Marcella Corcoran Kennedy (Offaly, Fine Gael) | Oireachtas source

I thank the Fianna Fáil Party for tabling this important matter of the ongoing liquidation of Setanta Insurance and Enterprise Insurance and the general issue of regulation of insurance firms passporting into Ireland for discussion. We had an interesting discussion and there is an understanding on all sides of the significant impact that the liquidation and administration of insurance firms has had on policyholders in recent years. As explained by the Minister of State at the Department of Jobs, Enterprise and Innovation, Deputy Pat Breen, the Government will abstain from the vote on the motion. However, I emphasise our agreement with elements of the motion.

As the Minister of State detailed, the liquidation of Setanta Insurance in 2014 highlighted weaknesses with the current insurance compensation framework. This weakness has led to a delay in the processing of the claims of Setanta policyholders until the outcome of the court case between the Law Society and the Motor Insurers Bureau of Ireland, MIBI, is known. Prior to this case, the Insurance Compensation Fund, ICF, would have been expected to meet the third party claims up to a limit of 65% and a ceiling of €825,000 per claimant. However, in September 2015, the High Court ruled that the MIBI was liable for the third party claims in respect of Setanta Insurance, a ruling which was upheld by the Court of Appeal. The MIBI appealed this decision to the Supreme Court in October 2016 and judgment has been reserved. It is unclear when the judgment will be delivered. Officials from the Department of Finance made inquiries but have been unable to get confirmation as to when this will happen.

The Government understands the position of Fianna Fáil in regard to these issues and the reason the motion has been tabled. As the Minister of State acknowledged, the Government is in broad terms sympathetic to the issues raised in the motion. However, I propose to make brief reference to the Government's two key concerns with it. The first issue relates to requiring the Insurance Compensation Fund, ICF, to compensate Setanta policyholders in advance of the Supreme Court decision. This is a sensitive matter, as the High Court has found that the MIBI, rather than the ICF, is liable for these claims. Consequently, to compensate policyholders from the ICF would be in direct conflict with the decision of the courts and could be interpreted as undermining their authority.

It must be stressed that until the judgment of the Supreme Court is delivered, there will be a delay in processing outstanding third party motor insurance claims as the MIBI will not pay out on these claims unless it is confirmed by the Supreme Court that it is liable. I am sure my Opposition colleagues understand that the timeframe for the delivery of a court judgment is not something that can be interfered with.

The second issue relates to giving consideration to taking legal action against the Maltese and Gibraltar authorities for losses arising from inadequate regulation of Setanta Insurance and Enterprise Insurance. This is an understandable request given the impact the liquidation of these companies had on consumers in Ireland. In addition, it is of concern to the Government that the failure of such firms can have a direct effect on the price of insurance here. Notwithstanding this, the advice received on this issue is that there is insufficient likelihood of a successful action to justify the costs that would be incurred in taking this course of action.

Aside from these concerns, there are other elements of the motion on which I propose to comment. The Minister of State provided an update on the position regarding Setanta and Enterprise, with 1,658 claims outstanding in the case of the former company and 233 claims outstanding in the case of the latter company. While there has been little change in the outstanding claims figures for Setanta in the past year, progress can be accelerated once the liability issue has been settled by the Supreme Court. In the event that the Supreme Court finds the ICF is liable, the necessary resources will be made available, which will allow the liquidator to address without further delay all outstanding claims, subject to the limits in the legislation. Should the High Court decision be upheld, the industry will be responsible for meeting the outstanding third party claims.

While the litigation is ongoing, the Department of Finance is looking to the future by working to finalise the implementation of the motor insurance compensation framework. This will provide clarity on the respective roles of the insurance compensation framework and the Motor Insurers Bureau of Ireland in the event of the future collapse of motor insurance firms selling in Ireland. This work involves amending primary legislation and it is expected that a legislative proposal will be brought to government for approval before the end of the second quarter of 2017.

On the suggestion that the Central Bank undertake a consumer awareness campaign, this is a matter for the bank to consider. However as indicated by the Minister of State, the bank is conducting a thematic review and inspection of managing general agents appointed to carry out business on behalf of insurance undertakings from other member states operating in Ireland on a freedom of service basis. The Central Bank has also indicated that insurance undertakings and their appointed managing general agents must disclose in full all relevant material information in a way that best informs the consumer. This includes making it very clear as to who is underwriting an insurance policy. The Central Bank has also engaged with EIOPA, the European regulatory body for insurance, on the issues raised in the motion to ensure common standards are applied consistently across member states.

It is acknowledged that there is uncertainty for the insurance sector as a result of Brexit. The issue of whether UK based financial services firms will have access to the European Union's Single Market post-Brexit will form part of the negotiations once Article 50 is triggered. Prior to the conclusion of these negotiations, however, there is no way of knowing what will be the position.

As the Minister of State noted, if the position of passporting is not satisfactorily resolved, insurers which currently have branch operations or conduct freedom of business into the State will have the option of applying for an authorisation to conduct business in the State from the Central Bank. As regards what has been described as regulatory shopping, it has been made clear that the Government is taking this issue seriously and there has been communication on the matter with our European partners.

The motion refers to the European Union freedom of services rules, under which an insurance company can be prudentially regulated in any member state and avail of the passporting provisions to sell insurance business in Ireland. It is worth noting that this is an important aspect of Ireland's obligations as an EU member state. While there have been cases that have caused difficulty, for example, Setanta Insurance, Ireland has also positively benefitted from these EU rules, in particular through our large life insurance sector.

The Government has acknowledged the matters outlined in the Private Members' motion. There is no doubt that the liquidation process is very difficult and frustrating for persons who have been waiting for a long period to have a claim resolved. Deputy Michael McGrath spoke of persons who have been out of work for a number of years as a result of accidents and are faced with mounting expenses which cannot be dealt with until their claim is finalised. Unfortunately, there are matters at play which are outside the control of Government.

While I understand the call for claims to be paid out without delay, we are not in a position to pre-empt the decision of the Supreme Court. Once the Supreme Court decision clarifies the question of liability for third party Setanta Insurance claims, more progress can be made for claims to be paid either through the ICF or the MIBI. In addition, we have outlined the steps we are taking to address this issue. Legislation to address it is being progressed and it is proposed to bring the heads of a Bill to amend the current ICF legislation to implement the framework for motor insurance report by the end of the second quarter of this year. This legislation will ensure that there is clarity as to the respective roles of the ICF and the MIBI.

As indicated by the Minister of State, Deputy Pat Breen, the Government will abstain from the vote on this motion.

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