I propose to take Questions Nos. 155 and 159 together.
Under EU law which governs non-life insurance, an insurer is required to inform the regulator in its home Member State (its home regulator) that it intends to pursue business in another Member State. The home regulator must then provide the host regulator with a certificate attesting that the insurer covers the EU Solvency Capital Requirement, as well as the nature of the business which the insurer intends to undertake. The insurer may start to pursue business from the date that the certificate is communicated to the host regulator, in this case the Central Bank of Ireland.
Setanta Insurance Company Limited ("Setanta") is a Maltese incorporated company which was both authorised and prudentially supervised by the Malta Financial Services Authority (MFSA). While its financial position is not supervised by the Central Bank of Ireland as the Central Bank has no role in that regard, the firm is supervised by the Central Bank for conduct of business rules, i.e. consumer protection obligations. The Central Bank is in ongoing contact with the Malta Financial Services Authority in relation to Setanta Insurance Company Limited, the impact on policyholders and the provision for relevant and appropriate information, particularly in relation to claims.
Setanta was regulated at EU regulatory level in accordance with a directive known as Solvency I which currently places requirements on the amount of regulatory capital European insurance companies must hold against unforeseen events. I understand that Setanta met its EU regulatory obligations and under EU law is therefore entitled to trade across EU borders. Following negotiations that were completed at European level in November, 2013, a new regime known as Solvency II will commence on 1 January 2016, which will further strengthen the EU regulatory framework. The Solvency II EU Directive sets out new, stronger EU-wide requirements on capital adequacy and risk management for insurers with the key aim of increasing policyholder protection. The new regime will also ensure greater cooperation between supervisors.
My Department and the Central Bank will be reviewing the circumstances relating to Setanta and will be reporting to me on what lessons can be learnt and how the framework can be strengthened. The European Commission have indicated that it will review whether any issues raised relating to the regulatory framework require action. On 16 April, 2014, Setanta determined that the company was insolvent. This means that Setanta does not have sufficient funds to be able to honour its full obligations towards claimants, policyholders and other creditors. Setanta was formally placed into liquidation by the MFSA following a meeting of the creditors which took place on 30 April, 2014 where a liquidator, Mr Paul Mercieca, was appointed. The meeting was attended by a representative from the MFSA, who advised the Central Bank of Ireland on developments.
While the position on each policy is for the liquidator to decide in due course, policyholders will be given cancellation notification during which period cover will remain in force. While policies will remain valid until the required notice period has been served, it is important to be clear that the amounts due under any claims may not be fully recoverable in all circumstances. The Central Bank has written to over 230 brokers and firms who were offering policies from Setanta Insurance to consumers to require them to immediately contact any Setanta policyholder and inform them of the urgency to make alternative motor insurance arrangements.
Claims on personal insurance policies will be payable from the Insurance Compensation Fund (ICF). Claimants will be eligible for 65% of the amount due or €825,000, whichever is the lesser. Under Section 3.6 of the Insurance Amendment Act 1964 (as amended) first party claims by a body corporate or unincorporated body are not covered by the ICF.
The Motor Insurance Bureau of Ireland ("MIBI") is a non-profit-making organisation which was established by Agreement between the Government and those companies underwriting motor insurance in Ireland. The principal role of MIBI is to compensate innocent victims of accidents caused by uninsured and unidentified vehicles. If, for legal reasons, MIBI is not in a position to accept a claim, these third party claims will be eligible to proceed for consideration by the High Court for compensation from the Insurance Compensation Fund (ICF). The ICF is subject to the limit of 65% of the amount due or €825,000, whichever is the less. The refund of premiums for commercial and personal insurance policies is not covered by the ICF or MIBI. A portion of the premium refunds may, however, be available upon completion of the Setanta liquidation. Until otherwise advised those policyholders which have been affected by the collapse should continue to contact to Setanta Insurance Services Limited at 0818 255 255 (if calling from outside Ireland +353 1 897 6300) or on support@setantainsurance.com.
