Pat Breen (Clare, Fine Gael) | Oireachtas source

I welcome the opportunity to address Dáil Éireann today on this motion. The matters raised are very important and I would like to state that while the Government will be abstaining from the vote on the motion for reasons which I will explain, there are elements of the motion with which we can agree.

There is no doubt that the insurance sector in Ireland has undergone a period of instability. The liquidation of insurers selling insurance into Ireland has had a major impact on consumers. The placing into liquidation of Setanta in 2014, and the subsequent legal action, The Law Society of Ireland v.the Motor Insurers’ Bureau of Ireland, MIBI, highlighted weaknesses with the current insurance compensation framework in Ireland.

Prior to this litigation, the insurance compensation fund, ICF, was expected to have met the third party claims up to a limit of 65% and a ceiling of €825,000 per claimant. However, the High Court and the Court of Appeal held that the MIBI was liable for compensating third parties. Should this decision be also upheld by the Supreme Court, virtually all Setanta claims will be paid in full. The Supreme Court appeal was heard in October 2016, and we are now awaiting its judgment on this matter.

Inquiries have been made by officials to try to establish when the decision will be handed down, but no indication has been given as to the timeframe involved. Until we receive the judgment, it is unlikely that third party motor insurance claims can be processed, as currently MIBI is liable and the industry, which finances this arrangement, will not pay out unless confirmed by the Supreme Court.

The Government recognises the reason this motion has been brought and in broad terms is sympathetic to many of the issues raised by the Members today. The very legitimate concerns about the lack of accountability of the Maltese authorities for the liquidation of Setanta are acknowledged. The delay in settling claims also has been unfortunate. However, it must be stressed that this aspect is completely outside the control of the Government because of the ongoing court case regarding which body should pay the compensation.

From the perspective of the consumer, much of what is outlined in the motion is not unreasonable. However, the Government has two concerns. The first relates to providing the necessary resources from the ICF to ensure the liquidator can address outstanding claims without further delay. The difficulty is the fact that the High Court and the Court of Appeal have found that the ICF is not liable for these claims. Instead, they have found the MIBI liable. Consequently, compensating policyholders from the ICF would be directly conflicting with the decision of the courts and could be interpreted as undermining their authority.

The second relates to giving consideration to taking legal action against the Maltese and Gibraltar authorities. This would involve engaging lawyers in Malta and Gibraltar to seek further information in respect of the failures of the regulators to uphold their legal duties to establish whether a valid claims arises. The advice from the Department of Finance’s legal unit is that there is insufficient likelihood of a successful action to justify the costs which would be incurred in taking this course of action.

In terms of what is being done, there are a number of items in the motion I would like to address. In regard to Setanta, I understand there are 1,658 open claims. It is acknowledged that this figure is decreasing slowly but that is due to the ongoing court case. Once the Supreme Court rules on where liability falls, progress on outstanding claims can be made.

With regard to enterprise, I am advised that a letter has been received from the Government of Gibraltar outlining that there are currently 233 live claims from Irish policyholders with a reserve value of €7.4 million. However, the reserve figure is under review. Wrightway Underwriting Limited has been appointed to manage claims to enable the liquidator to adjudicate and admit them as insurance claims in the liquidation. The letter details the work that is ongoing within the Gibraltar Financial Services Commission to reduce the live claims and notes that the commission maintains a positive working relationship with both the Central Bank and EU authorities. Claims are, therefore, being actively managed.

It is acknowledged that, with the failure of Setanta and the uncertainty that followed, the whole compensation area needs to be reviewed. Consequently, a review of the framework for motor insurance compensation was initiated and a report was published in July 2016. It is expected that a legislative proposal to implement the report will be brought to Government for approval in the coming months and this will bring clarity on the respective roles of the ICF and the MIBI in the event of a future collapse of a motor insurer.

The motion asks for an urgent update as to the final bill for the collapse of Quinn Insurance. I understand this is estimated to be in the region of €1.1 billion before any potential recovery from the court action Quinn Insurance is taking against its former auditors. It is not possible to give an exact timeframe for the final bill, but it is unlikely to be before 2020.

The issues which the motion asks the Central Bank to carry out are a matter for the bank to consider. However, the bank has indicated that it is conducting a thematic review and inspection of managing general agents, MGAs, that have been appointed to carry out business on behalf of insurance undertakings from other member states operating in Ireland on a freedom of service basis. This review is of relevance to the request for the Central Bank to undertake an awareness campaign.

The Central Bank has confirmed that it fully participates in EIOPA in the establishment of high quality common regulatory and supervisory standards and procedures. The Central Bank has an ongoing engagement with relevant European authorities in order to ensure common standards are applied consistently. I am advised that the bank has engaged with EIOPA on the specific issues raised in this motion.

With regard to the issue of regulatory shopping by UK based financial firms seeking to preserve access to the EU following Brexit, this is an issue which the Government has serious concerns about and which has already been discussed in the House. At a political level, we have been in communication with our European partners on this matter. We believe that it is important to have a transitional arrangement to protect the security of our financial system because of its importance in underpinning day to day business. A transitional arrangement would allow negotiations to take place in a calm and safe environment and would ease concerns about other jurisdictions potentially giving consideration to making commitments on the level of regulation and supervision to such financial firms. We must ensure that the level playing field is protected across the EU.

With regard to Brexit, it is important to note that the implications of Brexit are unclear. After the negotiations have concluded, the issue of passporting in from the UK and Gibraltar will be clearer. However, ultimately, should the position of passporting not be satisfactorily resolved, insurers which currently have branch operations or which conduct freedom of business into the State will have the option of applying for an authorisation from the Central Bank to conduct business in the State.

The Government understands that there is frustration with the slow pace of progress on the Setanta liquidation. However, once the Supreme Court judgment is issued, and I hope that will happen in the next few months, it should be possible for claims to be paid out either through the MIBI or the ICF within a reasonable period of time. Unfortunately, as I mentioned already, we do not believe it is possible to pre-empt this decision by paying such claims through the ICF immediately.

Finally, as indicated at the outset, the Government will abstain from the vote on this motion.

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