Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

The Deputy should note that the insurance compensation fund, ICF, levy being applied to home, motor and commercial insurance operates under the Insurance Act 1964 and came into effect from 1 January 2012. The ICF levy should not be confused with the 3% stamp duty on non-life-insurance premiums introduced in 1982, which is often referred to as an insurance levy. This stamp duty forms a part of general stamp duty receipts and is paid into the Central Fund along with other tax receipts. The ICF operates under the Insurance Act 1964. Its purpose is to protect policy holders in the event of an insurer's becoming insolvent. It is an industry-financed fund. However, because the scheme is not pre-funded, the Act provides for the Exchequer to advance moneys on the recommendation of the Central Bank in circumstances in which insufficient funds have been generated by an industry levy to cover a large demand.

Under section 6 of the Insurance Act 1964, the responsibility for deciding whether the ICF has sufficient funds available to it to at any particular time is a matter for the Central Bank. Where, in the bank’s opinion, the state of the fund is such that financial support should be provided for it, it determines an appropriate contribution to be paid to it by each insurer, calculated as a percentage not exceeding 2% of the aggregate of the gross premiums paid to the insurer in respect of policies issued in respect of risks in the State.

In 2010 joint administrators were appointed by the High Court at the request of the Central Bank because of concerns about the solvency position of Quinn Insurance Limited under the Insurance (No. 2) Act 1983. On the basis of its assessment of the funds in the ICF in late 2011 the Central Bank concluded that a levy should be applied to the industry with effect from 1 January 2012 under section 6 of the Insurance Act 1964. This assessment takes place on an annual basis and the next review is in progress.

I have contacted the Central Bank and it has informed me that, given what is reflected in the report on the ICF, which is published by the Department of Finance on an annual basis, for the year ending 31 December 2012, and without any intention to prejudice pending and future annual reviews, it is not anticipated there will be a change in the levy of 2% in the short to medium term.

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