Michael McGrath (Cork South Central, Fianna Fail)

I welcome the opportunity to make a contribution to this debate on the Bill. I am dissatisfied at the way in which the legislation is being handled. We have to rush it through both Houses of the Oireachtas over a short period because of the High Court date on 4 October. The sale of Quinn Insurance Limited to the Liberty Mutual-led joint venture was announced back in April, yet here we are on the eve of an important court date putting through the necessary legislation to ensure that the insurance compensation fund is adequately recompensed to deal with the losses on Quinn Insurance's books. Essentially, the levy is proposing to put a charge somewhere in excess of €700 million on policy holders. In truth, however, it is an open-ended commitment because we do not know for sure what the full extent of the losses are on Quinn Insurance's books. The Department's briefing note refers to this legislation facilitating a levy of up to 2% on the insurance industry, but it is a levy on policy holders. We all know that so we should call it as it is. It is a bit like saying the pension levy is a levy on the pensions industry when, in all cases that we are aware of, it is being passed on to pensioners and future pensioners. If this particular levy is approved by the Oireachtas, it will land on the doorsteps of ordinary policy holders through the renewal of their motor, home and other policies.

I have read the report of the Seanad debate which took place two weeks ago. The Minister's contribution then was most interesting, as were the contributions of Senators. It is fair to say, however, that the level of awareness - not just among public representatives but also among the general public - of this impending 2% levy is very low. It is a matter of concern that people are unaware that this is coming down the tracks and will hurt them. The cost of policy renewals is rising and this levy will only make the situation worse for those who are already struggling to make ends meet. The Attorney General has advised the Minister that our existing legislation is not compatible with EU law. It is therefore necessary to amend the Insurance Act 1964 to change the scope of the insurance compensation fund from one which covers the risks of policy holders of Irish authorised insurance companies to one which covers all insured risk in the State except for certain excluded risks. In effect, under the legislation all insurance policies taken out in relation to risks in the State come within the remit of the scheme.

The legacy of Quinn Insurance Limited is at the heart of this Bill, as is, to put it bluntly, the mismanagement of Quinn insurance over a number of years. That has now landed the State and every policy holder with a bill that is unknown, but is currently estimated at €738 million. In the Seanad two weeks ago, the Minister indicated that it was only €720 million. When the joint administrators first announced the sale of Quinn Insurance Limited they estimated it would be €600 million. Even in that short period we have seen the overall bill increasing. The joint administrators are hoping to conclude the sale of Quinn Insurance Limited to Liberty Mutual Direct Insurance Company Limited- a joint venture between Liberty Mutual and Anglo Irish Bank - on 4 October. They need to report to the High Court on that date in order to give effect to this. As the Minister has said, they must demonstrate to the court that there is a commitment from the Minister on behalf of the Government to advance the necessary funds to the insurance compensation fund in response to a request from the Cental Bank, which is the competent authority. That particular fund currently has only €40 million and the Minister has outlined in some detail the scale of the losses that were incurred at Quinn Insurance.

I accept the need to put this debate in the context of job retention. We all want to see the jobs at Quinn Insurance retained, which is a policy priority for all parties in the House. Some 1,600 jobs are at stake and generally the employees welcome the sale of Quinn Insurance to the new joint venture as a means of preserving and protecting the existing jobs which are so important in the Border counties and elsewhere. We all support the need for policy holders to be protected. We do not want a situation where policy holders are loading claims with insurance companies in respect of incidents that happened some years previously and then find that the insurance company is not able to meet the requirements of a valid claim.

In April, the joint administrators indicated that Quinn Insurance Limited has suffered losses of €905 million in 2009 due largely to operating losses in the UK and a write-down in the value of assets in regard to the company's investment in Quinn Property Holdings. The 2010 losses are expected to be some €160 million. I read with interest the contribution of Senator Jimmy Harte in the Seanad about the business model that Quinn Insurance was pursuing, including the aggressive undercutting of its competitors' pricing policy for premia. He made the point that ordinary people were asking how Quinn Insurance could do business at a figure that was one quarter of what massive companies such as Hibernian, Norwich Union and AXA - which have been in the business for 200 or 300 years - were offering. That is a question for the regulatory authorities. To be fair, the Financial Regulator, Mr. Matthew Elderfield, identified and quantified the problem, and put a process in place to deal with the legacy of that. Just as with our banking system, however, we must ask the hard questions as to how this situation was allowed to develop. I would be the first to acknowledge that.

We also need to acknowledge the potential cross-contamination of Seán Quinn's investment in Anglo Irish Bank and the €2.8 billion that he and his family owe to that bank concerning the share gamble they made. For example, Quinn Insurance made a loan to the family to facilitate the purchase of some of those shares. There is an element of cross-contamination. While the losses we are examining are substantially related to operating losses, they are also attributable to the reduction in property values. Quinn's investment in the property sector has also impacted on the losses and has increased them significantly. At the time, the administrators felt the losses would be €600 million, then €720 million and now €738 million. People really want to know where this will end.

I am disappointed and disturbed to see that there is no sunset clause in the Bill to set a date by which we are committed to ending this levy. Quantifying the cost of future claims in insurance is an extremely difficult task because of the tail effect. Claims can come in many years after incidents have taken place. It is important to give people some direction or assurance as to how long this particular levy will be in place. If the deficit is in the region of €740 million, the Minister indicated in the Seanad that the levy will bring in about €65 million per year, so we are looking at this levy being in place for 11 or 12 years. That issue is at the centre of this Bill and it needs to be addressed.

I welcome the involvement of the State Claims Agency concerning the processes that were being employed at Quinn Insurance. The agency's feedback and reporting is very helpful.

It will have found what the administrator found on Quinn's books, that sufficient provision was not made for claims and hence, this levy is being proposed to cover claims in the system and future claims. We need to ask hard questions about the deal being proposed by the joint administrators for the sale of Quinn Insurance to the Liberty Mutual and Anglo Irish Bank joint venture. Is this the best possible deal for the Irish taxpayer? What is Liberty Mutual bringing to the table? I know it is making some investment and a commitment about job retention. However, I refer the Minister to his reply to a parliamentary question last May:

I have had no direct dealings with Liberty in relation to the transaction, including the issue of the future of all existing job-holders, however, I am informed by the joint administrators that aside from the redundancies in Manchester, all the 1,570 jobs in Quinn Insurance Limited have been protected for at least two years.

What is the status of that commitment from the Minister? It is a welcome commitment but even if it stands up, two years is not a long period of time. It seems that the State is underwriting to an unlimited extent all the losses incurred by Quinn Insurance. Liberty Mutual is making an investment and it is taking on board a company with a large customer base, even though many customers have moved on to other providers. The legacy liabilities of that business have been taken care of for Liberty Mutual. What is the upside, the benefit, for the State, in the event of that business becoming successful once again? Anglo Irish Bank has a minority shareholding and I presume if the business does particularly well - as is to be hoped - Anglo will recoup more of the money it lent to Seán Quinn and his family for the purchase of the shares. This is one benefit that is obvious but I am not convinced that we are necessarily getting the best possible deal. It should be put on the record of the House the exact details of what Liberty Mutual is bringing to the table and what are the explicit commitments it has made regarding the retention of jobs in the Republic and in Northern Ireland. In the event of the business succeeding, will there be any compensation from the company to bridge the deficit in the insurance compensation fund or will the bill be entirely laid at the feet of Irish policyholders? This is the key question.

What other options were considered for plugging the hole in the insurance compensation fund? The Minister has made a decision to pass on this cost to the insurance industry which will, in turn, pass it on to policyholders. We need to have a debate on whether any other options were considered. The 2% levy comes on top of an existing stamp duty levy of 3%. I understand that in 2010 that stamp duty levy took in approximately €110 million. Does the Minister intend to retain this levy and in effect, create a 5% levy on all insurance policies? This is an important question for which the public will want an answer. Has the Minister any plans to reform the insurance compensation fund? Is he giving the insurance industry a completely free hand as regards passing on this levy to policyholders, as was done in the case of the pensions levy? I note with interest his comments about the health insurance policies. For obvious reasons, he has decided to exclude health insurance policies because of the status of the VHI. Is this status subject to change or to be reviewed by the Minister in the short term? This would have an impact on many more people.

I look forward to engaging with the Minister on Committee Stage. I am disappointed at the short time allocated to consider this Bill which will impose a charge of somewhere north of €700 million but we do not know the full extent of the liability on the Irish policyholders and many hard questions need to be asked and answered and that is what we are here to do.

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