The Irish Insurance Federation (IIF) has welcomed the publication of Government
proposals to clarify the scope of the levy on insurance premiums, but called on
the Minister for Finance to abolish the existing 3% stamp duty on premiums.
The Irish government has introduced legislation to alter its Insurance Act
in relation to the scope of the Insurance Compensation Fund, so that it may
cover all insured risk in the State.
The Insurance (Amendment) Bill 2011 proposes to amend the Insurance Act 1964.
As the attached Explanatory Memorandum explains, the bill will change the scope
of the Insurance Compensation Fund from one which covers the risks of policyholders
of Irish authorized insurance companies to one which covers all insured risk
in the State, except for specific excluded risks. As a result, except for the
specified exclusions, all insurance policies taken out in relation to risks
in the State will come within the remit of the scheme.
Insured risks outside the State are no longer covered by the scheme, where
an insurance company is being liquidated. In addition, the bill will see the
restriction of the availability of contributions from the Fund for the carrying
on of the business of an insurance company in administration to those companies
which conduct at least 70% of their business in the Irish market averaged over
a three year period.
According to the Department of Finance, the bill offers a financial benefit
in that it secures the revenue base for the Insurance Compensation Fund going
forward, because all insurance companies (whether operating on a subsidiary,
branch or freedom of service basis) will be required to pay the levy on the
policies they sell.
The Department argues that if these amendments are not put in place and the
existing arrangements continue there is a danger that companies could convert
to a branch of an undertaking authorized in another EU member state and avoid
any levy imposed.
Commenting on the bill, Mike Kemp, Chief Executive of the Irish Insurance Federation
(IFF) said: “The introduction of a Compensation Fund levy has been expected
for some time and the new Insurance Bill provides much needed clarity on which
policies will be subject to it and what purposes administrators will be able
to use Compensation Fund drawdowns for in the future. However we are concerned
that policyholders will now face an additional 2% levy on their premiums at
a time when the economic situation means that many consumers are having difficulty
in paying existing insurance costs.”
As a result, the IFF wishes to see the abolition or reduction of the 3% stamp
duty already levied on home, motor and commercial insurance premiums. As the
IFF has explained, a 1% stamp duty was first introduced in the early 1980s,
with an additional 2% Compensation Fund levy applied in 1984. When this Compensation
Fund levy (used to finance the administrations of PMPA and Insurance Corporation)
was being phased out in the early 1990s, a 2% stamp duty was applied, which
was increased to 3% in 2009. Kemp clarified that: “Unlike the Compensation
Fund contribution it is not used for any insurance-related purpose but is simply
a general tax-raising measure. The Minister could demonstrate his concern for
consumers in a practical way by abolishing or reducing this tax, which is of
marginal importance to the public finances at this point.”
LAWANDTAX-NEWS.COM
