Address by Minister Ahern to the Professional Insurance Brokers Association 1st Annual Conference , “Building on your Success”

Thursday 24th April 2008

Chairman, distinguished guests, ladies and gentlemen,

On behalf of An Tanaiste and Taoiseach designate, I am delighted to be here this morning to address the inaugural Professional Insurance Brokers Association annual conference. I would like to thank PIBA and especially your Chairman Jack Fitzpatrick for the opportunity to speak to you today.

The theme of this conference is “Building on your Success” which is certainly a very positive theme for your discussions. I was pleased to learn that you have assembled here today a number of excellent speakers who, I have no doubt, will stimulate and educate those present about the range of issues affecting your industry now and in the future.

From the Government’s point of view it is in many ways re-assuring that such a well-attended conference should be addressing matters such as wealth management. I think its fair to say that this topic probably would not have attracted as large an audience 15 years ago.

It is a clear measure of the success that the Irish economy has enjoyed over recent years, that the debate taking place here today, is on how the fruits of our prosperity can be best invested to create long-term value and improved living standards. It also demonstrates how the development of our financial sector, and especially the services offered by the members of PIBA, meets an important need for expert independent advice on personal finance. This expertise and assistance is just as valuable in the more challenging economic and financial circumstances that we are now experiencing. The habit of saving and investing for the longer-term is one that Ireland’s financial sector should continue to promote and reinforce.

Over the past decade or so, we have witnessed unparalleled levels of economic success and prosperity. Ireland is now an international showcase of how a country’s economic landscape can be transformed when the appropriate Government policies, as manifested through the fostering of a pro-business environment, are coupled with stakeholder involvement, through social partnership.

By any benchmark our economic success over the past decade has been extremely impressive. The numbers at work have increased by 700,000, our public finances are sound, with surpluses recorded in ten of the last eleven years, and we enjoy one of the lowest levels of public debt in the euro area. Irish per capita income levels have converged to and beyond the European average.

To consolidate our hard-won success and prosperity, this Government, through the National Development Plan, is engaged in an ambitious programme of enhanced investment in physical and human capital to boost the productive capacity of the economy, remove infrastructural bottlenecks and enhance our global competitiveness.

The Government is not complacent to the challenges that lie ahead for the Irish economy and remains steadfastly committed to our vision of a knowledge-based economy, which will help sustain our future. The recent OECD assessment of the Irish economy, while recognising the challenges facing Ireland in the period ahead, acknowledges the remarkable performance of the Irish economy over the past decade. It states that the fundamentals including - a skilled workforce, a flexible labour market, moderate taxation, a business-friendly regulatory environment and a sound fiscal position – all remain strong. Of particular note is the OECD’s assessment that Irish fiscal plans remain prudent overall.

The OECD report highlights the need to raise productivity growth as a key long-term challenge to the Irish economy, and that wage moderation is needed to avoid a weakening of export performance. In commenting on the fiscal position, the OECD notes that the rate of public spending needs to slow and that it is important not to lock-in expensive spending commitments. In terms of the housing market, the OECD’s assessment is that, while a correction to the very strong Irish housing market was necessary, the downswing is anticipated to be short-lived.

Ireland’s economic success over the past two decades has facilitated the adoption of policies in a number of areas, which will foster long-term competitiveness benefits. For example, since 1997, significant progress has been made in the area of income tax reform. The tax bands have been widened, the standard and higher rates have been lowered to 20% and 41% respectively, and the system of tax allowances has been replaced with a fairer system of tax credits. These improvements have ensured that almost four out of five income earners pay tax at no more than the standard rate and, indeed, two out of five are exempt from tax altogether.

The latest OECD data covering the year 2007 show that, for a single worker on the average wage, Ireland has the lowest tax wedge in the EU and one of the lowest in the entire OECD. The Government has also taken steps to ensure equity in the tax system, and that all taxpayers pay an appropriate amount of tax relative to their ability to do so. It is also important to point out the progress in making the tax system user-friendly for ordinary taxpayers, for example by providing relief at source in the cases of mortgage interest relief and health expenses.

I would now like to turn my attention to the issue of financial regulation. Appropriate regulation of financial services providers is essential in order for the market to function in an even-handed manner, and also to safeguard and promote the interests of customers. Of particular interest to you is, of course, the Financial Regulator’s review of the intermediary sector. I understand that this is now well underway – a High Level Forum and joint Regulator / Industry Working Group has been established - and I understand that good progress is already being made.

The various stakeholders, including PIBA, are playing a very constructive role in this exercise, the outcome of which is very important to ensuring that the quality and reputation of our regulatory system is maintained in a manner that ensures that regulatory costs – both directly to the industry and indirectly to consumers - are proportionate and appropriate. Some of the main aims of this review are intermediary categorisation, the role of the intermediary and the relationship between the intermediary and the product provider. I understand that the Group is reviewing the important issue of the terms and definitions currently in use.

A particular priority should be to ensure that meaningful categories should be used and, without wishing in any way to prejudge the outcome of the review, the most important thing is that customers have a clear understanding of the type of intermediary they are dealing with, regardless of what intermediary description is used – whether that term is “broker”, “insurance intermediary”, “tied agent” and the precise nature of the services being provided.

As professionals in the financial services industry, you will be aware that the Government has commenced a major programme of consolidation and modernisation of the legislative framework for the regulation of financial services. This is a unique opportunity to examine Ireland's financial services legislation and to ensure that it provides a world- class framework. The legislative framework should enable regulators, in adopting a risk-based approach to regulation, to balance costs against benefits, while at all times supporting the soundness, security and reputation of our regulatory regime.

As an integral part of this project, the Advisory Forum on Financial Legislation was established to provide expert advice and practical assistance to the Department of Finance. The Forum is composed of a wide community of representatives from the financial services industry, professional, consumer and public interests alongside the Financial Regulator and other public service partners.

In terms of progress to date, the Forum was formally launched in January and a number of drafting groups have been established to review sectoral and cross-sectoral issues. I understand that the Securities group of the Forum, which is at present completing a project in relation to Market Supervisory Directives, will consider issues in relation to financial intermediaries.

In view of the overall significance and the potential benefits to be realised from both the Financial Regulator’s review of the intermediary sector and the consolidation and modernisation of financial services regulation, it is important to highlight the commitment and the value of the contribution of the PIBA team at Committee and executive level to these initiatives. Constructive and positive engagement by those with direct experience and keen insight into the impact of financial services legislation and regulation on the ground will help secure the best outcome for all.

On a separate but related issue, I understand that revised Insurance Mediation Directive Regulations will shortly be circulated to all the main stakeholders, including your organisation, by the Department of Finance. These revisions are intended to address some important issues highlighted by your organisation, including the exclusion of credit institutions from the ambit of the regulations.

The draft text will also clarify that the provisions of the Investment Intermediaries Act 1995 will no longer apply to situations where the intermediary is only performing IMD business.

Finally, to conclude, I would again like to express my thanks for this opportunity to address the PIBA conference here this morning. I am sure that it will prove to be very informative and successful - and no doubt the first of many such annual conferences.

Thank you.

ENDS/IP42