Dáil debates

Thursday, 12 July 2018

Insurance (Amendment) Bill 2018: Committee and Remaining Stages

 

7:35 pm

Photo of Michael D'ArcyMichael D'Arcy (Wexford, Fine Gael) | Oireachtas source

At that stage our expectation is that when the fund reaches €150 million, the levy will be reduced to 1% and take the fund to €200 million. The rate will revert to zero at that point because €200 million is the appropriate figure for the fund.

In the review of the framework for motor insurance in Ireland, it was recommended that the 35% payment from industry be made via the Motor Insurers' Bureau of Ireland, MIBI. The industry opposed this approach, as in its view it created an open-ended exposure, and the industry would never know what is its obligations. In other words, it could be 35% of a very small amount or a very large amount, depending on the size of the insurer going into liquidation. Industry argues this would create uncertainty and unpredictability, leading to higher capital charges. It also made the case that the proposal would make Ireland unattractive to new entrants. Instead, the industry proposed the establishment of an ex antefund into which it would make a contribution equivalent to 2% of gross motor insurance premiums. Such a fund, once built, would allow the industry to meet its obligations. It would also create certainty as to what an insurer's exposure would be in any year to an insolvency, and it was indicated that a similar level of certainty is found in the UK and French models.

The option for the State to advance the necessary funds to the ICF to cover the full 100% compensation for third party motor insurance and recover the money by the existing 2% levy over time was one of the options considered in the regulatory impact analysis carried out in preparing the general scheme of the Bill, which was rejected in favour of the current proposal. In adopting the approach I have outlined, the Minister is seeking to strike a balance between protecting third party claimants affected by an insolvency and minimising the exposure to the Exchequer, particularly in the event of an insolvency of a larger insurer. At the same time, the Minister is seeking to ensure that industry shares the burden of the increased coverage of the ICF while creating predictability and certainty for industry with respect to the exposure in the case of financial insolvency and maintaining attractiveness for new entrants.

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