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Motor Insurance Claims

Dáil Éireann Debate, Tuesday - 30 January 2018

Tuesday, 30 January 2018

Questions (68)

Michael McGrath

Question:

68. Deputy Michael McGrath asked the Minister for Finance his plans to intervene to ensure that 100% of the cost of all outstanding claims arising from the collapse of a company (details supplied) are fully met and that former policyholders of the company are not held personally liable for claims; and if he will make a statement on the matter. [4525/18]

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Oral answers (6 contributions)

This question relates to Setanta Insurance, and ensuring that 100% of the costs of outstanding claims are met. I welcome today's announcement by Government. It has taken far longer than it should, but I think that those who are caught up in the nightmare will now want to know when 100% of the costs of the outstanding claims will be settled, because that is the key issue. This has been a debacle running over four years now, and I hope it does not continue for much longer.

Setanta Insurance was placed into liquidation by the Malta Financial Services Authority on 30 April 2014. As it was a Maltese incorporated company, the liquidation is being carried out under Maltese law.

As the Deputy is aware, the Supreme Court delivered its judgment on 25 May 2017 and overturned the previous decisions of the High Court and the Court of Appeal that the Motor Insurers' Bureau of Ireland, MIBI, was liable in respect of third-party motor insurance claims made against the policyholders of Setanta Insurance. The consequence of this is that the Insurance Compensation Fund, ICF, has been deemed responsible for the payment of such third-party claims subject to a limit of 65% or €825,000, whichever is the lesser, due to relevant claimants.

As the Minister for Finance, Deputy Paschal Donohoe, has previously indicated, there was a legal concern that any Government intervention to compensate third-party claimants over and above the 65% limit and then "step into the shoes" of these claimants to recover directly any balance due from the Setanta liquidation could result in the State having a lower status in the creditor hierarchy, and thus significantly reduce the amount it could recoup from the liquidator.

As indicated in recent parliamentary questions on this matter, the Department of Finance sought and received advice on this matter from a Maltese law firm which the Attorney General subsequently reviewed. This advice confirmed our original concern that the State would have a lower status in the creditor hierarchy and therefore could jeopardise its ability to recover any payments it made to third-party claimants. However, on the basis that the Department has established from the liquidators that the third-party claimants make up by far the largest percentage of creditors, the impact on the State’s ability to recover what would otherwise have been paid to these claimants is significantly less than anticipated.

As the Deputy is aware, the Government has decided to address the uncertainty this case has highlighted around compensation arrangements for third-party motor claimants in the event of any future insolvency of a motor insurer.  In this regard, it has been decided that coverage of the ICF should be increased from 65% to 100% for personal injuries, and to €1,225,000 per claim for property, in order to bring it into line with the compensation levels paid out by the MIBI.

Additional information not given on the floor of the House

The increased coverage of the ICF will be funded by a direct contribution to the ICF from the motor insurance industry via the MIBI to the value of 35% of the third-party motor insurance claims. The Department is currently working with the Office of the Parliamentary Counsel, OPC, and other relevant stakeholders to progress the drafting of the Insurance (Amendment) Bill 2017 to implement these changes.

As a result of his consideration of this matter, the Minister for Finance has made a decision in principle that the State should step in to pay the balance of 35% to Setanta third-party claimants. This will most likely be done through the Insurance Compensation Fund.  However, the Deputy should note that while the Department is of the view that there are no legal or competitive issues associated with this decision, it is currently exploring the matter with the Office of the Attorney General. Depending on the outcome of those discussions, legislation may be required to facilitate this payment. This is likely to be done through the Insurance (Amendment) Bill 2017.

Finally, while the Government hopes that this will bring the matter to a close, it is important to note that before the State can step in to pay the 35% balance of any individual case, the claim itself has first to be settled between the liquidator and the claimant. As I hope the Deputy will appreciate, this is a matter completely outside the Government's control.

I welcome today's announcement, and I acknowledge the work that the Minister of State has put into it. As he will know, it is an issue that my party and I have been raising for the last number of years. Those who are caught up in the Setanta mess will want to know when they will get the final payments and when 100% of the cost of claims will be met. I know that under existing legislation, the Insurance Compensation Fund can only go to the High Court every six months. I understand that the next tranche is likely to be brought next month, so any payment that is not included there is not going to happen until August. The courts probably do not sit in August. The question is, when does the Minister of State expect that all the claimants will have their claims fully met? The wider point is that while we welcome the heads of a Bill, all motor insurance policyholders in the country are still facing the prospect of there being another Setanta. If there is a collapse, there is still no statutory basis for 100% of their claims to be covered.

I will take the last point first. As Deputy McGrath knows, the Insurance (Amendment Bill) 2017 is awaiting pre-legislative scrutiny. It is incumbent on all of us to try to get that legislation through both Houses as quickly as possible to ensure that people do not find themselves in a similar position to Setanta's claimants. The Minister for Finance, Deputy Pashcal Donohoe, required the actuarial figure from the analysis to be done in July. Those calculations were concluded and presented in November or December. The Department had been dealing with the liquidator. To put it into context, we are looking at sums between €25 million and €40 million. The State will step up to try to conclude these matters as quickly as possible.

It is also important that people come to a conclusion; that they come to a settlement themselves. They will now be paid 100% of their claim, and the sooner people agree a figure, the sooner we can get as many of these dealt with as possible. I make that point because they do not all have to go to the High Court. It is important to note that the quicker people conclude the matter, the better.

It is also important that people come to a settlement themselves. They will now be paid 100% of the amount and the sooner they agree a figure, the sooner we can get as many of these finished as possible. I make that point because they do not all have to go to the High Court and the quicker people conclude the matter, the better.

With regard to the numbers, assuming that the higher claims estimate of €112.9 million is more accurate and that the 22% liquidator's estimate of what he can cover is accurate, the net additional cost will be of the order of €15 million rather than €40 million, provided that the liquidation delivers what is expected based on the actuarial report.

I refer to the issue I raised a while ago, which is the six-month cycle currently in place for the Insurance Compensation Fund to go to the High Court for approval to issue payments. People in some cases have been waiting three and a half years to have their claims settled, and they deserve to know now whether they will all be completely done and dusted and fully paid in 2018.

I cannot give an undertaking. When we had this conversation previously in the Chamber, I gave undertakings that I would do everything I could to try to conclude the matter as quickly as I could. My officials have done a good job to try to bring this to a conclusion and I am hopeful this can be concluded as quickly as possible. Unfortunately, I cannot do anything about the six months for the claims that are required to go to the High Court. Perhaps we will have an opportunity to reduce that to a shorter period in the next Bill. I gave an undertaking that I would conclude this as quickly as is practicable.

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