Tom Barry (Cork East, Fine Gael)

I welcome the opportunity to contribute to the debate on the Insurance (Amendment) Bill 2011. In essence, this Bill must be introduced to finance the insurance compensation fund. We are all aware of the reason for the establishment of the fund, namely, Quinn Insurance is under administration and is in the process of being sold as a going concern. Sufficient reserves will have to be in place to meet future liabilities arising from this situation.

Quinn Insurance suffered losses of €905 million in 2009 from its operations in the UK market which it entered as a so-called loss leader trying to create market share for itself. One could argue that was a spectacular gamble. A further €160 million loss is envisaged for 2010. These are colossal amounts. It is likely that the amount required from the insurance compensation fund will be a massive €738 million. Currently, there is €40 million in this fund, which shows how off the scale is the situation. What we could do with €750 million today if we had it.

The Government is again tidying up the mess of reckless trading. It was once said that we relied on the kindness of strangers. These days we are relying on the kindness of the taxpayer. To fund this requirement, a 2% levy is being applied to all insurance policies. This will be monitored by the Central Bank which will determine the levy to be applied and funding required, which may vary over time. The fund, which will facilitate payment to policyholders in respect of risks held within the State, comes with certain limitations such as payment from the fund shall not exceed 65% or €825,000, whichever is the lesser. Under the new scheme, policyholders will be covered in respect of risks within the State. There are four main determining factors in this regard, namely, whether the buildings are located in the State, whether the vehicles are insured within the State, whether the short term insurance was taken out in the State and whether the habitual residence of the policyholder is within the State. It is important all these are clarified, given the level of wriggling there has been in this area previously. In my opinion, all legislation now needs to be bolted down.

The levy will not apply to health insurance, which is to be welcomed. People in all parts of the country are, because of their financial situations, dropping out of private health insurance. Currently, wealthy people have no private health insurance and many people in receipt of social benefits have medical cards, which is the reverse of the position a few years ago. We will need to address this issue in the future. People who are contributing to the State by way of taxes deserve to be treated fairly. I believe companies should be obliged to confirm that 70% or more of their business over a three year period has been in Ireland, as provided for in the legislation. This will assure policyholders that they will be underwritten in the event of liquidation. This obligation to declare is important given the use in the past of financial vehicles to disguise cleverly the location of moneys. I do not want us to arrive at a situation whereby companies will say that 70% of their business is in the State when clearly it is not. We need to monitor this.

We cannot be complacent. We cannot assume that once this legislation has been enacted everything will be okay. We must remain suspicious and not assume that these situations will never recur. History has taught us to the contrary. The Criminal Justice Bill 2011, which deals with white collar crime, will be helpful in this regard because following its enactment people who robbed this country of vast sums of money may be sent to prison. There is no doubt but that this is a distressed sale. The moneys we get will not match what we could get in a healthier situation. However, we must deal with the reality in terms of where we are. I welcome this legislation and hope it proves to be a good deal for the taxpayer in the long term.

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