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 Header Item Bank Debt Restructuring (Continued)
 Header Item Insurance Compensation Fund

Thursday, 3 October 2013

Dáil Éireann Debate
Vol. 815 No. 3

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(Speaker Continuing)

[Deputy Michael Noonan: Information on Michael Noonan Zoom on Michael Noonan] We hope it will continue trading and providing credit North and South of the Border because it fulfils a very important function. It has serious problems, as do the banks in this jurisdiction.

The policy of the Government is that the banks will revert to private ownership in due course. The Government has no ambition to hold State banks indefinitely. The question of when portions of, or all of, the banks will be restored to private ownership depends on a pragmatic decision. Obviously, Bank of Ireland seems to be somewhat stronger than the others and only 15% of the ordinary equity in it is held by the State. It is already in private control. We will see; the intention is that if a sale takes place of all or part of the equity in the future, it will be used to reduce the level of debt.

Insurance Compensation Fund

 9. Deputy Billy Kelleher Information on Billy Kelleher Zoom on Billy Kelleher asked the Minister for Finance Information on Michael Noonan Zoom on Michael Noonan the prospects for a reduction in the insurance compensation fund levy; and if he will make a statement on the matter.  [41458/13]

Deputy Michael Noonan: Information on Michael Noonan Zoom on Michael Noonan The Deputy should note that the insurance compensation fund, ICF, levy being applied to home, motor and commercial insurance operates under the Insurance Act 1964 and came into effect from 1 January 2012. The ICF levy should not be confused with the 3% stamp duty on non-life-insurance premiums introduced in 1982, which is often referred to as an insurance levy. This stamp duty forms a part of general stamp duty receipts and is paid into the Central Fund along with other tax receipts. The ICF operates under the Insurance Act 1964. Its purpose is to protect policy holders in the event of an insurer's becoming insolvent. It is an industry-financed fund. However, because the scheme is not pre-funded, the Act provides for the Exchequer to advance moneys on the recommendation of the Central Bank in circumstances in which insufficient funds have been generated by an industry levy to cover a large demand.

Under section 6 of the Insurance Act 1964, the responsibility for deciding whether the ICF has sufficient funds available to it to at any particular time is a matter for the Central Bank. Where, in the bank’s opinion, the state of the fund 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 the insurer in respect of policies issued in respect of risks in the State.

In 2010 joint administrators were appointed by the High Court at the request of the Central Bank because of concerns about the solvency position of Quinn Insurance Limited under the Insurance (No. 2) Act 1983. On the basis of its assessment of the funds in the ICF in late 2011 the Central Bank concluded that a levy should be applied to the industry with effect from 1 January 2012 under section 6 of the Insurance Act 1964. This assessment takes place on an annual basis and the next review is in progress.

I have contacted the Central Bank and it has informed me that, given what is reflected in the report on the ICF, which is published by the Department of Finance on an annual basis, for the year ending 31 December 2012, and without any intention to prejudice pending and future annual reviews, it is not anticipated there will be a change in the levy of 2% in the short to medium term.

Deputy Michael McGrath: Information on Michael McGrath Zoom on Michael McGrath As the Minister indicated, every person with a home, motor or commercial insurance policy pays the 2% levy to make up for the losses incurred at Quinn Insurance, which at one stage the joint administrators stated in a worst-case scenario could be up to €1.6 billion. If the final figure comes anywhere close to this the Central Bank reviews will conclude for quite a number of years that the levy will have to be retained at the same rate or perhaps a greater one. I know it is difficult to estimate the final costs associated with Quinn Insurance, given that there is a significant tail effect when it comes to dealing with claims in the insurance business, but it is important that we get as much clarity as possible on what the bill will be. Does the Minister wish to comment on the case I understand is being taken by the joint administrators against the former auditors of Quinn Insurance? Depending on the outcome of the case, it could have an impact on the future levy, which might decrease for policyholders.

Deputy Mick Wallace: Information on Mick Wallace Zoom on Mick Wallace Will the Minister clarify that a sugar tax will apply only to products to which sugar is added? In wine it is produced naturally, and the Minister should seriously examine-----

An Leas-Cheann Comhairle: Information on Michael Kitt Zoom on Michael Kitt This is very interesting, Deputy.

Deputy Mick Wallace: Information on Mick Wallace Zoom on Mick Wallace -----a sugar tax because of the problems it causes.

An Leas-Cheann Comhairle: Information on Michael Kitt Zoom on Michael Kitt It is too late on a Thursday to have an argument with Deputy Wallace.

Deputy Pearse Doherty: Information on Pearse Doherty Zoom on Pearse Doherty Without going into the legal case, if there was an outcome that resulted in the scrapping of the legal case and the auditors had to take on the liability of the losses incurred, what would be the intention of the Government with regard to the money generated from the levy heretofore, which would not then be required?

Deputy Michael Noonan: Information on Michael Noonan Zoom on Michael Noonan The moneys involved are quite large. To date, a total of €1.118 billion has been drawn down from the ICF by Quinn Insurance administrators. In 2012 €45.5 million was raised by the levy, and a total of €49 million has been raised in the first nine months of 2013. This gives a total shortfall of €1.0235 billion, which is an enormous amount of money. This was against much lower estimates at the beginning of the process.

Written Answers follow Adjournment.

  The Dáil adjourned at 5.45 p.m. until 2 p.m. on Tuesday, 8 October 2013.

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