Amidst the understandable focus on the controversy surrounding the liquidation of IBRC and its assets this week, a worrying spat between the Central Bank and the Department of Finance over the issues of responsibility and accountability for effective oversight of the insurance sector, could easily be overlooked.
This would be a mistake as there are many warning signs evident that the sector is not in robust health. In this context and of all we are learning about inadequate regulation of the banking sector over recent years, it would be disgraceful if those entrusted with regulating the insurance market on consumers’ behalf were expending inappropriate energy on inter-agency turf wars and point scoring over resources.
The spat in question emerged via a freedom of information request published by the Irish Times earlier this week.
It revealed that the senior official in the Department of Finance with responsibility for overview of the insurance sector, Aidan Carrigan, had written to the Deputy Governor of the Central Bank, Cyril Roux, in March, requesting a report on the Bank’s view of the sector following media coverage of concerns that imprudent price competition had raised questions about reserve policy and overall competence in the industry, with particular reference to three firms, FBD Holdings, RSA and Liberty Insurance.
Carrigan had also sought assurance from the Central Bank that it was taking the necessary steps to ensure financial stability in the industry.
Mr Roux’s response suggests that not only is the relationship between Dame Street and Merrion Street not as collaborative as it should be, but that personal relationships between some of the key individuals concerned may be tense at best.
He went straight over Carrigan’s head and responded next day to his boss, the Secretary General of the Department of Finance, Derek Moran, who is also an ex officio member of the Central Bank Commission or board of directors.
Roux pointed out, rather tartly it appears, that he, and presumably his colleagues in insurance supervision in the Bank, were accountable to the Central Bank Commission and to the Oireachtas, but not to the Department of Finance. He added that Derek Moran himself, in his role as a director of the Central Bank, was the statutory channel by which any reports or other intelligence on the insurance sector might be shared with the Department. And he added for good measure that the Bank’s supervisory resources were in any case significantly under strength due to government constraints on pay and staffing levels. Miaou.
To be fair to Moran, his understated response, pointing out that the Department did have the legislative authority to seek the information his colleague had requested, seemed designed to defuse the situation to some degree.
That was in March. Further inquiries by Newstalk have revealed that no report has been furnished by the Central Bank to the Department on the insurance sector, other than the routine and scheduled annual report on the sector, which was delivered immediately prior to the correspondence in question.
If this is evidence of an ongoing Mexican stand-off between both State and ruffled personal feathers on the part of key personnel, it’s not good enough.
We are all paying a levy arising from the behaviour of the Quinn Insurance Group; RSA’s troubles here have cost its UK shareholder hundreds of millions of pounds and troubling public exposure; FBD is loss-making and shelving its dividend to try to repair its balance sheet, not to mention the difficulties faced by those who thought they were covered by Maltese-registered Setanta Insurance, which went into liquidation last year.
Time for some cop-on, methinks.
