Select Committee on Finance, Public Expenditure and Reform, and Taoiseach debate -
Wednesday, 3 Jul 2024

Apologies have been received from the Cathaoirleach, Deputy John McGuinness. I welcome members and viewers who may be watching proceedings on Oireachtas TV to the public session of the Select Committee on Finance, Public Expenditure and Reform and Taoiseach today. There are two sessions in today's meeting, the first of which will consider with the Motor Insurance Insolvency Compensation Bill 2024, and the second of which will consider the Double Taxation Relief (Taxes on Income) (Jersey) Order 2024 and the Double Taxation Relief (Taxes on Income) (Sultanate of Oman) Order 2024. On behalf of the select committee, I welcome the Minister of State at the Department of Finance, Deputy Neale Richmond, to the committee. They are all very welcome.

As normal, I will read the note on privilege. Members are reminded of the long-standing parliamentary practice that they should not comment on, criticise or make charges a person outside of the Houses of the Oireachtas either by name or in such a way as to make him or her identifiable. I remind members who are attending remotely of the constitutional requirements that members must be physically present within the confines of the place in which Parliament has chosen to sit, namely, Leinster House, to participate in a meeting. Members will not be in order if they are outside of the physical committee room or the Houses of the Oireachtas.

For the smooth running of the committee, any member acting in substitution of a member of the committee should formally notify the clerk now if they are ready to do so. Divisions will be taken as they arise and members must attend in person in the committee room for the divisions although they can attend a meeting remotely. Members attending this meeting in accordance with Standing Order 106(3), should be aware that, pursuant to the Standing Order, he or she may move his or amendment but cannot participate in voting on that amendment.

I move amendment No. 1:

In page 8, to delete lines 1 to 3 and substitute the following:

“ “voluntary winding-up proceedings” means collective proceedings which are solvent as construed in accordance with the definition of “winding-up proceedings” in Regulation 270 of the Regulations of 2015;”.

If it pleases and is agreeable to the committee, I would like to make a more general opening statement in which I will refer to the amendments as they are laid out. They are very short remarks to give some context. While a number of members were present in the Dáil on Second Stage, not all were, and it is important for the record.

I welcome the opportunity to appear before the committee to bring the Motor Insurance Insolvency Compensation Bill 2024 through the Third Stage of the legislative process. I also look forward to constructively engaging with the committee in respect of any issues that were raised before today and on which we can provide additional clarity, following on from the Second Stage debate. As the Minister of State with special responsibility for insurance, I am tabling this Bill to transpose Articles 10a and 25a of the motor insurance Directive, as inserted by the sixth motor insurance Directive. These provisions provide for a pan-EU motor insurance framework and require all member states to have a compensation regime for motor insurance policyholders of insolvent insurance companies.

As I indicated on Second Stage, this Bill represents an important enhancement of the protection of motor insurance policyholders as it will further protect customers and injured parties when a motor insurer becomes insolvent. Importantly, it streamlines the compensation process by authorising a compensation body and legislating for prescribed timelines for the payment of compensation.

The Bill builds upon the existing complex insurance compensation framework currently in place within the State and, furthermore, complements the Government’s real progress and firm commitment in implementing insurance reform.

Following the Second Stage debate, the Department engaged in further technical examination of the Bill and consultation with stakeholders, including the Central Bank of Ireland. On foot of this, I wish to propose two targeted technical amendments to the Bill as published and as before the committee. The proposed amendments remove any doubt, first, over the policy intent of certain legislative provisions relating to voluntary winding-up proceedings and, second, over the rights the compensation body has with regard to any remaining assets of an insolvent insurer.

Before we proceed to consider the remaining sections, I thank the committee for its support and for facilitating timely consideration of the provisions within the Bill. I particularly welcome the decision by the committee, as already outlined in the Dáil, to waive pre-legislative scrutiny. We have a set of very straightforward amendments across a couple of technical sections. I am hopeful of the committee’s continuing support. I am more than happy to engage on specific sections and questions throughout the course of this session.

This is a technical amendment which deals with the definition of voluntary winding-up proceedings. I have no issue with that. I welcome the legislation, as I did on Second Stage, although I will tease through some of the issues. In the main, as the Minister of State said, this is a directive we are required to transpose and we have already missed the deadline for its transposition. For many people who are concerned about motor insurance costs, it is not going to change the dial with regard to their premiums. We are familiar with the Central Bank release yesterday which showed that premiums last year rose at a marginal rate, although industry officials had told this committee we should see premiums go down by about 20% as a result of the reforms. Premiums have dropped since 2017, which is to be welcomed, but we can see from the profits the industry is making that, despite the reforms passed by this House, by this committee and by members of the Dáil and Seanad, the benefits have not been fully passed on to the consumer.

There is legislation before this committee but, five weeks on, we still do not have a money message, which is something the Government could waive if it so wished. That legislation would require insurance companies to state very clearly, through audited accounts, whether the benefits of the reforms that have been passed by these Houses have been passed on in full, euro for euro, pound for pound, to the consumer instead of bumping up their profits. That is what they committed to at this committee when they pleaded with us to bring in some of the reforms that have since been enacted.

We are dealing with motor insurance and, as I said, we have seen a slight increase in premiums in the past year when we had expected them to go down. We also know that one of the main drivers of profits for the insurance industry is the investment arm of the business. With the interest rate environment where it is, we should see premiums further reduce, given that one of the triggers for premium increases in the first instance was that insurance rates and the yields from Government bonds dropped substantially. However, given current ECB rates and the monetary position, the returns are now far greater.

What is very worrying and is an issue I have raised with the Government is that, despite this legislation, according to the CSO, motor insurance premiums have been increasing every single month for the past ten months. I am sure the Minister of State is also hearing the anecdotal evidence. We are going to have to wait for another year until we see the Central Bank data but we are hearing enough in our constituencies and from the CSO to tell us they are going up month by month. There is a serious problem with motor insurance premiums. The industry will give us reasons with regard to the cost of claims, the frequency of claims and so on. However, the reality is we brought in reforms that have reduced costs for the industry. When members of the insurance industry sat where the Minister of State is sitting today and the members of this committee asked them what type of profits they were looking for in the context of making sure the benefits would be passed on to consumers, they said that what they were chasing was about a 4% return. The returns are currently about 12%. The Central Bank two years ago called them “bumper” or “bonanza” profits for the industry. What is happening is off the Richter scale and it is ordinary individuals who are suffering as a result.

I say that in the context of the Government talking about its insurance reform package, and that is only for motor insurance. I run a festival in Donegal and the insurance premium is approximately €6,000. It is a major festival with an overall cost of about €300,000. There are festivals in my county that are not going ahead because of insurance costs. There are small local community festivals and walking tours that are not going ahead, and clubs cannot get insurance because premiums have gone up every single year for public liability and employer’s liability.

While I am digressing a little, the Minister of State talked about the Government reform package. I want to make clear we are seeing a different trend with motor insurance. There is legislation but I am not clear if the Government is going to support it when it comes before the committee next Wednesday. The second point is we are not seeing any benefit with regard to public liability and employer’s liability, and that is witnessed by events being cancelled or closed down.

I want to add a general point. I welcome the Bill, which is another step in the right direction. We all agree we want premiums to come down and we also want access to insurance for businesses. That is part of the work that has been done in recent years by the Minister of State and the team in the Department, including successive Ministers before him. There has been a relentless focus on trying to reform the insurance market and many changes have been made by this committee and other committees in the past couple of years. It will all play its part. Naturally, we expect the insurance companies to play their part and to reduce the premiums in line with the commitments they gave. I know they will argue back with regard to inflation. We can certainly see that the big jumps that would have been feared probably are not happening, but we want it to go the other way too, and I know the Minister of State is determined to achieve that. It is important we tick all these boxes.

I am glad that focus is still there and the Bill we are dealing with today, while short, is significant. When it comes to motor insurance, great progress has been made in recent years but we want to build on that and put it across this space. I am glad the Bill is before us today. I know it is short and deals with amendments we all support but it keeps a focus on the work, which I know the Minister of State is committed to. I thank him for that.

Several points were raised. I thank both Deputies for their consistent engagement on this issue. With regard to the money message, we simply have not received that from the Ceann Comhairle's office. The Department of Finance will respond to that if and when it is received, and we stand by that. I know we will be engaging on this matter more specifically on oral questions tomorrow morning.

We will engage fully with the Deputy tomorrow morning on that specific issue and we are willing to continue to do so.

With regard to the delay in transposition, it should be recognised, and it was stated on Second Stage by a Deputy from a different party, that this piece of work we are trying to do goes beyond the requirements of the directive. We were required to use primary legislation, as opposed to a statutory instrument, to achieve that. The Department of Finance remains in constant contact with the European Commission on this, and we have engaged with it literally in the past week. I have no doubt that, with the co-operation and support of the committee, we will be able to get this passed as quickly as possible. It is hoped it will move to Report and Final Stages in the Dáil next week, depending on the schedule - we all know the Dáil schedule is very busy - and then, in due course, it will undergo further consideration in the Seanad.

Some more general points were raised. I will give the context in regard to motor premiums. We have seen premiums decrease by 40% since 2016, so they have not come down by a little bit but by 40%. The results published by the Central Bank earlier this week saw a marginal increase of 0.5% which, while disappointing, on average equates to €7 per premium in the calendar year.

On the point made by Deputy English, it is important we take into account all the factors in this regard. I am not going to say I am happy about this but we have to look at general inflation, inflation when it comes to parts, the lack of supply, and the increased level of footfall in the street in terms of cars and accidents on the roads, all of which play a factor.

The Government reform agenda is wide-ranging. We have completed about 95% of it. All of the actions to be taken by the Department of Finance have been taken. There are one or two small actions to be taken by the Department of Justice. We will continue to engage with all actors. I have met the CEOs of every one of the large insurers in the State since being appointed to this portfolio and I intend to meet them again in the coming weeks. We have met Insurance Ireland. Last week, we had our third engagement with Brokers Ireland and our second official engagement for a round-table meeting with insurance brokers to talk about the availability of premiums not just in the motor sector but across insurance into general lines.

Crucially, we are seeing decreases in premiums in many areas where we had seen consistent increases. One key issue is availability. Deputy Doherty eloquently laid out his directorship of a very famous musical festival in Donegal and the issues it has faced. I can give the same anecdotal experience. My wife is on the record as being a Montessori teacher. We sought to set up a Montessori school a number of years ago and there was simply no insurance. The only thing preventing the opening of an additional much-needed childcare facility in my part of the world was the lack of availability of insurance. That was a post-Brexit legacy. There are now at least three providers providing the relevant insurance that had not previously done so. Through engagement with brokers we are seeing an increased level of availability of cover.

A couple of weeks ago I welcomed a new provider to the market, OUTsurance, a South African company, which is the first large-scale insurance company to come into the Irish market in ten years. Tomorrow, as part of the insurance competition office round-table meetings, I will meet Fastnet, another new bespoke provider which is coming into the market and expanding its offering. I meet insurance companies every day which are expanding their offerings and I meet brokers who are able to offer their clients a wider line of insurance.

We engage continually with issues relating to premiums where they affect motor insurance. Deputy Doherty launched an online survey earlier this week. I want to genuinely and sincerely engage with him on that. I look forward to getting that data, putting aside the data we have from the Central Bank and the monthly CSO figures, and seeing where we can work co-operatively to address those submissions. Insurance crosses every single one of our desks and people with insurance issues come into our clinics on a weekly basis.

When I became involved in politics in 2002, one of the biggest issues was the cost of insurance for young drivers. Unfortunately, we are going back to punts for that era. It was the biggest issue 20 years ago and remains a major issue. However, things have changed drastically in the past seven years. Our role and my role, because the heavy lifting on this was not done by me, but rather my predecessors in this role, and that of Department officials, in co-operation with all Members of the Houses and stakeholders, is to continue to make sure we make this a top priority issue and get reform in every aspect of insurance.

This important legislation will bring about not just peace of mind but real security to drivers on our roads in the worrying event they are involved in an accident with a driver who is insured by an insolvent company. This is something that is very pertinent to our jurisdiction. It has previously had an impact. The Bill will go a long way to address this. I have no doubt that the swift passage of the legislation will play an admittedly small but important part in an overall wider reform agenda.

I am happy to engage with the Minister of State on the results of the survey when it is complete. There has been a large response so far. Hundreds of people have presented their data. I have not had a chance to look at the trends.

Everybody in this committee and the Dáil, when we passed personal injuries guidelines to allow for legislative change to take place and facilitate what happens in the Judiciary, intended to make sure premiums were reduced. There is a piece of legislation there. While I know it is the Ceann Comhairle who makes the decision, I would be interested in knowing whether the Department has engaged with the Ceann Comhairle to express an opinion that a money message is required. It is up to the Minister of State or Department to waive a money message. There are ways to do that.

The motor insurance industry comprises the exact same companies that operate in Britain. In Britain, they have to carry out an independent audit to show that the changes introduced in Britain in respect of whiplash are passed on, pound for pound, to consumers. The Minister of State said that insurance costs have come down but not to the level we were promised. He mentioned that they have come down by 46%. Was that the figure he presented?

Come on. The Minister of State has responsibility for insurance. I have gone through this with every Minister. I mentioned the Central Statistics Office earlier in terms of the trends, but I qualified what I said. I said we have anecdotal evidence and all of the rest. The Central Statistics Office does an excellent job in terms of what it has to do and does so independently. The way it carries out price comparisons in terms of insurance is a sample of products and premiums. It asks insurance companies to give them the price of premiums and then calculates whether they are going up or down. That has been great and has guided us throughout the years.

The Central Bank database includes every single written insurance premium in the State. It is not half a dozen, a dozen or a basket of examples that insurance companies advise someone when they phone them for a quote. The Central Bank has data on millions of insurance policies. That is what the Minister of State has in front of him. The figures are clear. There has been no 46% reduction since 2016. Indeed, in 2016 the average price was €686 and the current average price is €561, a decrease of €120, or less than 20%. The high point was 2017, an overall peak, and costs have decreased by 24% since. In 2019, when insurance premiums were above €600, the insurance industry told this committee that if premiums had not come down by 20% following the introduction of reforms, we needed to ask serious questions. Those reductions have not been passed on. I want to make that point.

This is not about knocking the CSO, but it cannot do what we have tasked the Central Bank with doing. The bank has information on every single written premium. There is no point in having all of the data available to us and then using what the CSO uses, namely, a basket of indicators. The CSO is the only thing we can rely on in terms of trends and what is happening here and now because it gives us a monthly indicator. The Central Bank has looked at every single written premium and averaged them to come up with a price. That is the accurate data. There has been a reduction of 24%, which is substantial, but the industry told us in 2019 that if we introduced more reforms, there should be further reductions. There should be, but we are not seeing them.

It goes back to my point that there is legislation which is about holding insurance companies to account. This has to be done in the North and Britain. The exact same companies operate here. It may not fix the whole problem. The Government stalled the legislation and proposed a motion that it could not pass for a year. We were told we should see whether the reforms kick in. In terms of the Central Bank database, in 2020, before the new claims for the Judicial Council kicked in, the average premium was €603. In 2023, the average was €561, which is a drop of only €40, or 8%. The problem is that the trend is going in the wrong direction this year. The question we should be asking and that I will be asking when I sit down with the insurance industry is where the 20% reduction is it promised us and why profits are going up and premiums are not reducing to the level the industry told the committee we should expect.

The Minister of State is very welcome to the committee. This is interesting legislation. The primary purpose of it is to transpose the amending directive in respect of insurance companies that become insolvent.

We have a history in Ireland of insurance companies going insolvent, regrettably. Presumably, the purpose here is that if a company goes insolvent, individuals insured by that insurance company will be entitled to make a claim to the compensation body, the MIBI, in respect of the insurance they are due, and that will be paid out of the fund. Is that correct?

Regarding the contributions to the fund, there is money in the insurance fund at present. Am I correct in saying that the Central Bank will issue a direction under section 6 that this new fund will be increased as a result of contributions directed by the Central Bank of moneys to come from the fund that exists at present? How will that operate?

I am looking at section 8 of the Bill, "Publication of winding-up of insurer". If an application is made to wind-up an insurance company, does the objective of this legislation kick in at that stage? Do people bring the applications for their insurance claims to the compensation body at the time the winding-up petition is presented or do they have to wait for a final determination from the High Court as to whether the insurance company is insolvent?

So there has to be an outcome. Sometimes people can bring liquidation applications which ultimately do not succeed. A creditor can and they may not succeed. It will ultimately depend on an order from the court that it is wound up.

Is there an extraterritorial effect? It is imposing an EU directive. If I am a holidaymaker in Spain and the insurance company I am insured with in Spain goes insolvent, what protection do I have? Do I claim off the Irish compensation fund even though it is a Spanish insurer that has gone insolvent? It may be a complex question, but it is an issue that can arise for tourists and holidaymakers.

If I may come back to some of the points that Deputy Doherty raised on the statistics, I take his point. I used the CSO last week on Second Stage with regard to the points the Deputy made directly. However, the NCID statistics are the most pertinent and they show a clear reduction. I completely agree with the Deputy. With regard to the questions he said he would put to the insurance companies, I have and will continue to do put those. As I mentioned, I met the nine major insurance companies, as well as Brokers Ireland, Insurance Ireland and the Law Society, quite crucially, in recent weeks and we will meet them again. I have written to have follow-up meetings going forward on foot of this data and other data related to the points the Deputy made.

Regarding the Deputy’s legislation, we will await the money message from the Ceann Comhairle. There are a number of concerns that would have been laid out in the initial debate in response to the Private Members’ Bill when it was submitted in 2021 that the Government has and continues to have. Much of that is focused on the duplication of the work that is already being done in the NCID. It is also important to look at Great Britain, which the Deputy cited. The average costs of premiums in Great Britain have been going up considerably over the past number of years regardless. I appreciate there is absolutely a need for as clear transparency as possible. We fundamentally believe, as the Deputy does, that the NCID data provided is the best total example. I will not sit here and provide the sort of responses or excuses the Deputy well knows and would expect from insurance companies, but it is a matter of fact that inflation has gone up, the volume of road traffic incidents has gone up and the cost of parts is simply more expensive. It is not just the cost but also accessing parts is more difficult. That has affected the wider economy over the past couple of years with lingering issues, be it related to Covid, the war in Ukraine and various other issues related to the sheer logistics that go into this, the increased reliance on rental cars and the shortage therein. All these things factor in. These are the points that have been made to me.

I fundamentally underline that we are clear in our priority. The amount of work that has been done by the Government on reform has been quite substantial. I appreciate the Deputy’s and his party’s support in parts for that reform agenda and his continuing focus on it. It is important. We as legislators have the responsibility to consistently provide that focus. The Government knows much more work has to be done and much more heavy lifting has to be done either by the insurers themselves and the legal profession, which is a point worth making when we dig into the data that was provided earlier this week by the Central Bank. As I said, we will engage further with the Deputy specifically on that legislation tomorrow in parliamentary questions and in the context of this meeting.

I am grateful for the questions raised by all Deputies related to this important legislation, which is a small part of a wider reform agenda but is in itself extremely important. It is hoped it will have an impact on a number of motorists in many regards.

I support section 5. A question was asked about MIBI earlier and it was said that it only pays out in respect of uninsured drivers, but it will also pay out in insolvent cases. I just wanted to make that clear because I do not think that information was correct on the record. The difference here is because it administers the insurance compensation or the motor insurance insolvency compensation fund through the previous legislative changes we made in the wake of the Setanta Insurance scandal, just to bear that in mind and for the Deputies’ attention.

Regarding the compensation body, it is currently doing both. That was the point. This is a natural fit and I support this. MIBI is a State organisation. MIBI is funded through levies placed on the insurance industry. We will come to that later because there is another section that allows us to look at partial funds and all the rest. The Central Bank is also there in terms of payment to MIBI.

This legislation allows basically that all residents here will be able to apply to MIBI in the case of an insolvent firm. If, for example, the firm the claim was made against is a French firm, MIBI will seek reimbursement from the French firm or Italian firm or whomever.

It cuts out the bureaucracy, which is brilliant for the individual who has been involved in an accident or a claim. That is fine. The principle here is that, at the end of the day, when it is all sorted out between the firms within the compensation bodies, it is where the insurance entity is located that it is decided who will ultimately foot the bill. Were we to have a very high concentration or large proportion of those entities in Ireland, would there be any concern regarding potential exposure? I know that if we were to have a high concentration, I assume we would also have a higher concentration in terms of the levies. Therefore, one may equalise the other. Is there any consideration of that potential exposure? Obviously, the State has been very successful in certain areas and the concentration regarding different types of activities and firms. For example, say 50% of insurance firms were headquartered here. Would there be any concern about exposure because it would mean, across Europe, in the event of liquidation or something like that, the claims would all arise from Ireland?

In short, there is no concern. I will go into a little detail which might provide the information and the differences regarding the levy and the host-based and home based-systems, because we believe this change should allow sufficient flexibility for the Minister to introduce regulations requiring insurers writing risks outside the State to contribute to those financing arrangements, whether on an ex post or ex ante basis.

Part 5, as the Deputy rightly identified, authorises the Minister for Finance to introduce regulations to establish a funding mechanism to require such Irish-authorised insurers to contribute toward the cost of insolvency compensation in respect of their cross-border business. Such regulations also may empower the Central Bank to establish a sub-fund of the insurance compensation fund, into which contributions collected under these regulations will be paid. Any such financial contributions will relate to third-party motor liability insurance carried on by Irish authorised insurers and other member states. As such, it should not impact on Irish motorists in terms of any levies or concerns of costs. Again, as I mentioned, we saw from the data this week that in excess of 90% of Irish motoring insurance is on a comprehensive basis as opposed to this directive requiring it under third party, which obviously leads to a much greater difference in costs. It is also planned that the regulations, as outlined, will be developed in due course following the necessary consultation with the relevant stakeholders and full consideration of the issues. I hope this outlines that there is not a concern and that there is plenty there to look after it.

On the payments to the funds, there is provision in this legislation in terms of sub-funds, the Minister's right to specify the rate and so on. Will the Minister of State outline whether any changes are coming regarding further levies or changes to levies as a result of this legislation or indeed anything on his agenda as a result of it?

It is covered, so there will be no change. To clarify, the existing levies are 2% at the minute in terms of the motor insurance compensation fund. We also have the Quinn Direct Insurance levy, which will run out after a period of time, when we have paid back €800 million or something like that. It is a crazy amount of money. If the Minister of State has the data, how many more years will the Quinn Direct levy last for? Regarding the other levy, it is at 2% until it reaches €150 million, it then goes down to 1% until it reaches €200 million and then stops. That is my understanding.

If I may clarify, there are two levies which Deputy Doherty referred to. The first is insurance compensation fund levy, which is most typically understood as repaying the costs associated with Quinn Insurance. On the run-rate in terms of the levy that comes in each year, we expect it to be one or two years to run on at that point. The other levy, the motor insurance compensation fund has to top out at about €200 million, it is an ex ante fund. Again, we expect it to be another two years, potentially.

That is fine and crystal clear. It would be a benefit as it is a 3% additional levy on the top of gross written premium. On this policy in the legislation before us, is that the trajectory the Department expects or does it expect that this legislation requires us to continue those levies? As I said, the Quinn Direct levy is supposed to be gone in two years. The other levy, which we will call the Setanta levy, is supposed to be gone in a year. Will this legislation change that as a result of the needs and requirements?

I wish to clarify as there are a lot of various levies swirling around. As the Minister of State outlined, section 5 provides the Minister for Finance with the powers to impose an ex ante levy on insurers who export their policies abroad. A number of firms are based here and sell motor insurance across the European Union. Again, the policy intent behind this to safeguard motorists and build up a pot of money to help cover off any potential insolvency event were that ever to happen. Separately, the insurance recovery and resolution directive will come from the European Union later this year and we will have to look at that. We expect it to be adopted later this year in November or December. Arising out of that, we need to see whether there any possible tail issues in terms of levies. In terms of the Deputy's specific question on current policy, there is the order of maybe two years left on the ICF and motor insurance insolvency compensation fund.

In the order of two years, and we have to look at another piece of legislation coming from Europe to see the impact on that. That is grand. Is there a likelihood the legislation before us, the section of which we are discussing allows the Minister to set up sub-funds and set new levies, will alter the trajectory of the levies for the domestic Irish consumer, in that we know at the minute in terms of our own funds and all the rest that insurance premiums will likely be reduced by 3% in two years' time because the 2% and the 1% levies will be gone?

Do the sub-funds not allow us to set up a levy on companies that are involved in motor insurance here but are actually writing premiums in other countries? Our €200 million fund is based on domestic Irish entities, is it not? Is this legislation likely to change the trajectory of the person who is looking at the 3% levy being gone in two years' time?

Is our exposure under this legislation any greater than the exposure heretofore? We are changing who people claim from and ultimately who pays the bill. Is Ireland's exposure any greater? If Ireland's exposure is no greater, the current policy of ending the levies in two years' time is probably likely to continue. If Ireland's exposure is greater, obviously the Minister may have to consider whether the levies are appropriate at that time.

This section deals with the reimbursement claims from other authorised bodies to the Motor Insurers Bureau of Ireland, MIBI, or vice versa. It looks as if there is a convoluted approach to this. It means that a reimbursement claim is received by MIBI. It is sent to the Central Bank and then a proportion of that is returned to the MIBI, to be placed in the Motor Insurers Insolvency Compensation Fund, MIICF. Is that the pattern of where this goes under section 10? I would like clarity on the practical operation of this aspect of the reimbursement procedure. I am asking in particular about the power of the Central Bank to lodge funds directly into the MIICF, which would cut out it having to back through the MIBI again. I ask the Minister of State to take me through the steps of where the money flows in relation to the MIBI seeking reimbursement from another authorised body. What are the steps involved? Does it go straight to the MIBI or does it go to the Central Bank? Does it go back to the MIBI or does it go to the MIICF and why are those steps required?

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, the MIBI, has the right to be reimbursed for the relevant compensation by its counterpart in the home member state of the insolvent firm. In practice, that means that if the insurer provides cross-border insurance services, the compensation body in the injured party's member state of residence initially pays the claim of the injured party. That compensation body can then be reimbursed by a compensation body from the insurer's home member state. This will ensure that the ultimate financial responsibility is borne by the insurance sector of the home member state of the insurer, while allowing for quick payments. At an EU level, the governance and reimbursement mechanism between the various EU compensation bodies will be governed by either an agreement of the council of the bureau of which the MIBI is a member, or by means of a designated Act, which we understand is being considered by the Commission at this stage. It essentially follows the existing process but we will have extensive engagement with stakeholders following the passage of this legislation.

Okay. Section 10(2) of the Bill says that the reimbursement from the compensation body - in France, say - has to be transmitted in full to the Central Bank. It is then for the Central Bank to distribute that money in whatever required proportions to the insurance compensation fund, which is administered by the Central Bank, or to the MIICF, which is administered by the MIBI. It appears that the reimbursement is paid to the MIBI, which pays it to the Central Bank, and then the Central Bank pays it back to the MIBI to put it into a fund that is overseen by the MIBI. Why does it have to go through that process?

I want to be clear on the detail. The Deputy is correct on a legislative basis but referring to stakeholders on a practical basis, it will be done in a less convoluted manner, so the aim is that it will go straight to the MIBI. This requires engagement with stakeholders, including the Central Bank, to make sure that can be done efficiently and ultimately to get the payments made as quickly as possible.

I hear what the Minister of State is saying but we are asked to deal with the laws. Section 10(2)(a) provides "that it shall, as soon as is practicable after it receives such reimbursement, transmit in full amount such reimbursement to the Bank", which is the Central Bank in this case. It goes on to say that the bank will then pay back a portion of that. I hope it works a lot more smoothly than how it appears on paper.

I move amendment No. 2:

In page 18, line 19, to delete "section 3A" and substitute "sections 3A and 3K".

I have discussed these. As I have said, they are technical.

In my Second Stage contribution on the Bill, I said that section 16 allows for the State Claims Agency to carry out an annual audit of a sample of the claims payments made through the compensation body. When an audit has taken place, it will be presented to the Minister for Finance. Is the Minister obliged to publish it or lay it before the Oireachtas?

I thank the Deputy. I appreciated his raising of the matter on Second Stage. In short, the answer is "No", but I want to give the Deputy the detail on why. The reports produced by the State Claims Agency under section 16 will relate to specific claims that have been audited. It would be inappropriate to lay reports of such granular detail before the Oireachtas. There are also concerns regarding the protection of confidentiality and commercially sensitive information in this context.

I am aware that an audit will refer to claims, because that is what has to be done, but will an audit not provide a view on the claims, this view being what would be published? The Minister is not going to get a report stating Johnny was paid a certain amount because of this, that and the other; I presume the Minister will get a report stating the agency audited 25 claims and found X, Y and Z.

I suppose there would be a secondary report because section 18, as the Deputy knows, provides for the preparation of a report following the occurrence of an insolvency event to assess how the governance processes we are talking about under sections 16, 17 and 18 operate in the context of such an event. The purpose of this report is to allow the Minister to identify any potential enhancements that could be introduced to the governance structure under the Bill following the first insolvency event. Should any of the matters identified in a report need to be reflected in changes to legislation, everything in the report will be put before the Houses as amendments to the legislation, thereby allowing for discussion.

It is something we will revisit. My view is that transparency is of the utmost importance. I understand the argument on commercial sensitivity but we have not yet seen how the reports will be structured. I would like to know if there is a way to present such a report to the Oireachtas under section 16 that does not breach commercial sensitivity or other requirements concerning personal data, for example. The structure of the reports is not stipulated in the legislation.

I take the Deputy's point on the need for transparency and oversight, and that is why there is in the wider legislation an allowance for an ex ante check to be carried out by the State Claims Agency based on a material threshold, which the Deputy will probably raise in respect of the next section. Furthermore, an ex post audit will be carried out and a statement of the amounts of compensation paid will be included in a report to be submitted to the relevant Minister and laid before the Oireachtas. That will include statements on compensation amounts and expenses, and the summary of IMCB operations. The information will be included in the report submitted by the Central Bank to the Comptroller and Auditor General for a possible audit. Of course, a strategic review of the governance and oversight framework will be carried out after the first insolvency event.

A possible audit. Will it be possible to examine the issues concerning the claims? This section is really important and I support it because it requires not just a periodic examination but also an annual review by the State Claims Agency. There may not be many claims and one would hope that the annual review of the State Claims Agency will state everything is above board, great and all the rest of it. Where this is not the case, and bearing in mind that the section allows for the recoupment of claims payments made in error, I do not like the idea that the Minister for Finance will have a report stating the agency believes payments on claims have been made in error and that the Oireachtas will be ill-informed on the issue. If an annual report can be published without compromising personal or commercial data, can there be an undertaking to make it available to the Oireachtas?

The first port of call on this is the State Claims Agency. It is the most relevant body. The Comptroller and Auditor General will review the insurance compensation fund, and the Motor Insurers Bureau of Ireland will be part of this review.

It must be stated that this approach is utterly consistent with the separate collection (deposit return scheme) regulations 2021. There is nothing new about this. We are just following best practice and precedent.

This is a cost being placed on the Irish Exchequer and on taxpayers across the State. It accumulates to hundreds of millions of euro. I do not understand why a report that does not contain commercially sensitive or personal data cannot be published. That is my basic question. We talk about full disclosure and all the rest. Why not publish the report?

Perhaps we could, in a parallel session, provide more information on the entire governance framework. I completely understand the point the Deputy is making and I understand the aspiration. Equally, the Deputy can understand that when we talk about the level of commercial exposure and the potential for individual privacy and everything else, it is difficult to achieve. As I said, I am more than happy to go through the full governance structure that we are satisfied is completely transparent, in line with best practice and fit for purpose.

That may cause a problem for the schedule because we will have to table amendments. I was hoping for an undertaking. I hear what the Minister of State is saying about commercial sensitivity. In scenarios such as this, a Minister of State would sometimes say that a report can be published without compromising commercial sensitivity. If the State Claims Agency presents a report to the Minister for Finance and there is commercially sensitive information in it in respect of an entity in Spain, France or wherever else, or there are commercially sensitive issues regarding a dispute, I understand that report would not be published. However, that is not what I am asking for. Is there a way of publishing a report that does not compromise commercial sensitivity?

I thank the Minister of State. Amendment No. 2 is technical. A section is to be deleted and from what I understand, amendment No. 3 replaces or does the job of the deleted section. We are deleting a section relating to the treatment of the compensation body as a creditor during the winding up of a company and have replaced that section through amendment No. 3. Will the Minister of State explain the difference? What have we taken away and what have we put in its place? What is the material difference?

I thank the Deputy. The Department identified a potential drafting ambiguity in the text of the Bill as initiated insofar as section 27 could potentially be interpreted as making the rights of the compensation body set out in section 27(c) of the Bill unavailable because of where the amendments to the 1964 Act are positioned in the text. Accordingly, this could hinder the ability of the compensation body to recoup moneys it had paid as compensation to policyholders from insolvent insurers and section 27 of the Bill should, therefore, be amended to place paragraphs (c) and (d), as set out in section 27(c), in a stand-alone section that is not subject to section 3 of the 1964 Act. This drafting amendment will better reflect the intended position for the compensation body, address any unintended ambiguity in the current draft and avoid any legal uncertainty.

This section follows on with regard to the State Claims Agency. Will the Minister of State clarify the time limits that could be placed on the State Claims Agency when auditing claims that have not yet been completed and how these will interact with the timeframes required to assess and provide compensation? Will he also clarify the factors that will be taken into account to determine the relevant amounts under section 17(1)(a) by way of ministerial order that will trigger an audit? He mentioned that I would probably ask that question. This is where the compensation body will not be allowed to pay out compensation above a certain amount until the claim is audited by the State Claims Agency. What factors will be taken into account to determine the amount? Does the Minister of State have an amount in mind and will he relay that to the committee?

I thank the Deputy. The directive imposes a strict three-month timeframe within which the compensation body must make an offer of compensation or reasoned reply to the claimant. In order to work within these strict timeframes, any audit that is carried out on an ex-ante basis needs to balance the interests of carrying out a comprehensive audit of as many claims as possible with the operational constraints of working within this tight enough timeframe.

I will give the full context around the relevant amount, if that is okay with the Deputy. Officials in the Department have engaged extensively with the relevant stakeholders, including the Central Bank, the State Claims Agency and MIBI, to determine an appropriate threshold in this context. Currently, it is anticipated that €250,000 would represent an appropriate threshold amount. That is based on information from the national claims information database, NCID, which indicates that approximately 1% of number and approximately 20% of value of claims would be reviewed by the State Claims Agency on an ex-ante basis, based on the NCID data. On the basis of data relating to stakeholders' previous experience of claims payments in the context of previous motor insurance insolvencies, the State Claims Agency has advised that a threshold of €250,000 would amount to 0.8% of complaints, or one in 125, which is consistent with such NCID data. The governance and oversight framework under the Bill, therefore, as we have mentioned, needs to be balanced to ensure that claims can be processed in accordance with that strict three-month timeline to which I alluded a few moments ago under the motor insurance directive, MID, in particular. That would create a challenge in terms of capacity and timing but we have explored the situation extensively with stakeholders to ensure this works as efficiently as possible.

I move amendment No. 3:

In page 29, after line 41, to insert the following:

“Circumstances in which Compensation Body or compensation body (other) to be creditor of relevant insurer

30. The Act of 1964 is amended by the insertion of the following section after section 3J:

“3K. (1) The Compensation Body shall, in the case of any compensation paid by it under section 9 of the Act of 2024 or reimbursement paid by it under section 10 of that Act, be a creditor of the relevant insurer and the Compensation Body’s claim for the amount of such compensation or reimbursement, as the case may be, shall be—

(a) treated as an insurance claim for the purposes of the European Union (Insurance and Reinsurance) Regulations 2015 (S.I. No. 485 of 2015), and

(b) admitted in the proceedings for the winding-up as a proved debt of the insurer having priority to any sum remaining due under the policy.

(2) The compensation body (other) shall, in the case of reimbursement paid by it to the Compensation Body under section 10 of the Act of 2024, be a creditor of the relevant insurer and the claim of the compensation body (other) for the amount of such reimbursement shall be—

(a) treated as an insurance claim for the purposes of the European Union (Insurance and Reinsurance) Regulations 2015 (S.I. No. 485 of 2015), and

(b) admitted in the proceedings for the winding-up as a proved debt of the insurer having priority to any sum remaining due under the policy.”.”.

That is not in my gift. The Deputy knows better than I that there is a very busy legislative schedule but we asked the Chief Whip to get this to this as soon as possible, potentially next Wednesday. I thank the Leas-Chathaoirleach and the committee for this session, particularly for allowing us to go into private session to provide clarification. I hope it will be next Wednesday, all going well.