State ac­cuses in­sur­ers of dodg­ing €20m

Irish Independent - Business Week - - FRONT PAGE - Gavin McLough­lin

Depart­ment of So­cial Pro­tec­tion says com­pa­nies are ob­tain­ing court or­ders to avoid fees on in­ac­cu­rate ba­sis

IN­SUR­ERS are de­lib­er­ately seek­ing to avoid mak­ing back-pay­ments to the Ex­che­quer, the Depart­ment of Em­ploy­ment Af­fairs and So­cial Pro­tec­tion has said.

The depart­ment be­lieves as much as €20m could be owed by the in­dus­try to the State. The de­tails are con­tained in a bond prospec­tus is­sued by FBD In­sur­ance, which has told the mar­ket it could face a li­a­bil­ity of as much as €2m.

The is­sue re­lates to a pro­gramme called the Re­cov­er­able Ben­e­fits and As­sis­tance Scheme (RBA). The scheme is de­signed to al­low the State to claim back cer­tain so­cial wel­fare pay­ments on foot of the wel­fare re­cip­i­ents get­ting in­sur­ance pay­ments.

But an is­sue has arisen whereby in­sur­ers are set­tling cases out­side of court, and then go­ing to court to look for a re­duc­tion or elim­i­na­tion of any pay­ments due to the State un­der the RBA scheme.

“The DSP are of the opin­ion that in many cases the court or­ders do not re­flect an ac­cu­rate po­si­tion of the set­tle­ment ne­go­ti­ated between the par­ties and that or­ders are also be­ing ob­tained to de­lib­er­ately avoid an RBA li­a­bil­ity,” the FBD prospec­tus states.

FBD said the depart­ment “be­lieve they have a short­fall of €20m in RBA pay­ments as a re­sult”. The in­surer said it was dif­fi­cult to es­ti­mate how much ex­po­sure it might have if it had to make pay­ments to sat­isfy the depart­ment. But it added that, based on a sam­pling ex­er­cise, the fig­ure could be as high as €2m.

The prospec­tus says the depart­ment is chal­leng­ing in­sur­ers about they way they have in­ter­preted the leg­is­la­tion,

In the depart­ment’s opin­ion, the part of the leg­is­la­tion that al­lows for the RBA re­pay­ment to be re­duced or elim­i­nated be­cause of a court or­der only ap­plies when the or­der is made af­ter a full hear­ing of the case – ie not when a set­tle­ment has been made with­out a full le­gal hear­ing.

The prospec­tus says the Depart­ment has taken no ac­tion in pur­su­ing the RBA re­pay­ments since June 2017, when it told in­dus­try group In­sur­ance Ire­land that it was tak­ing le­gal ad­vice on the mat­ter.

A spokesper­son for In­sur­ance Ire­land said: “In­sur­ance Ire­land out­lined its po­si­tion in re­spect of the Re­cov­er­able Ben­e­fits Scheme to the Depart­ment of So­cial Pro­tec­tion in cor­re­spon­dence in 2016. In­sur­ance Ire­land has no fur­ther com­ment on this mat­ter.”

A spokesper­son for the depart­ment said: “The Depart­ment of Em­ploy­ment Af­fairs and So­cial Pro­tec­tion is cur­rently await­ing le­gal ad­vice. Pend­ing such ad­vice the depart­ment main­tains that amounts due re­main out­stand­ing.”

The prospec­tus has been is­sued by FBD as it seeks to is­sue bonds as part of its buy­out of loan notes held by bil­lion­aire Prem Watsa’s Fair­fax. Fair­fax had the right to con­vert the notes into shares – some­thing which would have di­luted the stakes cur­rently held by FBD share­hold­ers.

The com­pany has elected to buy back and can­cel the notes to avoid share­hold­ers be­ing di­luted.

Some of that is be­ing done in cash along­side the is­sue of the new bonds.

As part of the is­suance it has to dis­close the risks it faces, and the po­ten­tial li­a­bil­ity aris­ing from the Depart­ment’s probe of the RBA pay­ments is in­cluded un­der that head­ing.

Other risks it flagged in­clude Brexit, ad­verse weather events and em­ployee mis­con­duct.

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