Neale Richmond (Dublin Rathdown, Fine Gael) | Oireachtas source

I welcome the opportunity to address the Seanad on the Bill. As Minister of State with special responsibility for insurance, I am bringing forward this Bill to transpose Articles 10a and 25a of the motor insurance directive, as inserted by the sixth motor insurance directive. The Bill has required significant technical input and involvement from a range of stakeholders. The Department of Finance has been intensively working on it for some time. Underscoring the domestic complexity of some of the issues the directive raises, it has consulted a wide range of relevant stakeholders through a working group on insolvency compensation comprising the Central Bank of Ireland, Motor Insurers' Bureau of Ireland, Departments of Transport and Enterprise, Trade and Employment, Revenue Commissioners, State Claims Agency and Courts Service. The Bill has undergone extensive engagement throughout the legislative process to date, particularly on Committee Stage in the Dáil, where we had a full and thorough discussion on its provisions. I express my thanks to the Deputies and various stakeholders for their contributions to date. I know Senators will also want to contribute to the debate on this important Bill and I look forward to hearing their views this afternoon.

The purpose of the directive is to protect and allow for the timely compensation of Irish motor insurance policyholders and injured parties in the event of an insurer becoming insolvent. This is an important policy development in improving consumer protection in the event of a motor insurance failure. As Senators will be aware, through the existing Insurance Compensation Fund framework, Ireland has a comprehensive compensation architecture to compensate policyholders and injured parties in the event of an insurance failure. The existing fund is primarily designed to facilitate payments to policyholders on a host basis, that is, relating to insurance risks in the State, where a non-life insurer goes into liquidation. The fund has previously been used to address failures of firms we are all well aware of such as Quinn and Setanta. However, Articles 10a and 25a of the motor insurance directive build upon our existing framework by moving the European Union towards a harmonised compensation framework for motor insurance by compelling member states to each establish a national compensation body. This is further underpinned by a centralised cross-border function to compensate policyholders and injured parties in a timely manner.

In summary, this Bill represents a positive development for Irish consumers, making it easier for claimants to seek compensation following a motor insurance failure either by firms regulated here or in other member states. Injured parties will be entitled to efficient compensation from the newly-established motor compensation body. By way of background to the Bill, the European Union consolidated and codified four motor insurance directives into one single motor insurance directive in 2009, setting out minimum insurance requirements for all member states to follow.This in turn facilitates travel by EU citizens and helps boost tourism, business and other cross-border activity in the Union. In 2019, the European Parliament and Council agreed on a revised version of this motor insurance directive, referred to as the sixth motor insurance directive. In this context, the Department of Finance is specifically responsible for transposing Articles 10a and 25a of this directive as these relate to situations of motor insurance insolvency. These provisions essentially provide a pan-European framework for motor insurance insolvency compensation, which in turn naturally has implications for countries such as Ireland where the existing insurance compensation fund framework exists.

I will outline some of the key elements of the directive which include the establishment of motor compensation bodies in each member state; a shift from a host to a home-based system, meaning that, crucially, the cost of such claims will be met by the home country of the insurer and, thus, Irish customers will not foot the bill for insolvencies outside Ireland; and the imposition of a hard deadline for the assessment and payment of compensation of claims of policyholders and injured parties relating to an insolvent motor insurer.

Until now, there have been no harmonised EU rules to ensure that injured parties are swiftly compensated in such situations involving motor insurance firm insolvency. Again, here in Ireland we are aware of circumstances where Irish motorists have been impacted by failures of firms based in other jurisdictions. This Bill will help to address such situations.

Turning to the detail, I now propose to give an overview of the Bill and each of its five Parts. Part 1 contains standard legislative provisions that cover the Short Title of the Bill and its commencement, as well as some relevant definitions and some standard provisions regarding regulations and orders made pursuant to the Bill, as well as expenses incurred by the Minister for Finance in the administration of the Act.

In accordance with the directive, Part 2 of the Bill will establish in legislation a motor compensation body with responsibility for dealing with claims arising from motor vehicle accidents where the relevant insurance undertaking is insolvent. Accordingly, Part 2 formally appoints the Motor Insurers’ Bureau of Ireland to this role, which follows on from a letter of nomination that was sent to the European Commission in June 2023. This section sets out how the compensation body will operate, how it will engage and co-operate with interested parties and other stakeholders and how the body will have sufficient funds for the purposes of providing compensation to claimants.

Following its authorisation as the compensation body in Ireland, once this Bill is enacted the Motor Insurers’ Bureau of Ireland will be empowered to manage claims directly and make payments in a timely manner. In order to achieve this, the Bill will provide the Motor Insurers’ Bureau of Ireland with the full range of functionality required to manage claims, administer a fund to make payments and engage with EU bodies.

In considering this, the Department of Finance carried out a detailed assessment with the various stakeholders within the insurance compensation fund framework and it was ultimately determined that the well-established Motor Insurers’ Bureau of Ireland is the most suitable agency to be appointed to the role of national compensation body in Ireland. The role also complements the Motor Insurers’ Bureau of Ireland’s existing role of compensating victims of road traffic accidents caused by uninsured and unidentified vehicles, one which it has fulfilled in this jurisdiction since 1955. In addition, the State has considerable experience of working collaboratively with the Motor Insurers’ Bureau of Ireland in the context of the Motor Insurance Insolvency Compensation Fund. This is a motor insurance compensation fund the bureau has administered since the failure of Setanta Insurance. Accordingly, we see the nomination of the Motor Insurers’ Bureau of Ireland as a positive evolution of its role in protecting policyholders.

Turning to how this would operate in a cross-border context, where the relevant claim relates to an insurance undertaking that is authorised in another member state, the Irish compensation body has the right to be reimbursed for the relevant compensation by its counterpart body in the “home” member state of the insolvent firm. On Committee Stage, a pertinent question was raised regarding the specific circumstance where an Irish resident is a holidaymaker in another EU member state such as Spain and the Spanish insurance company goes insolvent. This provides a concrete example of how this Bill and the directive will have a positive effect for policyholders and claimants. In this circumstance, the Irish resident can present their claim to the Motor Insurers’ Bureau of Ireland. The claim will be assessed locally by the Motor Insurers’ Bureau of Ireland and, where compensation is due, it will pay the claim to the Irish resident before seeking reimbursement of the claim amount from the Spanish compensation body - assuming the insurer is authorised in Spain. Equally, if it is authorised in another member state, Germany, for example, the Motor Insurer’s Bureau of Ireland can seek reimbursement from the German compensation body and so on across the 27 EU member states. This change under the Bill and directive ensures that the ultimate financial responsibility is borne by the insurance sector of the home member states of the insurer, while allowing for an efficient and prompt payment to injured parties.

Part 2 also sets out in detail how a claim can be presented to and processed by the compensation body. The compensation body will be empowered under Part 2 to collect the relevant information from both policyholders and injured parties and then utilise this material while co-operating with other insurance compensation fund stakeholders to ensure the assessment of claims and payment of compensation occurs in an efficient and timely manner.

In summary, section 9, together with the amendments to the 1964 Act under Part 5, facilitate a comprehensive reform and streamlining of the existing legal framework relating to the insurance compensation fund into a one-stop shop for motor insurance insolvency claims. As such, claimants will go directly to the Motor Insurers’ Bureau of Ireland which will handle these claims rather than dealing with different liquidators and will also ensure that customers receive their compensation within three months of the offer. In order to achieve this, the Bill now enables the compensation body to assess and pay compensation to injured parties without recourse to High Court approval, as is currently the position under the 1964 Insurance Act.

Significantly, the Bill preserves the existing broad spectrum of compensation that is available domestically under the 1964 Act for claims relating to motor vehicle liability by allowing the compensation body to also handle, for example, claims on comprehensive motor policies, which predominate the Irish market, rather than the minimum bar of third party cover, as is the requirement under the directive. As such, we have tailored our approach under this Bill to meet the specificities of the Irish motor insurance market. I hope and believe we all welcome this approach.

Part 3 sets out the comprehensive governance and oversight processes that will be put in place relating to the processing and auditing of claim payments under the Act. This in part reflects the reform proposed under this Bill where the role of the High Court in approving payments has been changed to the compensation body now fulfilling this in a timelier and more effective manner.

A thorough discussion of the provisions of Part 3 took place on Dáil Committee Stage. During the course of the debate, I offered to provide further clarity on the transparency, governance and oversight provisions within the Bill. In that context, the Department of Finance set out additional detail in relation to the key issues of governance, oversight and transparency under the Bill in a letter to the committee in advance of Report Stage in the Dáil.

I will set out a summary of the matters addressed in the letter for the benefit of the Senators present. In summary, the letter provides a detailed overview of the claims assessment and payment process; the additional oversight and controls included in the Bill; and the reporting and transparency provisions under the Bill.

First, with respect to the processing of claims and the payment of compensation by the compensation body, the function of claims assessment will be performed by well-established claims handling offices, which are authorised and regulated by the Central Bank of Ireland. The assessment of each claim by the relevant handling office will be overseen and monitored by the Motor Insurers’ Bureau of Ireland in accordance-----