Tuesday, 10 June 2014

Questions (159)

Michael McGrath

Question:

159. Deputy Michael McGrath asked the Minister for Finance if he will check the accuracy of his Dáil statement during a Topical Issue debate on Wednesday, 30 April 2014 on the collapse of Setanta Insurance that the Motor Insurance Bureau of Ireland intends to accept all third party claims in connection to Setanta policies; if he will confirm whether this information is correct; and if he will make a statement on the matter. [24264/14]

View answer

Written answers (Question to Finance)

At the outset, I would like to say that both I, as Minister for Finance, and the Government are concerned over the situation that arose with regard to the Irish policyholders of Setanta Insurance Company Limited (Setanta).  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. 

With regard to the position of Setanta policyholders, my 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 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.

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 in May and the Central Bank is in ongoing contact with him regarding the position of Setanta policyholders. All Setanta policies have now been cancelled in line with the terms of the policies and the Liquidator made arrangements for policyholders to obtain their "no claims bonuses" certificates from Setanta. Insurance Ireland have informed me that these certificates are being 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.  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.  I am 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).

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.  At the time of the Liquidators appointment on 30 April 2014 there was a degree of uncertainty regarding the exact legal status of Setanta polices and whether these policies remained valid. The statement made during the Topical Issue debate on Wednesday 30 April 2014, that "the Motor Insurance Bureau of Ireland has indicated that they intend to accept all third party claims in connection to Setanta policies", was accurate as based on the information available up to that time on the status of the policies.  Officials from my Department had been informed that the Motor Insurance Bureau of Ireland (MIBI) had indicated that they intended to accept all third party claims. This statement was used in answer to Parliamentary Questions on 30 April and 01 May 2014.

In the following days there was clarification from the Liquidator that all Setanta policies remained valid until cancelled by either the Liquidator or the policyholder. MIBI has sought legal advice regarding their liability in situations where the unpaid third party claims arising are in relation to insured drivers. Once this ambiguity was brought to the attention of my Department then more appropriate text which stated that "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)", was used in the next Parliamentary Questions on 7 May 2014 to reflect this legal position.  

From 27 May 2014 the text was changed to state that "The principal role of MIBI is to compensate innocent victims of accidents caused by uninsured and unidentified vehicles. 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)." This change was made in order to inform Deputies that the position of MIBI was being clarified. 

Claims on insurance policies will be payable from either the ICF or MIBI.  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.