Dáil Éireann díospóireacht -
Wednesday, 28 Sep 2011

Vol. 741 No. 4

Insurance (Amendment) Bill 2011 [Seanad]: Committee and Remaining Stages

Section 1 agreed to.

SECTION 2

Question proposed: "That section 2 stand part of the Bill."

Deputy Michael McGrath

Can the Minister clarify his intentions as to the exclusion of health insurance policies from the levy? I raised this issue during the debate on Second Stage. The Minister indicated that health insurance policies will be excluded from the levy for the moment but that the matter may be subject to review. When does the Minister intend to review this exclusion and what impact would the exclusion have on the amount of money the levy would raise if health policies were included? I know the Minister has excluded health insurance on the grounds that so many people are not renewing health insurance policies, given the increase in the cost of health insurance.

Can the Minister clarify the comment he made when concluding Second Stage, that we are not covering any further tail risk? It is my understanding that we are replenishing the compensation fund to the extent that is necessary and that the new venture, Liberty Anglo, will not be responsible for legacy issues, that is old claims that will come to fruition in the next number of years. If we are not accepting any further tail risk, surely we can put a final figure on the actual exposure, which is currently estimated at €738 million. I understand that figure is open-ended. Can we not be certain as to what the final figure will be?

In his remarks on Second Stage, the Minister did not address the issue of the sunset clause. Why are we not putting an end date for the levy in the legislation?

Minister for Finance (Deputy Michael Noonan)

We do not have a sunset clause because some insurance claims take a long time to settle. Sometimes people must wait for medical evidence or to see how injuries develop before a claim can be finalised. A sunset clause would be unfair to policyholders who have claims pending. The intention is that claims shall run out over a period of ten years and tail off as that period comes to an end. It is hard to be definitive about this because it is difficult to estimate in advance the amount of an award that might be made in four or five years time. That is the only reason. The best estimate of actuaries is that it will come in around the figure I have mentioned.

Under the legislation, the levy cannot be more than 2%. It can be varied if the money is not required as we come to the back end of the period. The Central Bank will advise on the adequacy of the provisioning in the insurance compensation fund. If circumstances arose where it was reasonable to reduce the levy to, say, 1% that could be done.

With regard to medical insurance and the VHI, I did what Ministers always do. I will not tie the hands of any successor. However, the Government has no plan to extend the levy to health insurance. The reason for excluding health insurance is not only to avoid making an imposition on people who are finding it hard to pay premiums. The primary reason is that health insurance is in a different legal space from car, house or travel insurance. It is not controlled by the Central Bank and is outside the scope of the normal insurance regulatory regime. It is excluded for that reason. There are other exclusions which we will speak about when we come to that section.

I think the Deputy asked me something else.

Deputy Michael McGrath

I asked about tail risk.

Deputy Michael Noonan

I was referring to the overall deal that Anglo Irish Bank and Liberty Mutual made with the insurers. For example, we got several offers of private equity stakes in Bank of Ireland but many of them, as well as buying a majority of the shares in the company, wanted the State to cover any possible risk down the line. There are no tails to the deal with Liberty, Anglo and the administrators, other than the levy. The State's commitment is to provide against insurance claims. Of course there are tails to insurance claims but nothing else is being covered elsewhere in the deal. That is the point I was making at the end of Second Stage.

Deputy Richard Boyd Barrett

Will the fund cover only the losses of the Quinn Insurance group in the UK or will it cover the future losses of Liberty Mutual Direct Insurance Company Limited and Anglo Irish Bank, who are taking over as part of the deal? As I understand it, the business will be broken up into two parts, one of which is the big loss making business primarily in the UK which is to be run off by the administrator and the potentially profitable part which Liberty and Anglo will own? For instance, are we giving a guarantee to Liberty that, if things go bad and it makes losses in the future, we will cover them? Perhaps the Minister would clarify that point.

I have a few other questions to put to the Minister. Will I do so now?

An Leas-Cheann Comhairle

Deputy Doherty wants to put a question on the same issue.

Deputy Pearse Doherty

My question is on a different issue.

Deputy Richard Boyd Barrett

I would like to make a few other points.

Deputy Michael Noonan

I will respond to the Deputy's first question and will then read the speaking note on the section, which may anticipate many of the Deputy's questions.

The levy will be applied to all vehicle, home or travel insurance written in the State for persons living in the State. What is being covered are the insurance claims of the Quinn Insurance group in respect of which adequate provision was not made. For example, a person insured with Quinn Insurance who had a car accident two years ago, at which time Quinn Insurance was insolvent, will be compensated by the insurance compensation fund. The levy paid into the insurance compensation fund will provide the funds out of which a person's claim will be met when settled. The levy has nothing to do with UK or Irish claims. It relates to any claim that arises from insurance written by the Quinn group of companies. The big hits in this regard are in respect of car accidents.

While it is true that this is an imposition on ordinary Irish people who will have to pay a further 2% on their insurance, we must ensure that other Irish people, equally meritorious, who have had a car accident, their house burn down or made a claim on their travel insurance get paid. That is what the insurance compensation fund is about. This has nothing to do with the wider Quinn group. There is no question of this money being used to bail out Quinn in any respect. That is not the issue. This is to provide money so that insurance claims that could not be met because Quinn Insurance was insolvent can be met by way of the insurance compensation fund.

The enabling legislation provides that, if another insurance company which has claims pending goes broke, it or the administrator of it will have access to the insurance compensation fund. Regulation of insurance has improved substantially over the past 18 months. Where previously there were only 50 people in the Central Bank regulating insurance companies there are now 100 people doing so. Also, the Central Bank no longer promotes financial services business because being the regulator at the same time as promoting the Financial Services Centre in Dublin to an insurance company was a potential conflict. As such the Central Bank has moved out of that area. It also has the power to bring in third party professionals such as actuaries to help with the regulation. It is hoped that a company like Liberty will have adequate provision and reserves to meet all claims. There is an advantage in bringing in a big American company which has a great deal of assets. It will have appropriate reserves and make appropriate provision for the business it writes. The additional regulatory regime and the fact that regulation in Ireland is working much better than it used to should provide the assurance we need that as Liberty trades in the market it will not get into the difficulties into which Quinn did.

The problem arises because Quinn Insurance did not make sufficient provision for future claims. It is as simple as that. There are rules about this in insurance regulation and they fell below the benchmarks. I dislike saying that this will never happen again but new measures have been taken to ensure it does not.

Would the Deputy like me to read the speaking note on the section?

Deputy Richard Boyd Barrett

What is in the speaking note?

Deputy Michael Noonan

The note provides a general description of what is contained in the section and will probably answer many of the questions which Members may raise individually.

Deputy Richard Boyd Barrett

I would prefer to make my points first because I am not sure how they relate to the different sections.

Deputy Michael Noonan

That is no problem.

Deputy Richard Boyd Barrett

The Minister said that the new better resourced regulatory regime in terms of the Central Bank should guard against this type of situation developing again and that there should be proper provisioning against claims by insurance companies. I am not that familiar with the insurance industry. Is it an offence for an insurance company not to make proper provision against claims or not to have or maintain sufficient assets against claims? If not, should that not be the case and should it be part of this legislation or are we simply relying on there being a little bit better regulation by the Central Bank? The Minister stated that there is now in place a little more regulation and that while it is hoped this will not happen, he cannot be sure it will not. That worries me. It is bad enough that people are being levied in this way because of what happened. Surely, in pushing through this legislation, which provides that people will pick up the tab for the malpractice of Quinn Insurance, we should be providing serious sanctions or measures to ensure this does not happen again and that where it does it will be a criminal offence.

It is right and proper that we should step in and cover policyholders who took out insurance with Quinn in good faith. We must ensure we can discharge any claims made. However, where is the logic of us covering all those losses and nursing back to health or cleaning up Quinn Insurance only to hand it over to a multinational that will obviously have an interest in it because it will be potentially profitable? If policyholders are covering the losses and paying for the clean up, why then should we not own the company at the end of this process, thus ensuring that any future profits generated from it will come back to the Exchequer or benefit policyholders in terms of lower premiums and so on? Why are we handing the cleaned up company to Liberty? I do not understand the logic behind that.

If the levy has to be imposed, can measures be taken to ensure the full extent of the cost is borne by the company's future profits rather than unloading it on to policyholders through higher premiums? Liberty Mutual would not have an interest in Quinn Insurance if it did not believe it was going to make much profit out of it in the future. Notwithstanding Mr. Quinn's malpractice, speculations and failure to manage his business in a conscientious way, underneath it all there is a potentially viable and highly profitable business. Liberty Mutual must know this and it is getting the company for a song. We should at least ensure a quid pro quo for policyholders coughing up for the compensation fund is a mechanism whereby the company’s potential profiteering on the back of policyholders is kept in check.

The Minister claimed the introduction of this legislation is not linked to the wider issues in the Quinn group. I hope the departmental officials, Mr. Sheridan and his colleagues, will pardon me if I admit I did not take in everything they said at the briefing the other day on this matter because it is all quite complicated. If I understood their briefing correctly, some €200 million will come indirectly out of the compensation fund to go to Anglo Irish Bank bondholders. The officials suggested this still worked out good for the Exchequer because in exchange for this €200 million, the bondholders would relinquish their claim on securities and assets of the Quinn group. Whether this is a good deal for the taxpayer is debatable.

Deputy Catherine Murphy

Are there any guarantees that Liberty Mutual will not relocate the Quinn Insurance jobs elsewhere once it gets its hands on the company? This issue was raised early on in the debate with criticism levelled against several Opposition Members for not raising it themselves.

My understanding of insurance companies is that they invest moneys raised through premiums in banks, property and other profitable commercial activities. Were the large UK losses suffered by the Quinn group due to insurance claims or investments it made? Are satisfactory protections in place for dealing with losses caused by poor investment?

The legislation requires the insurance compensation fund will be restricted to those companies which conduct at least 70% of their business in the Irish market. However, does this mean that the 2% levy will apply to losses incurred by the insurance group in question in the UK? Will the Minister clarify this confusing matter?

Deputy Michael Noonan

Deputy Boyd Barrett raised the issue of sanctions and penalties. This is a technical Bill and plays a small part in the corpus of insurance legislation. The wider framework of insurance law and Central Bank regulations allows for appropriate sanctions that can be applied to companies that do not meet their solvency requirements. I do not have the specific details to hand but I can forward them to the Deputy if he is interested.

Deputy Richard Boyd Barrett

Is the Minister satisfied they are sufficient, given what has happened?

Deputy Michael Noonan

Yes, I am.

Deputy Richard Boyd Barrett

Does the Minister expect Mr. Quinn to be suitably prosecuted then?

Deputy Michael Noonan

The regulatory regime has improved significantly also.

It was very difficult to get anyone interested in buying the Quinn group. When it came down to the wire, only two companies had any interest in purchasing it. I understand from Anglo Irish Bank that it was a difficult negotiation. Liberty Mutual will take over the complete Republic of Ireland book, both assets and liabilities. It will assume liabilities of €51 million in excess of the assets to be transferred to it by Quinn Insurance Limited, QIL.

Liberty Mutual is making a contribution. When I spoke to the company's managing director recently, who is also a company shareholder, he told me any company guaranteeing jobs will say so for two years but that does not mean there will be no job losses after two years. He assured me his fullest intention was not only to trade but to expand the insurance footprint of Liberty Mutual in Ireland. Economic circumstances may change but there was no doubt about the security of the jobs, no more than there would be in any other company. Liberty Mutual has no intention of closing down the company at an early date. There would be no point in doing that anyway because the only value it has is to trade profitably.

Deputy Boyd Barrett said he found the arrangement concerning the bondholders complicated. I too find it complicated. However, I have a note which may help explain it better. The guarantees the bondholders have over Quinn property holdings are legally enforceable. If they were enforced, the joint administrators would only be able to realise about €40 million of the €464 million worth of property over which the guarantees are held. In this context, the deal struck with the bondholders through the involvement of Anglo Irish Bank has to be considered. The bank, by participating in this deal, is facilitating the lifting of guarantees valued at €464 million over assets held by Quinn Property Holdings assets, a subsidiary of Quinn Insurance Limited, held by banks and bondholders in return for a payment of €200 million. It should be noted these guarantees were the reason the Central Bank appointed the joint administrators in the first place, as the guarantees were held over assets which should have been available to cover QIL's insurance liabilities. This agreement releases value of €264 million to QIL which will reduce the call on the insurance compensation fund. Without this agreement, there would have been a considerable extra cost.

If this deal had not been done and instead of looking for the €700 million I referred to earlier, another €264 million would be required from the insurance compensation fund. It is a complicated but good deal. Thanks to all the rumours and publicity, Quinn Insurance lost business during the month of negotiations with Liberty Mutual Direct. Liberty will not find restoring that business or rebuilding confidence easy. The publicity and events impaired the brand. However, Liberty will go ahead, sign off on the deal in the High Court on 4 October and get down to business.

Deputy Pearse Doherty

The Minister will agree that the manner in which we are dealing with this legislation is unsatisfactory. Although his clock is ticking down to 4 October, we should have had an opportunity to listen to and digest his contribution and that of other Members, examine the legislation and, if required, present amendments. Asking us to table amendments last week before we had even heard him on Second Stage is unacceptable. It is the reason no amendments have been tabled.

I have a number of simple questions. First, I am not arguing about whether the exemption of the health levy should be included in section 2, but how many policyholders will the 2% levy affect? The Minister presented figures on the total estimated call — approximately €738 million is to be paid off by the 2% levy over 11 years. Some form of assumption is being used by the Department. Will the Minister provide me with the detail of how many policyholders this legislation will affect?

Second, what of the figure of €738 million? Given the Minister's comments of a few moments ago, I obviously had the wrong end of the stick. My understanding was that the €738 million accrued from the losses on the insurance policies held in the North and Britain and that the company was being split into two. Will the Minister clarify this matter? It is fine if this is not the case.

The administrator has not published the 2010 accounts. They will not be published until November. Should interim reports not have been published so that we might have scrutinised the loss in more detail?

On Second Stage I focused on the issue of the bondholder who has a call on assets worth €464 million within Quinn Group Property Holdings, a Quinn subsidiary. A deal is being arranged to pay off that bondholder, and I accept the Minister's point that it will not be the full €464 million. Is it a bondholder in Anglo Irish Bank or a bondholder in the Quinn Group that lent to Quinn Insurance? If the former, is it covered under the State guarantee? It is obviously a secured bondholder, given that it has Quinn assets as security. If the legislation passes, the bondholder will be paid €80 million next Wednesday and will have a call amounting to €120 million in respect of three hotels held by the Quinn Group. Is it a guaranteed Anglo Irish Bank bondholder that is to be paid off next Wednesday or is it a Quinn Insurance bondholder?

Deputy Richard Boyd Barrett

The Minister is about to answer Deputy Doherty's question. Although I asked the officials about the matter, I want to be clear. If the insurance industry is regulated to ensure companies have sufficient assets to meet claims and so on, how can the claim of the policyholder on the company's assets be trumped by the claim of the bondholder? I cannot figure it out. If the insurance company's assets are specifically intended to ensure sufficient provision to pay out on policyholders' claims, surely they have some protection and cannot be used subsequently as security for other loans. It is extraordinary that these assets would be misused to acquire loans to cover Mr. Quinn's speculative gambling behaviour and that the bondholders could have a stronger legal or other claim over them than the policyholders.

I ask this question because the Minister is presenting it as not being a bad deal, since the bondholders would have a claim on the assets. How is their claim legally stronger than that of the policyholders? If it is, surely something is amiss with our insurance law, as it would give priority not to the policyholders, but to the bondholders who lent to Mr. Quinn. In return, they demanded securities that he should not have been able to provide, since they were assets to be used to secure against policyholders' claims.

Deputy Michael Noonan

Deputy Doherty returned to what he regards as the inadequate manner in which the legislation is being handled. I explained the constraints placed on me in ensuring that we had the law enacted in time for a High Court appearance by the administrator on 4 October. However, there has been a great deal of hypocrisy. The Government side of the House is not alone in its responsibility for what occurs in the Chamber. The Opposition is also responsible. Second Stage finished one hour before the allocated deadline despite all of the fuss made on the other side of the House about inadequate debating time.

Deputy Richard Boyd Barrett

Not because of us.

Deputy Michael Noonan

An hour remained for Second Stage when we voted. I initiated this Bill in the Seanad so that this House would have time to table amendments. All Stages were taken in the Seanad on 15 September. If Deputy Doherty or anyone else wanted to table Committee Stage amendments, there were 13 days in which to consider them. That there is not a single amendment from anyone on today's Order Paper is not because Members had inadequate time. Rather, it is because they did not table amendments. Deputy Doherty had a fortnight.

Deputy Pearse Doherty

The Minister knows it is inappropriate to ask people to take Second and Committee Stages on the same day.

Deputy Michael Noonan

The Deputy had a fortnight to consider amendments had he wanted to table any.

Deputy Pearse Doherty

I read the Minister's speech to the Seanad. It was a different speech from the one he gave to the Dáil. It also contained different figures.

An Leas-Cheann Comhairle

Allow the Minister to conclude.

Deputy Michael Noonan

The lady doth protest too much. He had a fortnight to file amendments had he desired. We have discussed Dáil and Seanad reform. Only one Opposition Member was in the Seanad when I took all Stages of the Bill. Deputy Michael McGrath's Fianna Fáil colleague in the Seanad handled everything. No one else from the Opposition appeared.

Deputy Richard Boyd Barrett

We do not have anyone in opposition in the Seanad.

Deputy Pearse Doherty

The Minister published the Bill 24 hours——

An Leas-Cheann Comhairle

Deputies, please.

Deputy Richard Boyd Barrett

Believe me, if we did——

Deputy Pearse Doherty

It was not the Minister's finest hour. He published the Bill 24 hours beforehand.

An Leas-Cheann Comhairle

One voice, please.

Deputy Michael Noonan

Deputy Doherty should not take it all so personally. To enter this House——

Deputy Richard Boyd Barrett

For the record, the Technical Group used all of its speaking slots.

Deputy Michael Noonan

——as Deputy Doherty does a fortnight after full explanations of the Bill were given in the Seanad and blame me for his not tabling a single amendment——

Deputy Pearse Doherty

The Minister did not answer any of my questions.

Deputy Michael Noonan

——is a bit rich. Less posing and a little more work would help this House. A little bit more homework and then the Deputy would have everything done.

I was asked about the value of the levy. It amounts to €65 million per year, including €40 million in respect of the compensation fund. Using rough mathematics, if one multiplies by ten and adds €40 million, one will get a result close to €700 million. We cannot be accurate about this because it pertains to future claims.

The balance of the Quinn UK book is being run off. It relates mainly to non-motor insurance but it is not the total story. Quite a proportion pertains to the United Kingdom and the Deputy is correct in that regard.

I do not have information on the number of people who will pay. The levy will apply to motor and house insurance, and to travel insurance, which is intermittent. It is paid by the insurance companies on the book. It is collected by the Revenue Commissioners in the same way as they collect stamp duty. We do not have the breakdown of the number but I presume that, in any documentation concerning insurance, the industry will be able to say how many people it has covered. The levy is paid by the companies to the Revenue Commissioners. It is a question of the quantum rather than the individual numbers that are involved.

I cannot go further than I have in explaining the bond. A bond is not an asset; it depends on which side of the bond one is on. It is really an IOU to somebody giving money to the company.

Deputy Richard Boyd Barrett

Why does the IOU to the bondholder carry more weight than that to the policyholder?

Deputy Michael Noonan

There was a charge on the assets in respect of the guarantees. This was legally enforceable by the bondholders. The solvency rules require that assets set aside for solvency requirements are not encumbered. Therefore, the guarantees cannot be used to meet the requirements for reserves set by the Central Bank.

Deputy Pearse Doherty

A little bit more homework by the Minister would not go astray to help the functioning of this House. He stated he does not know how many people in the State will be affected by the legislation. He cannot even give an estimate although the number is probably in the hundreds of thousands. He told us today how much money will come into play but not how many people will be impacted.

What percentage of the €738 million that the Minister estimates is required under the fund pertains to insurance in the North and Britain? It was our understanding that the vast majority pertained to those locations.

My third question is simple. Is the bondholder who is being paid in the order of €80 million next Wednesday and who will have a call of €120 million regarding three hotels an Anglo Irish Bank bondholder? If so, is that bondholder guaranteed under the State guarantee?

Deputy Richard Boyd Barrett

When the Minister is answering that, could he not tell us who the bondholder is? He must know the identity.

Deputy Michael Noonan

The State had no involvement in this; it was the administrator in Anglo Irish Bank and the Liberty Mutual group. We are ensuring the compensation fund is adequate to pay for outstanding claims, the vast bulk of which are in Northern Ireland and the United Kingdom, but some of which are in this jurisdiction. This is the way we fund the insurance compensation fund, and we are following the advice of the Central Bank in doing so. We are not party to the arrangements of Anglo Irish Bank and the Quinn group. It is not in our remit. We do not have the information about the bondholders because it is not relevant to this legislation.

Deputy Richard Boyd Barrett

Could the Minister ask Mr. Alan Dukes for the identity of the bondholder?

Deputy Michael Noonan

Mr. Dukes is a private citizen.

Deputy Pearse Doherty

If the Minister does not know whether it is a bondholder in Anglo Irish Bank that will be paid off as a result of the deal, he should note it has a fundamental bearing on the legislation. Only last week, if we are to believe what he told the people, he was over with his friends in Europe asking that unguaranteed bondholders in Anglo Irish Bank be burnt or made burden-share. If this were to emerge, then the call on the Quinn group would be less. Therefore, the call on the insurance fund would be lower. It is a very simple case. The Minister can say he does not know — it is a case of "see no evil, hear no evil, speak no evil" — but I put it to him as he put it to me that a little bit of homework would not go astray to help us, as parliamentarians, to decide which way we should vote on this type of legislation. Is the bondholder being paid off as part of this legislation an unguaranteed Anglo Irish Bank bondholder? The bondholder is to receive a cash payment of €80 million next Wednesday, with a €120 million call in respect of three hotels. My question is simple.

Deputy Michael Noonan

I have explained to the Deputy already that it was not legally possible to do other than make an arrangement from Anglo Irish Bank's perspective.

Deputy Pearse Doherty

I may accept that.

Deputy Michael Noonan

An arrangement worth €264 million was made that was of benefit to the Irish State. If the bondholder arrangement had not been made, we would be required now to make provision for another €264 million to go into the compensation fund. We are not party to any of this.

The relationship between Anglo Irish Bank and the Quinn group is a commercial one. Under the relationship framework put in place under the Anglo Irish Bank Corporation Act 2009, which governs the relationship between the bank and its shareholder the State, the issues relating to normal commercial activities at the bank are a matter for the board, in respect of which I, as Minister for Finance, have no role. Therefore, I do not have a role in any of the court actions or any of the arrangements. The relationship between Anglo Irish Bank and Quinn group is totally commercial. I am not taking Government responsibility for what are commercial arrangements between Anglo Irish Bank and the Quinn group. It is not my legal responsibility.

Deputy Pearse Doherty

The Minister would like to have us believe he has no role, yet he told us we must pass this legislation before 4 October because the State must say the fund is in place to insure the losses before the sale to Mutual Liberty goes through. Deputy Noonan should not pretend that he, as a Minister for Finance proposing legislation that will affect hundreds of thousands of policyholders by increasing their premiums, has no role.

The Minister is insisting on passing legislation that, over the next ten years, will demand the payment of over €700 million by Irish policyholders, yet he does not know whether some of the money is to pay off an Anglo Irish Bank bondholder who may not be guaranteed by the State. The payment of the bondholder is central. This is not just an incidental occurrence. When the Central Bank found out that the subsidiary of Quinn Insurance Limited, Quinn Property Holdings Limited, posted its assets, worth €464 million, and secured this to a bondholder, it then said the insurance company was behaving recklessly and put it into administration. The bondholder is a central player on this stage. For the Minister to tell us he does not know whether this is an Anglo Irish Bank bondholder, while he has been trotting about since March stating such bondholders should be burned and there needs to be burden sharing, is not credible. The Minister should have done his homework if he expects people to take this legislation in any way seriously.

Deputy Michael Noonan

Deputy Doherty's position is that he wants to burn everybody.

Deputy Pearse Doherty

Answer the question.

Deputy Michael Noonan

If we take his remarks in context, he now objects to us covering, through the insurance compensation fund, people in Northern Ireland who received their insurance from the Quinn group.

Deputy Pearse Doherty

No.

Deputy Michael Noonan

That is his position.

Deputy Pearse Doherty

It is not.

Deputy Michael Noonan

The purpose of this——

Deputy Pearse Doherty

With due respect——

An Ceann Comhairle

Deputy Doherty, resume your seat.

Deputy Pearse Doherty

——the Minister cannot present this type of falsehood.

An Ceann Comhairle

The Minister is on his feet.

Deputy Pearse Doherty

I never articulated that position. The Minister cannot answer the question.

An Ceann Comhairle

Deputy Doherty cannot be jumping up and down when he feels like it.

Deputy Michael Noonan

The purpose of the Bill is to provide money to the insurance compensation fund so the claims of people who are not covered by the Quinn group will be covered. This is what it is about. Deputy Doherty is correct to state the bulk of these are claims in Northern Ireland and other parts of the United Kingdom but not all of them are. However, he seems to be objecting to this, and what I am stating is that it is his position that the insurance compensation fund should not cover the claims of citizens who are resident in Northern Ireland if they are covered by insurance policies written by the Quinn group. This seems to be his position.

I have already answered the question about the bondholders.

Deputy Pearse Doherty

With respect, you have not. Is it an Anglo Irish Bank bondholder?

Deputy Michael Noonan

I explained it in detail to Deputy Doherty in so far as it is relevant to this legislation. There is a major advantage in doing things this way in respect of the bondholder, because if it was not done this way I would be here proposing that instead of trying to get something in excess of €700 million into the compensation fund we would be seeking €1 billion for the compensation fund, because the deal with the bondholders yielded €264 million which would have to be got through the compensation fund if we did not do it this way.

An Ceann Comhairle

I call Deputy Michael McGrath, but before he speaks I wish to state that we are dealing with section 2, which amends section 1 of the principal Act which covers definitions.

Deputy Michael McGrath

Yes.

An Ceann Comhairle

However, we are arguing about bondholders. Can we deal with the issue?

Deputy Michael McGrath

I want to raise a question with regard to section 2 but perhaps the Ceann Comhairle wishes to dispose of the other matter being discussed.

An Ceann Comhairle

I do not know how we can dispose of it because it is not related to section 2.

Deputy Michael McGrath

I have a question on section 2 which relates to the move to apply the levy to risks in the State as opposed to the previous regime whereby Irish authorised insurers were levied in respect of risks inside or outside the State. Will the Minister clarify whether in a case where an insurance policy contains risks inside and outside the State the company must do a pro rata calculation and submit this information as part of its calculation to Revenue or how will it work?

With regard to the definition of risks in the State and exclusions, will the Minister clarify the impact on the various insurance policies that businesses have in respect of property, employers liability and professional indemnity? Which of these are included?

Deputy Michael Noonan

I thank the Deputy for his question because it finally allows me to speak to the section and explain what is in it. Section 2 introduces a number of new definitions to section 1 of the Insurance Act 1964 and updates the existing definitions for "authorisation", "policy" and "insurer". These will allow the scope of the scheme to be extended to cover all insured risk in the State except for specific excluded risks.

The principal factors which will determine whether a risk is a risk in the State will be whether insured buildings are located in the State; whether insured vehicles are registered in the State; in the case of short-term travel insurance whether the insurance was taken out in the State; and in most other cases whether the habitual residence of the policyholder is in the State or, in the case of legal persons, whether the establishment of the policyholder is in the State.

The newly defined term "excluded risk" removes such policies from the provisions of the legislation which would enable the fund to compensate policyholders and also removes such policies from the provisions which enable such policies to be levied. In summary, the risks excluded from the compensation fund and from being levied are the insurance of shipping and aircraft, mainly because these risks are located outside the State; life insurance is excluded because this is solely a non-life scheme; health insurance, mainly because a large proportion of the market, namely the VHI, is outside the scope of the current body of insurance legislation; dental insurance is excluded to be consistent with the stamp duty consolidation levy, as we want to make the payment and collection of the levy as easy as possible by mirroring the stamp duty levy exclusions and stamp duty is collected by the Revenue Commissioners; reinsurance is excluded because it relates to business to business transactions and is therefore not covered by the scheme; and insurance issued when the insurer's authorisation was revoked is also excluded.

There is also a definition for "insurer authorised in another Member State" as this is required under the new scheme since such insurers can operate in the Irish market on a branch basis or on a freedom of services basis and policyholders of these companies are brought into the scheme with regard to risk in the State.

Deputy Michael McGrath

Are business insurance policies excluded?

Deputy Michael Noonan

If the business is in the State.

Deputy Michael McGrath

Then all types of policies they have are included, such as employer liability, professional indemnity——

Deputy Michael Noonan

Businesses are excluded.

Deputy Michael McGrath

Even in respect of property? I am looking at the exclusions in the legislation.

Deputy Michael Noonan

Yes, it is excluded also.

Deputy Michael McGrath

Business property is excluded.

Deputy Michael Noonan

Yes.

Deputy Michael McGrath

So all business policies are excluded.

Deputy Michael Noonan

Yes.

Deputy Michael McGrath

I thank the Minister.

Deputy Pearse Doherty

On the risks excluded under section 2, I understand this comes from a European directive and that it is with regard only to risk within the State. My question on to whom the existing fund would be paid and whether it would be to policyholders in the State or outside it was not to argue we should not pay the insurance premiums of those outside the State; it was very much because the Minister stated in his argument that the fund was to pay Irish policyholders. The point we teased out, and which I believe I got clarified, is that the majority of these are in the North and Britain but we have no breakdown of the categories.

When did the European directive on risk take force? The Bill is being presented as being required because of a European directive.

Deputy Michael Noonan

It came into force in 1991.

Question put and agreed to.

SECTION 3

Question proposed: "That section 3 stand part of the Bill."

Deputy Michael Noonan

This is a technical provision which makes a number of minor cross-referencing changes to section 2 of the Insurance Act 1964 consequential on the amendments made in this Bill. The purpose of this is to ensure the legislation holds together after these amendments have been made.

Question put and agreed to.

SECTION 4

Question proposed: "That section 4 stand part of the Bill."

Deputy Michael Noonan

Section 4 replaces section 3 of the Insurance Act 1964 and introduces three new sections: 3A on the application by the liquidator of an insolvent insurer; 3B on an application where the insurer in liquidation is an insurer authorised in another member state; and 3C on the payments out of the fund where an administrator is appointed. These provisions are designed to facilitate payments out of the fund to policyholders with regard to risks in the State where an Irish authorised or an EU authorised insurer goes into liquidation and the approval of the High Court has been obtained for such payments.

This section also provides that a body corporate or an incorporated body of persons may not be paid out of the fund unless the sum is due to an individual. The intention of this limitation is to confine the benefits of the scheme to consumers.

In more detail, section 3 is inserted into the 1964 Act and applies general terms to payments out of the fund.

Subsection (1) provides the general power to make payments out of the fund in respect of payments due under a policy issued by an insurer in liquidation. Subsection (2) operates to restrict payments from the fund where payment is available from other sources, for example where the claim is guaranteed by a party other than the insurer in liquidation. Subsection (3) elaborates on subsection (2) and provides that where the assets of the insurer in liquidation partially meet the claim the fund will take up the balance. This ensures that the fund is not used to meet the whole of the claim in a manner which would subsidise the assets available to meet the claims of other creditors. Subsection (4) retains the existing limits on the amount which can be paid out of the fund to the lesser of 65% of the total sum due under the policy or €825,000. These limits operate in addition to any payments received from the assets of the insurer or other sources, so where 35% of a claim was met from other sources the fund would contribute 65%, so that the policyholder would receive the total amount she was entitled to, assuming the €825,000 claim limit was not met. Subsection (5) clarifies that the limits imposed under subsections (3) and (4) also apply to liabilities to third parties. For example — where a payment from the fund is payable to a person injured by an insured driver, rather than payable to the policyholder, the limitations in subsections (3) and (4) will also apply. Subsection (6) retains the existing limitation of the scheme in respect of payment to legal persons. Legal persons are entitled to receive compensation under the scheme only in circumstances where the sum due is in respect of a liability to a human person or in respect of liabilities towards the legal person from a human person's insurance. Subsection (7) elaborates on subsection (2) and retains the existing limitation in respect of payments from the fund where the Motor Insurers' Bureau of Ireland, MIDI, meets the claim. It provides that the fund will contribute only towards any shortfall where a part payment is made by the MIDI. Subsection (8) defines "insurer in liquidation" for the purposes of the section. This definition means that subsection (1) operates in respect of Irish authorised insurers when a liquidator has been appointed by the High Court, or in respect of insurers authorised in another member state when an equivalent person is appointed.

Section 3A, application by liquidator of insolvent insurer, provides for the mechanics of payments being made out of the fund to the liquidator of an Irish authorised insurer which has gone into liquidation. Subsection (1) empowers the liquidator to apply to the High Court for payments to be made out of the fund under section 3, to meet the claims of policyholders of the liquidated insurer. Subsection (2) provides that where a liquidator receives money in respect of policyholders under subsection (1) it must be paid over by the liquidator to the policyholder concerned, so that it cannot be used to meet the claims of other creditors. The subsection also provides that the fund shall be a creditor of the insurer in respect of the amount paid over, and so will be entitled to recover any portion of the debt available to unsecured creditors in respect of the insurer's debts generally. Subsection (3) provides that where persons who receive payments from the fund also receive other sums in respect of the claim so that in total they receive in excess of 100% of the claim, they are obliged to repay the fund in the amount of the overpayment. The subsection also clarifies that where the accountant receives sums under the winding up of the insurer he shall not pay over those sums to the policyholder to the extent of any excess. Subsection (4) creates an offence where a person fails to make a repayment as required under subsection (3). Subsections (5) and (6) apply the standard provisions for the criminal responsibility of management if the offence under this subsection is committed by a legal person. Subsection (5) provides for the criminal liability of officers of a corporate body, where the corporate body commits the offence under subsection (4), in circumstances where they consent or connive in the offence or the offence is attributable to their wilful neglect. Subsection (6) applies the equivalent rules as apply under subsection (5) to offences committed by members who manage a body corporate, for example, members of a club. Subsection (7) provides that the Central Bank can bring summary prosecutions for the offence, as well as the DPP.

Section 3B deals with application where the insurer in liquidation is an insurer authorised in another member state. It provides for the mechanics of payments out of the fund which are due to policyholders of an insurer authorised in another member state. Subsection (1) provides that where the insurer concerned is in the equivalent of liquidation in another member state the accountant to the insurance compensation fund, who manages the fund on behalf of the High Court, can apply on behalf of the persons concerned for payment to be made, once in every six months. The limitation on the frequency of the applications is included to ensure that excessive legal costs are not imposed on the fund and to enable claims to be made in respect of a number of policyholders at a time, rather than in respect of each policyholder individually. This section also makes provision to allow the accountant of the High Court to receive a payment from the fund for the costs of any application to the insurance compensation fund he or she makes to the High Court on behalf of policyholders of insurance companies authorised outside the State, whether the application is successful or not.

Subsection (2) provides that where an amount is paid out of the fund under subsection (3), the accountant will pay over the amount due to the person concerned, and the fund and the accountant will be a creditor of the insurer concerned in respect of the amount paid over. Subsection (3) provides that where a person receives an overpayment in respect of the claim, between payments made by the fund and payments from other sources, the amount of excess must be repaid to the fund. This will mean that the fund covers a shortfall in the claim, subject to the limits imposed in section 3, but will not cover overpayments which would result in a windfall for the person concerned. Subsection (4) provides for an offence equivalent to that which applies under section 3B, where a person fails to make a repayment as required under subsection (3). Subsections (5) and (6) apply the standard provisions for the criminal responsibility of management if the offence under this subsection is committed by a legal person.

Subsection (5) provides for the criminal liability of officers of a corporate body, where the corporate body commits the offence under subsection (4), in circumstances where they consent or connive in the offence or the offence is attributable to their willful neglect. Subsection (6) applies the equivalent rules as apply under subsection (5) to offences committed by members who manage a body corporate, for example, members of a club. Subsection (7) provides that the Central Bank can bring summary prosecutions for the offence, as well as the DPP.

Section 3C deals with payments out of fund where an administrator is appointed. Section 3C provides for the mechanics of payments out of the fund in respect of administrations. Subsection (1) provides for payments out of the fund in respect of administrations. Where, in the opinion of the Central Bank, the average business of the insurer was at least 70%; in respect of Irish risks, then the current rules will apply and sums required to enable the administrator to carry on the business of the insurer and to perform his or her functions can be paid out of the fund. Where the average proportion of the insurer's business over three years that concerns risk in the state is less than 70% then payments from the fund will only be available to defray the expenses of the administrator in circumstances where those expenses are unlikely to be defrayed from other sources. Subsection (2) retains existing provisions which apply to payments made to administrators, so that the amount paid from the fund is an unsecured debt of the insurer. There is also a provision to enable the Minister for Finance to waive such a debt in certain circumstances. The provision mirrors the existing provisions in both respects. Subsection (3) relates to the existing restriction on payment of dividends or making other distributions to shareholders, while an administrator is appointed to an insurer remains. The restriction would continue to apply after an administrator ceases to be appointed to the insurer, while the debt remains outstanding. Subsection (4) mirrors the substance of the existing provisions in respect of the matters to which the High Court shall have regard in exercising its discretion under subsection (1).

Members can see the section is technical. It deals with how the fund will operate. I wanted to read it into the record in order that a full explanation is provided for Members and the industry.

Deputy Pearse Doherty

I have two questions, one of which I have not posed before but I posed the other on Second Stage. First, I am curious as to where the figure originated of 65% of the claim being paid out to a maximum of €825,000. How was that percentage and value determined? What were the factors that led to a 65% figure being introduced in the legislation?

Second, I am concerned by section 3C which deals with companies that have more than 70% of their business in the State for over three years. According to the legislation, when companies go into liquidation they are treated equally whether they have 70% or less in the State. However, only companies that have 70% of their business in the State are covered when in administration.

For example, if I have a policy with a company that has 60% of its business in the State and someone else has a policy with a company that has more than 70% of its business in the State, and both companies fall into administration, am I put at more risk than the other person because I have decided to go with a company that has less than 70% of its business in the State? Apart from the individual, is the latter company itself in a more disadvantageous position because the fund will assist a company that has at least 70% of its customer base in the State, thus helping it to get over the hump when it is in administration? The fund will not, however, assist a company with 65% of its business in the State to get over the hump when it is in administration. I am sure there is a rationale as to why this provision is in the section. I understand that everybody is supported when in liquidation and I presume that is because policyholders are affected rather than the business. Can the Minister explain the rationale behind that? Are there any questions as to how that would be construed concerning State aid, or any similar questions that would be of concern?

Deputy Michael Noonan

I will deal with the 65% question first and then the 70% one. The purpose of an insurance compensation fund in a liquidation situation is to provide a certain minimum level of protection to policyholders. There is a need to strike a balance between what policyholders will receive in compensation and what the cost of such payments will be, as ultimately funding for such compensation will be paid for by other policyholders through the levy system, as we have discussed. The rate in the existing legislation is 65% and we saw no reason to change the level at this time. It should be noted, however, that there is a proposal to introduce an insurance compensation directive at EU level which would require a minimum set of harmonised standards to apply to every EU country. It is likely that under these rules the level of protection will increase for policyholders. While this is expected to be published in late 2012, agreement between the member states is not expected for a number of years thereafter.

As regards the 70% question, at the outset it should be noted that the Central Bank will continue to have the option of placing any firm in administration if it deems it appropriate. There will, however, be restrictions on the availability of funding for new administrations, as funding for day-to-day business will be confined to firms which conduct over 70% of their business in the Irish market. The reason for restrictions is that, unlike liquidation, there is no link between the funding available for administration and the levy process. The role of an administration is to carry on the business of an insurance company on an ongoing basis and meet policy obligations as they arise. Therefore if a company is put into administration and funding is required, it is not possible to distinguish between insured risk in the State and foreign risk, because all obligations must be met as they arise since in many cases the company is still conducting business in the open market. Consequently, since only insured risk in the State can be levied to pay for the administration, it is important that the company in question conducts the bulk of its business in the Irish market, as otherwise there would be a disproportionate benefit for foreign policyholders at the expense of Irish policyholders who would be paying for the funding.

The 70% share will be averaged over the previous three years. The reason the 70% figure was chosen is that we believe it covers all the large domestic firms in the Irish market. It should be noted that Irish policyholders or firms that are not eligible for funding while in administration are protected should the company be unable to meet its obligations to them and it has to go into liquidation.

Deputy Pearse Doherty

I thank the Minister for his reply and can see where he is coming from. Please God, no company currently trading will have to go into administration anytime soon, but there is obviously a benefit for a company that has more than 70% of its business in this State. I am worried about a company that might have, for example, 32% of its business outside the State. We live on an island that is partitioned. If a company in Monaghan or Donegal had 68% of its business in this State but 32% in the North of Ireland, it would not have the same support as a company in Cork that may have 70% of its business in the State. I am worried how the legislation we are introducing will affect the market in relation to that. Is this a State aid issue, as well? Does the Minister have any concerns over that, or perhaps there are no concerns? It seems, however, that we are not providing a level playing pitch for these companies. Maybe that is the only way the Minister can do it, but I am concerned by that aspect of the legislation.

Deputy Michael Noonan

I do not think anybody is being treated unfairly because there is a compensation fund in the UK as well. A company in Northern Ireland would have access to the UK fund, so I do not think we need to be too concerned about that. I do not think there are considerations of State aid in this. As I said already, the EU is considering a compensation fund which would apply throughout the Community.

Deputy Pearse Doherty

May I clarify this matter? I will take the example of a Donegal company that has 68% of its customer base in the South, but would not be able to apply to this fund when in administration. I presume that even though it would have 32% of its customer base in the North, it would still not be able to apply under the British fund because it is based in this State and the majority of its customer base is here. I am concerned that it would have absolutely no support whatsoever under administration, bar the expenses that the administrator would incur. I am sure businesses would not plan for the eventuality of going into administration, but it would be a concern for businesses that wish to operate on both sides of the Border and have an all-Ireland business plan. That is something that not only Sinn Féin promotes, but also I am sure every party in the Dáil wants to see a vibrant economy right across the island. I am therefore concerned about that issue.

Deputy Michael Noonan

I am advised that the 70% marker includes all the large companies that trade in the State. However, it is also part of the section that the 70% is averaged over three years. Therefore the possibility of somebody getting caught on the basis of one-year figures would not arise. A Northern Ireland company will not have access to liquidation provisions if its business model was not sustainable. We do not think there is any such company as the Deputy's example refers to. We think it is a workable solution because there are obviously other considerations.

Question put and agreed to.

SECTION 5

Question proposed: "That section 5 stand part of the Bill."

An Ceann Comhairle

Section 5 involves the repeal of section 4 of the principal Act.

Deputy Michael Noonan

Section 5 repeals section 4 of the Insurance Act 1964 which is obsolete as it relates to a specific insolvency in 1964, namely the insolvency of the Equitable Insurance Company Limited. This provision allowed the Minister for Finance to provide a grant of £30,000 to the fund out of moneys provided by the Houses of the Oireachtas under section 3 of the existing legislation, to the liquidator of Equitable Insurance Company Limited. This matter has been resolved a long time ago so the Office of the Attorney General has agreed this provision is no longer necessary.

Question put and agreed to.

SECTION 6

Question proposed: "That section 6 stand part of the Bill."

Deputy Michael Noonan

Section 6 is a technical provision that makes a cross-reference change to section 5 of the Insurance Act 1964, consequential on the amendments made in this Bill.

Question put and agreed to.

SECTION 7

Question proposed: "That section 7 stand part of the Bill."

Deputy Michael Noonan

Section 7 replaces section 6 of the Insurance Act 1964. The section sets out the conditions for the levying of insurance companies in relation to the insurance compensation fund. The provision sets out a number of elements including the following — the Central Bank continues to be responsible for assessing the fund from time to time to see if it needs financial support. In addition, it determines the levy to be placed on insurers where funding is required and notifies them. The Minister for Finance is provided with power to appoint a collector to collect the levy who will pass on the levy to the insurance compensation fund. The collector will inform the Central Bank where no payment is made. The collector is the Revenue Commissioners.

The Central Bank will continue to be responsible for enforcement in the event of non-payment of the levy. The levy is required to be reviewed regularly. All insurance companies will be levied in respect of risks in the State under the new scheme. This contrasts with the existing scheme under which only Irish authorised insurances are levied. However, in that scheme, they are levied in respect of risks inside or outside the State. The levy will be collected by the Revenue Commissioners.

Deputies may be aware, because they were probably lobbied by the insurance industry, that in the early stages of drafting this legislation it looked as if the levy would have to apply to all business written in Ireland, even if the insured persons or assets were outside of the State. There was a serious threat to major insurance companies who had written much of their business across the Continent of Europe, particularly in Germany. There was a potential loss of 1,500 or 1,600 jobs arising from this and it was one of the reasons we needed to scrutinise it so carefully in Europe and come up with a formula to ensure that in protecting the jobs of this company that we did not lose the jobs in very significant insurance companies in this city who write a lot of business from the financial services centre in respect of risk outside the State.

Deputy Michael McGrath

I ask about the mechanics of how the levy will be implemented. I note under this section that the Central Bank determines the levy to be placed on insurers and notifies them of same. When is it intended this levy will take effect and what will be the relevant valuation date and payment date? Will it come into force in 2012? Any details the Minister can provide would be helpful.

The levy is being imposed on the insurance companies. Is it accepted that this levy will be automatically passed on to policyholders as a 2% levy? What discussions, if any, has the Minister had with the industry regarding the levy? Has the industry confirmed it will be automatically passed on to policyholders? Has there been any change of thinking as regards the existing 3% stamp duty? Is the Minister proposing any changes in that regard?

Deputy Michael Noonan

I am not proposing any changes in the stamp duty but all such issues are budgetary issues and it would not be done in mid-year in any case.

Subsection (1) makes the Central Bank responsible for assessing the fund from time to time to see if it needs financial support. It can determine the appropriate contribution to be paid to the fund by each insurer up to an amount not exceeding 2% of the gross premiums paid to the insurer, in respect of policies issued in respect of risks in the State.

Subsection (2) requires the bank to publish on its website any decision to levy insurers and to deliver a notice to each insurer specifying the date from which the levy will commence, the percentage contribution to be paid and the person to whom it should be paid.

Subsection (3) requires the insurance company to deliver to the collector a statement in writing showing the aggregate of gross premiums paid in that quarter in respect of risks in the State and to pay the appropriate contribution based on the gross premiums.

Subsection (4) requires the collector to pass the money received on to the fund after deducting its costs and to inform the bank of who has been paid and what is the contribution.

Subsection (5) requires the collector to inform the bank if it is the view that a company has not paid its appropriate contribution.

Subsection (6) provides the bank with the power to recover any contribution not paid by an insurer and to take appropriate action against the company.

Subsection (7) requires the bank to transmit any money to the fund recovered as a result of the action taken under subsection (6).

Subsection (8) requires the bank to publish on its website any decision to levy insurers and to deliver a notice to each insurer specifying the date from which the levy will cease. It also provides the bank with the basis for reviewing the levy on a yearly basis, either to increase or to lower it or to allow it to continue at the same rate. Of course, it could only be increased if it were below 2% in the first instance.

Subsections (9), (10), (11) and (12), provide the legal basis for the offence provision in circumstances where an insurer does not pay the appropriate contribution.

Subsection (13) enables the Minister to appoint the Central Bank, the Governor or Commissioners or any other appropriate person, to perform the functions of the collector under this section.

Where the bank is appointed, then subsection (b) removes the obligation to inform itself which would otherwise arise. Where the Revenue Commissioners are appointed, subparagraph (c) ensures that if stamp duty moves to electronic collection, then the levy may also move to electronic collection.

Subsection (14) is a definition section which provides for defined terms for the purposes of the section. The obligations on the insurers to make payments are triggered with reference to the effective date, the date on which the original notice is published by the Central Bank or the dates on which amending notices are published under subsection (8). The definition premium ensures that policies cannot be taken outside the scope of the levy in the event they cover a risk outside the State as well as risks in the State. The definition of "quarter" operates to govern the period during which contributions must be paid.

The Deputy asked about a three month notice which must be given when it is signed.

Deputy Michael McGrath

Has the Minister had discussions with the industry and has the industry confirmed it will be levying policyholders?

Deputy Michael Noonan

There have been levies before so the industry will be familiar with the Insurance Compensation Fund and the 1964 legislation. I think the levies lapsed some time in the early 1990s so the companies would be familiar with the situation.

The main requirement of the domestic industry is that there should be a level playing field between companies which operate in the Irish market on a subsidiary or a branch basis. Their main fear with the existing arrangements was that an authorised firm could convert its business into a branch and therefore evade the levy. This possibility has now been removed by applying the levy to all policies relating to risks in the State, whether these are sold by a branch or by a subsidiary. International industry is satisfied that the legislation addresses their needs, their main concern having been that because of the scale of their international business, they would end up paying the bulk of the levy. Their view was that this would force most companies conducting such business to leave the country. They have indicated they have no difficulty paying the levy on insured risk in the State. This reiterates the point I made about the risk of losing jobs if the levy were imposed on the risk written here——

Deputy Michael McGrath

Have the companies confirmed that the levy will be passed on? The levy is on the companies and they will absorb it.

Deputy Michael Noonan

The Central Bank organises it and the Revenue collects it from companies on their book of particular businesses and it is passed on by the company to the Revenue and it is passed in turn to the insurance compensation fund on the direction of the Central Bank.

Deputy Michael McGrath

Yes, but it is not a requirement of the law that the insurance companies pass it on to the policyholder.

Deputy Michael Noonan

The way the levy operates, it operates on the books; the Deputy can take it that it will be passed on.

Deputy Michael McGrath

I know that but they do not have to do it legally.

Deputy Michael Noonan

Legally, they could absorb it.

Deputy Pearse Doherty

I take it that Michael Flatley's legs will not be paying into this insurance fund, given the exemptions the Government has got.

I presume that the Minister's ability to pay into the fund itself is covered in the principal Act. What payment will be required this year and next year? How will the money be recouped? Is that covered in the principal Act?

Deputy Michael Noonan

The Exchequer will have to put in money in the first instance. When the Bill is signed there will be three months notice. Money is required from now on. It is like a loan from the Exchequer. In terms of the general Government deficit, it is treated as a financial transaction. The State will put money in and will get an interest rate on it. The State will get its money back as the levy builds over the years. It does not have an effect on the budget figures for example because it is a financial transaction according to the people who deal with these issues.

Deputy Pearse Doherty

Is it correct to say that the State will put in a sum in the region of €400 million in the next 24 months? Will the State receive a higher rate of interest on that money that it puts into this fund than what it paid to borrow the money from the EU and IMF at this time?

Deputy Michael Noonan

We are putting in €460 million, a sum of €280 million this year and €180 million next year because we think many of the claims are front loaded. We will receive the appropriate commercial rate of interest on this investment and members can take it that will cover the cost of State borrowing.

These things vary. On the CoCos we put into the banking system for recapitalisation, we will get a 10% coupon on that. I do not think it will be as high an interest rate as that, it will be at commercial rates, but I am sure it will be above the cost of borrowing.

Deputy Pearse Doherty

Will we see a return on the money in two, three or four years time?

Deputy Michael Noonan

It depends on the level of draw down. The levy will produce €65 million a year and there is €40 million in the fund at present. If we put in €280 million this year and €180 million next year, the Deputy can do the sum, but it will be a while before we get the money back.

Question put and agreed to.

SECTION 8

Question proposed: "That section 8 stand part of the Bill."

Deputy Michael Noonan

Section 8 is a technical amendment. The purpose of this provision is to repeal section 31 of the Insurance Compensation Fund of Insurance Act 1989, which made amendments to section 3 of the 1964 Act. Those amendments are now obsolete as they are superseded by section 4 of this Bill.

This repeal will remove any ambiguity which might arise in the event that section 31 were to remain on the Statute Book.

Question put and agreed to.

SECTION 9

Question proposed: "That section 9 stand part of the Bill."

Deputy Michael Noonan

Section 9 provides the saving mechanism and to ensure that any liquidations or administrations commenced before this Act comes into effect will continue to be subject to the old rules. This is a standard convention that a company under administration is protected under the rules that applied when the company went into administration. The effect of this is to ensure that QIL, Quinn Insurance Limited, remains under the administration, as if this Bill had not been introduced.

Question put and agreed to.

SECTION 10

Question proposed: "That section 10 stand part of the Bill."

Deputy Michael Noonan

Section 10 sets out the Short Title of the Act, as the Insurance (Amendment) Act 2011. This is a standard provision in all Acts.

Question put and agreed to.

Title agreed to.

Bill reported without amendment and received for final consideration.

Question put: "That the Bill do now pass."

The Dáil divided: Tá, 97; Níl, 42.

Tá

• Bannon, James.
• Barry, Tom.
• Breen, Pat.
• Broughan, Thomas P.
• Bruton, Richard.
• Burton, Joan.
• Butler, Ray.
• Buttimer, Jerry.
• Byrne, Catherine.
• Byrne, Eric.
• Cannon, Ciarán.
• Carey, Joe.
• Coffey, Paudie.
• Conaghan, Michael.
• Conlan, Seán.
• Connaughton, Paul J.
• Coonan, Noel.
• Corcoran Kennedy, Marcella.
• Costello, Joe.
• Coveney, Simon.
• Creighton, Lucinda.
• Daly, Jim.
• Deasy, John.
• Deering, Pat.
• Doherty, Regina.
• Donohoe, Paschal.
• Dowds, Robert.
• Doyle, Andrew.
• Durkan, Bernard J.
• English, Damien.
• Farrell, Alan.
• Feighan, Frank.
• Ferris, Anne.
• Fitzgerald, Frances.
• Fitzpatrick, Peter.
• Flanagan, Charles.
• Flanagan, Terence.
• Gilmore, Eamon.
• Griffin, Brendan.
• Hannigan, Dominic.
• Harrington, Noel.
• Harris, Simon.
• Hayes, Brian.
• Hayes, Tom.
• Heydon, Martin.
• Hogan, Phil.
• Howlin, Brendan.
• Humphreys, Heather.
• Humphreys, Kevin.
• Keaveney, Colm.
• Kehoe, Paul.
• Kelly, Alan.
• Kenny, Seán.
• Kyne, Seán.
• Lawlor, Anthony.
• Lynch, Ciarán.
• Lynch, Kathleen.
• Lyons, John.
• McCarthy, Michael.
• McHugh, Joe.
• McLoughlin, Tony.
• McNamara, Michael.
• Maloney, Eamonn.
• Mitchell, Olivia.
• Mitchell O’Connor, Mary.
• Mulherin, Michelle.
• Murphy, Dara.
• Murphy, Eoghan.
• Nash, Gerald.
• Naughten, Denis.
• Nolan, Derek.
• Noonan, Michael.
• Ó Ríordáin, Aodhán.
• O’Donnell, Kieran.
• O’Donovan, Patrick.
• O’Dowd, Fergus.
• O’Mahony, John.
• O’Reilly, Joe.
• O’Sullivan, Jan.
• Perry, John.
• Phelan, Ann.
• Phelan, John Paul.
• Quinn, Ruairí.
• Reilly, James.
• Ring, Michael.
• Ryan, Brendan.
• Shatter, Alan.
• Sherlock, Sean.
• Shortall, Róisín.
• Spring, Arthur.
• Stagg, Emmet.
• Stanton, David.
• Timmins, Billy.
• Tuffy, Joanna.
• Twomey, Liam.
• Walsh, Brian.
• White, Alex.

Níl

• Adams, Gerry.
• Calleary, Dara.
• Collins, Joan.
• Collins, Niall.
• Colreavy, Michael.
• Crowe, Seán.
• Daly, Clare.
• Doherty, Pearse.
• Donnelly, Stephen.
• Dooley, Timmy.
• Ellis, Dessie.
• Ferris, Martin.
• Fleming, Tom.
• Halligan, John.
• Healy, Seamus.
• Healy-Rae, Michael.
• Higgins, Joe.
• Kelleher, Billy.
• Kirk, Seamus.
• Kitt, Michael P.
• Mac Lochlainn, Pádraig.
• McGrath, Finian.
• McGrath, Mattie.
• McGrath, Michael.
• McGuinness, John.
• McLellan, Sandra.
• Moynihan, Michael.
• Murphy, Catherine.
• Ó Caoláin, Caoimhghín.
• Ó Cuív, Éamon.
• Ó Fearghaíl, Seán.
• Ó Snodaigh, Aengus.
• O’Brien, Jonathan.
• O’Dea, Willie.
• O’Sullivan, Maureen.
• Pringle, Thomas.
• Ross, Shane.
• Smith, Brendan.
• Stanley, Brian.
• Tóibín, Peadar.
• Troy, Robert.
• Wallace, Mick.

Tellers: Tá, Deputies Emmet Stagg and Paul Kehoe; Níl, Deputies Aengus Ó Snodaigh and Seán Ó Fearghaíl.

Question declared carried.