Dáil Éireann Debate, Thursday - 29 May 2014
58. Deputy Denis Naughten asked the Minister for Finance the arrangements he will put in place regarding liability for costs and so on as a result of the decision by Setanta Insurance to cease trading; where liability for payment of costs and settlements already agreed or ruled by a court and due to be paid by Setanta now lies; the discussions he has had in relation to same; and if he will make a statement on the matter. [23610/14]
View answerMy officials have been in discussions with the Central Bank of Ireland, with the Setanta Liquidator, the Accountant of the High Court and with the insurance industry representative bodies and I have asked them to convey my wish that every effort is made to facilitate Setanta policyholders in obtaining new motor insurance policies and in understanding their overall position. We are endeavouring to obtain legal certainty on a number of matters relating to policyholders' claims for compensation and this will be made publicly available in due course. At this time, I propose to set out the position as it currently stands.
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, 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.
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 has indicated that it will also review whether any issues raised relating to the regulatory framework require action.
On 16 April 2014, the MFSA 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 on the 30 April 2014 and Mr Paul Mercieca was appointed as Liquidator. Officials from my Department together with officials from the Central Bank met with the Liquidator and his representatives in Ireland on 7 May 2014 and the Central Bank is in ongoing contact with him regarding the position of Setanta policyholders. The Liquidator confirmed that all policyholders who have not already done so should arrange alternative cover without delay as claims are unlikely to be paid in full and he has issued letters to policyholders informing them that their insurance cover will be cancelled within 7 to 10 days, in accordance with their policy documents. This process has commenced and there were less than 20,000 policies with Setanta Insurance on 27 May. It is expected that all remaining policies will be cancelled this week in line with the terms of the policies. In the circumstances, I continue to strongly advise policyholders to make alternative insurance arrangements without delay and that they should contact their insurance broker or an insurer directly to seek alternative cover. This is also the advice of the Central Bank.
The provision of motor insurance cover is 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. In my role as the Minister for Finance I have responsibility for the development of the legal framework governing financial regulation. The Liquidator has advised that arrangements are in hand for policyholders to obtain their "no claims bonuses" certificates from Setanta. Insurance Ireland have informed me that these certificates will be honoured by other insurers and we are aware that many insurers are being flexible surrounding requirements for documents. In addition, the Insurance Ireland 'Declined Cases Agreement' is 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.
With regard to Setanta premiums and claims, the position on each policy is for the liquidator to decide in due course. My officials and the Central Bank will remain in close contact with the Liquidator and I have asked that public statements are provided to clarify matters for policyholders and claimants.
The Motor Insurance Bureau of Ireland (MIBI) is a non-profit-making organisation registered in Ireland. All insurance companies underwriting motor insurance in this county must, by law, be members of MIBI and contribute to the funding of claims in proportion to their market share. The principal role of MIBI is to compensate innocent victims of accidents caused by uninsured and unidentified vehicles. This is regulated under the terms of an Agreement between the MIBI and the Minister for Transport, Tourism and Sport. We are endeavouring to clarify the position on a number of matters relating to policyholders' claims for compensation, including the role of MIBI in this regard. However, 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 or personal insurance policies is not covered by the ICF or MIBI. However, unpaid premium would fall to be claimed from the Setanta Liquidator in due course.
