Dáil Éireann Debate, Tuesday - 29 September 2015
125. Deputy Michael McGrath asked the Minister for Finance the current position regarding the payment of claims due by Setanta Insurance following the recent court ruling regarding the role of the Motor Insurance Bureau of Ireland; the level of payments that are expected to be made; the approximate timeframe for this matter to be dealt with; and if he will make a statement on the matter. [32866/15]
View answerMy question is on the same subject. This has been a shambles from the beginning because when Setanta Insurance was liquidated in April last year, we were told initially on the record of the House that the MIBI would be responsible. Subsequently, the bureau received legal advice to the contrary and the issue ended up before the courts because another arm of the State took the MIBI to court. The net effect has been that, for almost a year and a half, 1,700 claimants have been left in limbo. The Joint Committee on Finance, Public Expenditure and Reform examined this issue and all the relevant parties appeared before us. They all sat around looking at each other and no one had answers. It has been a complete shambles for almost 18 months. The issue has ended up in the courts, which is not satisfactory. At this stage, we should be able to provide some clarity to people who are waiting on outstanding claims as to when the issue will finally be decided and when payments, which have been awarded, will be made.
My reply to Deputy's question is much the same as my reply to the previous question.
The liquidation of an insurance company is a legally complex and time-consuming process. Setanta is a Maltese incorporated company and, therefore, the Setanta liquidation is being carried out under Maltese law.
Progress in the liquidation of Setanta has been awaiting the outcome of the High Court case of the Law Society of Ireland v. the Motor Insurers' Bureau of Ireland. As this case is still sub judice, there are certain matters upon which I am not in a position to comment at this time. I will, however, respond to the Deputy's question as best I can within these constraints.
The Setanta liquidator informed me that he has made the following progress: the number of open claims was 1,696 at the end of August; the claims reserves position stands at between €87.7 million and €95.2 million; the liquidator will accept new claims up until May 2016, two years after the insurance policies issued by Setanta were cancelled - final settlements can only be paid out after all of the company's liabilities are quantified; and on foot of work already done with the Office of the Accountant of the Courts of Justice and the State Claims Agency, the liquidator was in a position to move quickly to start the process of paying claims in the event that the ICF had been deemed liable.
It has proven difficult to settle claims in advance of the High Court judgment as there is a lack of clarity as to whether the MIBI or the ICF is to be held liable. There is a cap on payments from the ICF of 65% per claim or €825,000, whichever is less. This cap does not apply in the case of payments by the MIBI.
The liquidator continues to await a final outcome to the High Court case. On 4 September 2015, the High Court held that the MIBI is liable in respect of claims against the policyholders of Setanta. The matter has been further listed for 13 October 2015, when the matter of costs in these proceedings will be dealt with. I understand that after that point the MIBI will have a further 28 days to appeal the case.
I am not currently in a position to confirm the level of payments expected to be made or the timeframe for the matter to be dealt with. I expect, however, to be in a better position to advise the House once the High Court proceedings have finally concluded.
The main point I would put to the Minister is that he should appoint somebody to examine this whole saga with a view to bringing in changes if this happens in the future. In view of the way insurance companies can passport in their services, they can be regulated primarily in another European country and regulated here for conduct of business purposes only. We are at the mercy of the strength of the regulation in another country. It is being standardised with a new European directive and so forth but that will take time to settle down.
The reality is that there are 1,700 individual stories involved here. They are very human stories and some of them are harrowing. I have seen solicitors' letters sent to many of the Setanta policyholders who were involved in accidents whereby they were being personally threatened that they would be held liable themselves, including by way of a judgment mortgage against their home if a payout was not made. That is the human dimension of this. It is unsatisfactory that almost a year and a half on these people have no clarity as to where they stand.
It is a fact that the Attorney General advised that the MIBI was not responsible. The High Court subsequently found in the other direction, that, ultimately, whatever the outcome, the MIBI's policyholders are going to pay, whether it be through the insurance compensation fund by way of the 2% levy or the MIBI members who will simply pass it on to policyholders. The Minister needs to take account of, and learn from, this experience and get all the parties together to ensure that if something like this happens again, there will be a much better and more efficient way of dealing with a liquidation scenario.
I do not disagree with what the Deputy has said and I could agree with most parts of his intervention. On the Deputy's question regarding the situation following the High Court decision and what we will do to ensure this does not happen again, I would point out that many of the arrangements are subject to European law and European regulation. That is why a Maltese company can write insurance here in this jurisdiction. I would ask for the assistance of Deputies, perhaps through the finance committee, when the High Court finally decides on this, such that the finance committee would consider what lessons we can learn from this and if there are any changes in domestic law which would be required, or if there is any advocacy which we could conduct in Europe to improve the situation to ensure there is no repeat of what the Deputy rightly said was a tragic situation for many of the 1,700 people who were affected by this.
The final point I would make is directed towards consumers and policyholders, namely, that they should listen very carefully to the tag-lines we hear on radio advertisements, for example, that an insurer is regulated by the Central Bank for conduct of business purposes. That does not mean that the Central Bank is the principal regulator of that insurance company; that insurance company could be regulated in Malta or Slovenia and it could just passport its services into Ireland. There is no consumer awareness of the difference between a firm being prudentially regulated in Ireland and being regulated here for conduct of business purposes.
There should be an awareness campaign to ensure consumers are more informed about this issue. As a result of the Setanta collapse, we saw the difference it can make. We also saw the difficulties presented when a company, essentially regulated abroad, collapses in Ireland with the claims of 1,700 customers directly affected, as well as the 70,000 customers who did not get the full value of the premium they had paid for the year ahead. This issue needs to be examined.
As in many other matters dealing with insurance companies, there is the issue of caveat emptor. It is hard to let the buyer beware, however, if he or she does not have the full facts. In any review that takes place after the liquidation and the court case are completed, we should certainly take into account the suggestions the Deputy has made about raising awareness for people purchasing motor insurance if their policies are underwritten in another jurisdiction.
