Mr. Kevin Thompson:

First, I will provide a bit of context in terms of how we got to where we got to with the Setanta situation. If one looks at the current insurance legislation, I suppose the anomaly reaches back to the 1964 Insurance Act which was amended in 2011. Under that Act, if a company - up until Setanta - went into administration, 100% would be paid through the ICF. Unfortunately, with Setanta, when it was put into liquidation by the Maltese regulator, it was the first time a liquidation had occurred within the State and an anomaly had appeared within the 1964 Act where in such cases one had a cap in terms of what could be claimed through the ICF, namely the lesser of 65% or up to €825,000. In short, unfortunately, that meant we had a liability of 35% for the claimants.

The proposed amendments to the Act would bring liquidation in line for compensation in relation to administration. They also propose a pre-funding mechanism to build a fund up to a maximum of €200 million through a 2% collection on gross written premium for market participants in the previous year. In addition, should the fund be called upon before an adequate amount could be built up within that fund, the Insurance Compensation Fund, ICF, would backstop it until the ICF could be paid through the pre-contributions of the industry. There is also provision within the proposed general scheme that an extra 1% could be called upon in extraordinary cases.

The pre-funding mechanism, in terms of getting this lump sum or funding together, will bring stability to the market in that policyholders who are affected by such liquidations in the future would have moneys to call upon. From an industry point of view, it brings certainly in terms of the contribution that will have to be made to the fund, and which is in line with international practice. Under the French model, for example, they collect a 1.1% levy from policyholders and the industry makes a 1% contribution as well until they build the fund up. That is our view of it.