Author: Louise McBride
Irish taxpayers and millions of Irish insurance customers could have to foot the bill for the collapse of Setanta Insurance – even though the insurer was regulated in Malta
Last week, the manager of a State-backed Irish fund which covers the losses of bust insurers, said he expects that the fund will be used to pay out compensation to Irish drivers affected by the collapse of Setanta Insurance.
This would expose the Irish State to Setanta’s losses.
An estimated €35m in insurance claims were outstanding when Setanta Insurance, which largely sold commercial motor insurance, collapsed last April. About 75,000 Irish were stranded with no cover when the insurer shut down.
“There is an expectation that the Insurance Compensation Fund (ICF) will be called on to compensate eligible [Setanta] claimants,” said a spokesman for the Accountant of the Courts of Justice (ACJ), which manages the fund. “The final decision on payments from the fund rests solely with the President of the High Court.”
The ICF was set up in Ireland about fifty years ago to cover the losses which arose from the collapse of an Irish insurer. Three years ago, the remit of this fund was extended to cover insolvent insurance companies who were authorised in other member states – but had insured policyholders within the Irish State.
This has left Irish taxpayers exposed to the losses which arise when an insurer based outside Ireland goes bust.
The ACJ has so far received about 20 claims for compensation from the fund which are related to the collapse of Setanta.
“The ACJ is currently not in a position to establish the merits or otherwise of these requests,” said the spokesman. “The liquidation process is currently underway and as this process proceeds, Setanta’s liabilities will be established and this will allow claims on the fund to be assessed.”
Irish insurance policyholders paid out a total of €65.69m last year arising from the special 2pc Quinn Insurancelevy. This levy, which is paid on car and home insurance was introduced by the government to cover the losses which arose from the collapse of Quinn Insurance.
The Quinn levy is paid into the ICF.
The Minister for Finance can advance funds to the ICF on the recommendation of the Central Bank. In the case of Quinn, the money is paid by the State using exchequer funds – and this money is then paid back to the State through the Quinn levy.
It is not yet clear if Irish consumers could be hit with an insurance levy to cover the cost of the Setanta collapse.
Setanta is regulated by the Financial Services Authority. When asked if it had covered any claims which arose from the collapse of Setanta Insurance, or if it had any plans to do so, an MFSA spokesman said: “Policyholders of Setanta are entitled to compensation under the Irish Insurance Compensation Fund”.
Author: Catherine Shanahan
Thousands of policyholders left out of pocket following the collapse of Setanta Insurance will not receive any assistance from the Motor Insurance Bureau of Ireland (MIBI).
Concerns that the MIBI might not pick up the tab for third-party claims surfaced in June and the Irish Examiner has seen documents which confirm those fears.
One former policyholder faced with forking out towards the cost of a €52,000 award made against him received a letter from the MIBI effectively stating that it had no role to play.
The MIBI said it had received legal advice that the MIBI Agreement (2009) “does not require the MIBI to satisfy awards against drivers covered by a policy of insurance where the insurer is unable to pay all or part of an award due to insolvency”.
The Malta-registered Setanta Insurance was liquidated in April and all policies were cancelled by the liquidator with effect from May 29.
At the time it went into liquidation, Setanta had approximately 75,000 policyholders, two-thirds of which were commercial motor insurance policies and one-third of which were private motor insurance policies.
Concerns have also been raised about who is entitled to access the Insurance Compensation Fund (ICF), set up to facilitate payments to policyholders where an insurer goes into liquidation. However, the fund only pays out on claims where an individual is involved and not corporate bodies — raising questions about the implications for companies which took out commercial motor insurance policies. Even for individuals who can access the fund, the ICF only pays out 65% of the total claim — or €825,000, whichever is the lesser.
A former Setanta policyholder who spoke to the Irish Examiner and who is in the process of being sued on foot of an accident, which he admits was his fault, said he now faces forking out 35% of a €52,000 award.
“This is despite the fact that I always had insurance. It was the financial regulator and the central bank that failed in their duties by allowing an insurance broker to operate without sufficient funds to compensate injured parties,” he said.
Fianna Fáil Finance spokesman, Michael McGrath said it was high time the situation was clarified on behalf of the at least 2,000 claimants caught up in the collapse of Setanta Insurance “who are still awaiting information on whether their claims amounting to €35m will be honoured”