Tuesday, 13 May 2014

Questions (169, 194)

Shane Ross

Question:

169. Deputy Shane Ross asked the Minister for Finance his plans to protect policy holders with the now collapsed Setanta Insurance; the way he will ensure the smooth transition for all the innocent policy holders to another insurer or assist in brokering the deal for another insurer to take over; and if he will make a statement on the matter. [20952/14]

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Willie Penrose

Question:

194. Deputy Willie Penrose asked the Minister for Finance in the context of the situation that has arisen for policy holders here as a result of the recent collapse of Setanta Insurance, if the compensation fund is being made available to these policy holders who have been left out of pocket and have to secure alternative policies of indemnity so as to fulfil their legal obligations; and if he will make a statement on the matter. [21188/14]

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Written answers (Question to Finance)

I propose to take Questions Nos. 169 and 194 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 contact with the MFSA in relation to Setanta Insurance Company Limited, the impact on policyholders and the provision for relevant and appropriate information, particularly in relation to claims.

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 the 30 April, 2014 where a liquidator, Mr Paul Mercieca, was appointed.

Officials from my Department together with officials from the Central Bank met with the Liquidator and his representatives in Ireland on 7 May 2014. At that meeting, the Liquidator confirmed that Setanta will not be in a position to pay the full amount of claims. It is also unlikely that a pro-rata portion of premiums will be refunded upon completion of the Setanta liquidation.

On Friday the 9th of May the Liquidator placed notices in national newspapers which advised policyholders that all Setanta policies of insurance will be cancelled by way of 7 days' notice or 10 days' notice to policyholders in accordance with their policy documents. The notice further urged Setanta policyholders to make alternative motor insurance arrangements, as soon as possible, as previously advised by the Central Bank. The position on each policy is for the Liquidator to decide in due course. 

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).

Claims on personal insurance policies will be payable from the ICF.  All ICF payments are subject to the limit of 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 refund of premiums for either commercial and personal insurance policies is not covered by the ICF or MIBI.

The Liquidator advised that arrangements are in hand for policyholders to obtain their "no claims bonus" certificates from Setanta. Insurance Ireland have informed me that these certificates will be honoured by other insurers. 

In addition, the Insurance Ireland 'Declined Cases Agreement' was available to policyholders of Setanta.  The current Declined Cases Agreement was drawn up in 1981 and is adhered to by all motor insurers in Ireland. I am informed that under the agreement, the insurance market will not refuse to provide insurance to an individual seeking insurance, if he/she has approached at least three insurers and has not been able to obtain cover from them.  I understand that Insurance Ireland is also making information available to those who have queries, complaints or difficulties in relation to this matter through their service at (01) 676 1914 or by email at info@insuranceireland.eu .

The provision of motor insurance cover remains a commercial matter for insurance companies, which is based on a proper assessment of the risks they are accepting and the making of adequate provisioning to meet these risks.

Until otherwise advised those policyholders which have been affected by the collapse of Setanta should continue to contact Setanta Insurance Services Limited at 0818 255 255 (if calling from outside Ireland +353 1 897 6300 or on support@setantainsurance.com .