Vol. 409 No. 1
6 Mr. Taylor asked the Minister for Industry and Commerce whether, having regard to the Government's decision to issue an insurance licence to Allied Irish Banks he will outline the safeguards put in place to ensure that public funds will not be required again to rescue this bank in like manner as occurred when the bank was involved in the insurance business on a previous occasion; and if he will make a statement on the matter.
The conditions for the granting of an authorisation to transact life assurance business are set out in the European Communities (Life Assurance) Regulations 1984 which implement the provisions of the First EC Directive on life assurance. As is the case in all such applications the decision to grant an authorisation to Ark Life Assurance Company, a wholly owned subsidiary of Allied Irish Banks, was taken following a detailed examination by my Department to ensure that these conditions had been met. Particular attention is given to ensuring that an applicant company has made adequate capital provision now and for the future and that the management team possesses the necessary expertise in all the key areas required for the proper management of a life office. Like all new entrants to the life assurance market, the company will be the subject of close monitoring by my Department.
Regarding the non-life insurance business in which the AIB group were involved on a previous occasion, I should point out to the Deputy that none of the costs of the administration of that business has fallen on the Exchequer and, as I pointed out in a statement on 13 February 1990 when announcing the sale of the Irish business of ICI, the Government do not intend that any cost will fall to be met by the general taxpayer or by insurance policyholders.
Is the Minister satisfied that his Department will be able to monitor the bank adequately and that the bank have taken adequate precautions, before they venture into the insurance industry on this occasion, and that we will not have another débacle similar to the one which occurred in the mid-eighties following their acquisition of the ICI?
I believe so. This application has been fully examined and suggestions were made as to how it might be amended. These have been complied with. I would point out to the Deputy that the bank now propose to get into the life assurance business, which is notoriously less risky than general insurance in which they had an unhappy short period of trading. I am quite confident that they will be able to run the low risk life assurance business that they now propose to enter without any great problems.
It would appear from the advertisements in today's newspapers that the bank's Irish customers will be expected to continue to pay higher and ever-increasing charges to fund the bank's unsuccessful acquisitions and ventures abroad. Is the Minister concerned about this?
First, I do not think the matter which Deputy Rabbitte raises arises out of this question and, second, I do not have statutory responsibility for bank charges. However, having said that I agree with the Deputy. It is a great pity that this bank have significantly increased their charges to Irish customers given that they are already very profitable in Ireland even though they may be loss-making.
May I ask the Minister if clients of Allied Irish Banks who wish to raise loans through the bank or extend overdrafts will be required to go to this insurance company to take out insurance to cover those loans? This now appears to be the practice in that bank.
One of the conditions of the licence is that they will have to deal with the bank and with the bank's customers on an arm's length basis.
Does the Minister believe that?
It is a condition of their licence and if I get evidence that they do otherwise we can reconsider their licence. Banks have been asked in the past to deal with their insurance subsidiary on an arm's length basis. I was never as confident as the banks were themselves that they were operating on an arm's length basis but if a customer looks for a loan on the security of a life policy, then a life policy from any company should be equally acceptable to the bank concerned.
They are required to go to the company before they get the loan.
