.
Since Deputy Mac Giolla put down the question, I am allowing a supplementary to Deputy De Rossa and a final question from Deputy Flynn. I will then move to the next question.
Would the Minister not agree that the public at large, particularly the tax paying public, have a right to be concerned that we do not know even yet how the collapse of the ICI came about? What guarantee is there that the taxpayer will not have to pick up the tab for future private investments by banks or insurance companies?
That is a separate question of a general nature.
As the Minister seems to have no respect for the underwriter of Lloyds, can he indicate his opinion on the view of a Mr. John Gardiner, managing director of Insurance Solvency International, that it is likely losses may rise to £500 million because of reinsurers trying to get out of contracts with ICI?
I refer the two Deputies who have just asked questions to the statement of the Central Bank, on 4 October, regarding the financial arrangements for the underpinning of ICI. As I said at the commencement of my reply, I will not pass comment on the statements made by the interviewees on the "Today Tonight" programme. This House will be fully informed of the affairs of ICI when their accounts for the two years are published, which should be by the end of this year. The administrator has taken the best advice possible from actuaries, accountants, lawyers and reinsurance experts and the accounts will be audited. That is the most professional way of dealing with this matter. It is very easy to spin home-spun stories and exaggerate multiplying losses. I am prepared to wait for the professionally produced account under the aegis of the administrator.
It is difficult for Deputies in the House not to be suspicious of the Minister's edginess in answering this question. I fully accept that the administrator is a competent person and we look forward to his published report on 31 May. Will the Minister now agree, since he is relying heavily on the Central Bank's statement on 4 October and has reconfirmed the guarantee that the taxpayer will suffer no loss, that the RTE expose on 20 March was irresponsible?
I saw the programme. It is not for me to comment on it. I will rely on the accounts as audited and submitted by the administrator and that will happen in the course of this month.
Was it irresponsible?
I do not have to pass comment on it. I certainly do not have to rely on what the interviewee says. I put a fair bit of weight on the comments of the administrator and I will await his report.
I reiterate that the programme was irresponsible.