Written answers

Tuesday, 9 June 2015

Department of Finance

Motor Insurance Regulation

Photo of Paul ConnaughtonPaul Connaughton (Galway East, Fine Gael)
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333. To ask the Minister for Finance given the significant increases in the cost of motor insurance in recent months and the pressure this is placing on family finances, especially in areas outside the larger cities where public transport is not available, if he will consider reducing the amount of the Government levy on motor insurance; and if he will make a statement on the matter. [22130/15]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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In my role as Minister for Finance I have responsibility for the development of the legal framework governing financial regulation.  Neither I nor the Central Bank of Ireland, as regulator, interfere in the pricing of insurance products. The provision of insurance cover and the price at which it is offered is a commercial matter for insurance companies and is based on an assessment of the risks they are accepting and adequate provisioning to meet these risks. 

While competition in the market place acts as an effective constraint on insurance costs, insurance companies must be conscious of their prudential obligations and are required by the Central Bank of Ireland to meet their capital requirements on an ongoing basis in order to ensure the sustainability of their business. In circumstances where they are exposed to a high level of claims, it is possible that their capital position can be affected with a consequential effect on prices. In this regard, it should be noted that the new prudential regime for insurers across the EU known as Solvency II, which will come into force from the start of 2016, will place a greater emphasis than the existing regime on the need to price risk appropriately, and will in turn require insurance companies to be more conscious of their pricing policy.

Government initiatives such as the establishment of the Personal Injuries Assessment Board and legislation to improve road safety, which has reduced accidents significantly, continue to make a major contribution to keeping insurance costs at a reasonable level.

The Insurance Compensation Fund (ICF) provides for payments to meet the liabilities of insolvent insurers in certain cases where it is unlikely that claims can be met elsewhere, thus protecting policyholders who would otherwise suffer a loss.  It is funded through a  levy which is applied to home, motor and commercial insurance  This levy, which operates under the Insurance Act 1964, came into effect from 1 January 2012 and continues to be required give the current liability on the Fund.  Under Section 6 of the Insurance Act 1964 the responsibility for deciding whether the ICF has sufficient funds available to it at any particular time is a matter for the Central Bank of Ireland. Where, in the opinion of the Central Bank, the state of the ICF 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 that insurer in respect of policies issued in respect of risks in the State.  This determination is based on a review carried out by the Central Bank annually.  The last such review was carried out in October 2014 following which the Central Bank made a determination that the levy should remain at 2%.

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