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Insurance Industry

Dáil Éireann Debate, Wednesday - 19 December 2018

Wednesday, 19 December 2018

Ceisteanna (158, 159)

Michael McGrath

Ceist:

158. Deputy Michael McGrath asked the Minister for Finance his views on the establishment of an EU-wide insurance compensation fund to deal with the aftermath of insurance company failures; his views on whether such a mechanism will be established to improve the EU-wide insurance market; and if he will make a statement on the matter. [53954/18]

Amharc ar fhreagra

Michael McGrath

Ceist:

159. Deputy Michael McGrath asked the Minister for Finance his views on whether each member state in the EU should have an insurance compensation fund to deal with the aftermath of insurance company failures; his further views on whether such a proposal will be forthcoming from the European Commission; and if he will make a statement on the matter. [53955/18]

Amharc ar fhreagra

Freagraí scríofa

I propose to take Questions Nos. 158 and 159 together.

I am supportive of the general idea of greater harmonisation at EU level for insurance guarantee schemes (IGSs) as this would serve to enhance policyholder protection and ensure a more equitable outcome for policyholders and claimants in different Member States.

The current situation whereby Member States have adopted their own approach to insurance guarantee schemes, which show noticeable differences in design features, such as scope, coverage (e.g. geographical or by product line) and funding is not satisfactory. For instance, I understand, based on reports published from various sources including the European Insurance and Occupational Pension Authority (EIOPA) and EU Commission, that there are, 26 Insurance Guarantee Schemes (IGSs) (or similar schemes) established in 20 Member States: 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. In addition, IGSs do not exist in the following EEA Member States: Croatia, Cyprus, the Czech Republic, Iceland, Liechtenstein, Lithuania, Luxembourg, the Netherlands, Slovakia, Slovenia and Sweden.

These differences in national Insurance Guarantee Schemes (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. Therefore it has been difficult to arrive at a common EU position in relation to IGSs. However, there has been considerable efforts on the issue, including a number of reports and initiatives in recent years:

- A 2010 Commission white paper on the introduction of an EU wide framework of Insurance Guarantee Systems. No significant progress was made on this framework subsequently as the development of Solvency II was the priority piece of work at the time.

- A 2015 Commission discussion paper on the possibility of introducing a recovery and resolution regime for insurance undertakings which could include an Insurance Guarantee Scheme.

- In 2017 the Commission issued a questionnaire to all Member States seeking information on Recovery and Resolution including experiences with failures and near-failures of insurers.

- The European Systemic Risk Board published a report “Recovery and Resolution for the EU insurance sector: a macro prudential perspective” in August 2017. The Central Bank of Ireland was represented on the drafting team.

- EIOPA published an Opinion to Institutions of the European Union on the Harmonisation of Recovery and Resolution Frameworks for (Re) Insurers (July 2017).

- Work is also underway at an EIOPA level, where a project group has been set up to examine more broadly recovery and resolution within insurance and in relation to Insurance Guarantee Schemes, a discussion paper was published on this topic. https://eiopa.europa.eu/Publications/Consultations/EIOPA-CP-18-003_Discussion_paper_on_resolution_funding%20and.pdf

In addition, the Deputy should note that the European Commission proposed an amendment to the Motor Insurance Directive which would oblige member states to set up Insurance Guarantee Schemes to cover the cost of insolvent motor insurers. I support this measure and my officials 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-Freedom of Services (FoS) insurers.

Finally, while the provision of cross-border insurance is an essential part of the Single market, and it is acknowledged that there are obvious difficulties which arise when an insurer fails, it should be noted that Solvency II is not a 'no-failure' regime as it would not be possible to build a viable system that provides a cast iron guarantee that no insurer will ever fail. Consequently it is important that EU supervisors properly and consistently supervise the insurers that they authorise, and that there is greater communications between supervisors across the EU about their respective companies conducting cross-border business. You should also be aware that as part of the ongoing review of the European Supervisory architecture, there is a proposal to further improve cross-border co-operation and communication through the strengthening of Cross-Border Collaboration Platforms. These already operate on an ad-hoc basis, however this proposal would ensure a more formal structure is put in place where an insurer is doing a lot of cross border business. This would therefore give the supervisors of countries into which insurance is written a greater insight into how the business is being conducted.

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