Dáil Éireann Debate, Tuesday - 18 December 2018
136. Deputy Michael McGrath asked the Minister for Finance the member states in the EU and EEA that have insurance compensation mechanisms in place to pay claims in cases in which an insurance company fails; if those compensation mechanisms apply to claimants in other jurisdictions in which the failed company is operating under freedom of services; and if he will make a statement on the matter. [52748/18]
Amharc ar fhreagraAt the outset, the Deputy should note that currently there is no European harmonised framework of insurance guarantee schemes (IGSs) for the insurance sector. Member States have therefore adopted their own approach to such policyholder protection schemes, which show noticeable differences in design features, such as scope, coverage and funding. These differences in national IGSs, together with differences in insolvency laws, have led to a situation where policyholders across or even within the same Member States are not protected to the same extent in liquidation.
I understand, based on a report published from various sources including the European Insurance and Occupational Pension Authority (EIOPA) and the EU Commission, that there are, 26 IGSs (or similar schemes) established in 20 Member States: Austria, Belgium, Bulgaria, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Malta, Norway, Poland, Portugal, Romania, Spain and the United Kingdom.
IGSs do not exist in the following EEA Member States: Croatia, Cyprus, the Czech Republic, Iceland, Liechtenstein, Lithuania, Luxembourg, Netherlands, Slovakia, Slovenia and Sweden.
Based on the available information, there are eight IGSs operating on the basis of the host-country principle, eight operating on the home-country principle and eight schemes with a combination of both. The remaining two schemes are undefined.
The host-country principle applies when the domestic IGS covers policies or risks in that state only; in other words those policies in relation to risks in the state in question issued by domestically authorised insurers and those sold by insurers authorised in another member state who are ‘passporting in’ to that state under freedom of establishment (branches) or freedom of services (FoS). The Irish Insurance Compensation Fund (ICF) is a host-based scheme.
The home-country principle applies when the domestic IGS covers policies issued by domestically authorised insurers sold in that state or in other member states via branches or FoS. The home-country principle does not require incoming insurers which operate via branches or FoS (inward FoS) to participate in the IGS.
EIOPA are currently working to develop proposals for harmonisation of IGSs across the EU/EEA. Officials from my Department and the Central Bank are working closely with their European-level counterparts on the issue.
A final point for the Deputy to note is that in its review of the Motor Insurance Directive, the European Commission has proposed requiring all Member States to establish an IGS to cover the cost of insolvent motor insurers, including on a cross-border basis. We support this measure and are actively participating to ensure that the legislation is strong and in the best interests of Ireland, given the large insurance industry here and our previous experience with insolvent inward-FoS insurers.
