The Motor Insurers Insolvency Compensation Fund (MIICF) is an ex-ante fund which has been set up to collect contributions from motor insurers in order to fund the increase in compensation for third party motor claims from 65% to 100% arising from a motor insurer insolvency. This change was introduced by the Insurance (Amendment) Act 2018 and became operational on 1 December 2018. What it means in practical terms is that compensation levels payable from the Insurance Compensation Fund (ICF) for third party motor insurance claims as a result of a motor insurer insolvency are aligned with the compensation levels paid out by the Motor Insurance Bureau of Ireland (MIBI) where a motorist is in a collision with an unidentified or uninsured driver.
The 2018 Act requires motor insurers to contribute an amount equivalent to 2% of gross motor insurance premiums annually to the MIICF until it reaches €150m, and thereafter a rate of 1% until it meets its target level of up to €200 million, when contributions cease. MIBI is required to invest these monies prudently to ensure that they are available to recoup the ICF for 35% of any future third party motor insurance claim which it is required to pay.
Department of Finance officials have been engaging closely with MIBI in relation to its new role. On the 30th July MIBI submitted to the Minister the ‘Motor Insurers Insolvency Compensation Fund Annual Report for the year ended 31st December 2018’. This has been laid before the Houses of the Oireachtas. At end-December 2018, following one month of contributions made to it by motor insurers, the total contributions made by members equalled €2,498,972.
It is not possible to say exactly when contributions will cease as that will depend on amongst other things the volume of gross motor insurance premiums written in a year and whether there are any calls upon the fund. However, if we were to base our projections on the amount of just under €2.5 m collected for December 2018, this would result in an annual collection of €30m a year, which means after 5 years, the deduction rate would fall to 1%. Therefore another 3 to 4 years of collection at this lower level would be required before the €200m threshold was crossed. This would suggest a period of 8 to 9 years before contributions cease in a steady state scenario, and assuming no call upon the fund during this period.