Michael Noonan (Limerick City, Fine Gael)

I thank the Deputy for his question because it finally allows me to speak to the section and explain what is in it. Section 2 introduces a number of new definitions to section 1 of the Insurance Act 1964 and updates the existing definitions for "authorisation", "policy" and "insurer". These will allow the scope of the scheme to be extended to cover all insured risk in the State except for specific excluded risks.

The principal factors which will determine whether a risk is a risk in the State will be whether insured buildings are located in the State; whether insured vehicles are registered in the State; in the case of short-term travel insurance whether the insurance was taken out in the State; and in most other cases whether the habitual residence of the policyholder is in the State or, in the case of legal persons, whether the establishment of the policyholder is in the State.

The newly defined term "excluded risk" removes such policies from the provisions of the legislation which would enable the fund to compensate policyholders and also removes such policies from the provisions which enable such policies to be levied. In summary, the risks excluded from the compensation fund and from being levied are the insurance of shipping and aircraft, mainly because these risks are located outside the State; life insurance is excluded because this is solely a non-life scheme; health insurance, mainly because a large proportion of the market, namely the VHI, is outside the scope of the current body of insurance legislation; dental insurance is excluded to be consistent with the stamp duty consolidation levy, as we want to make the payment and collection of the levy as easy as possible by mirroring the stamp duty levy exclusions and stamp duty is collected by the Revenue Commissioners; reinsurance is excluded because it relates to business to business transactions and is therefore not covered by the scheme; and insurance issued when the insurer's authorisation was revoked is also excluded.

There is also a definition for "insurer authorised in another Member State" as this is required under the new scheme since such insurers can operate in the Irish market on a branch basis or on a freedom of services basis and policyholders of these companies are brought into the scheme with regard to risk in the State.

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