The Setanta Insurance liquidator has determined the cost of claims could run to about €90m
A ruling from the Supreme Court means the State is potentially liable for claims against collapsed insurer Setanta.
It's after the Supreme Court overturned a finding that the Motor Insurers’ Bureau of Ireland (MIBI) was potentially liable.
The ruling was passed by a five-to-two majority.
The liquidator of Maltese-registered Setanta - which sold insurance policies in Ireland before it collapsed in 2014 - has determined the cost of claims could run to about €90m.
Today’s ruling means that claims against Setanta will have to be met by the State’s Insurance Compensation Fund (ICF).
The ruling means that policy holders will only be able to recover a maximum of 65% from the ICF for each claim – rather than the 100% that would have been available if the MIBI was footing the bill.
Supreme Court Justice Donal O’Donnell warned however that there may be strong case for the rules governing the fund to be amended to allow for full recovery of the claims against Setanta.
As things stand, the remainder of the claims is likely to be paid by the State Liquidator.
In a statement this afternoon, Eoghan Murphy, minister of state for financial services said it is “likely that in many cases” the additional 35% will be met from the proceeds of the sale of the failed company’s assets when the liquidation process is complete.
A key recommendation from the government’s Cost of Insurance Working Group, which presented its findings in January, is that in the event of similar circumstances arising in the future, the insurance industry should cover the 35%.
Mr Murphy said he has already agreed a “proposal in principal” with the insurance industry as to how this could be achieved – adding that legislation in line with the proposal will be brought forward “shortly.”
He said the agreement with insurers represents a “significant step forward to achieving a more stable insurance market and also should make Ireland more attractive to new entrants."
On Newstalk Drive this afternoon, Jonathan Hehir, managing director of Insuremyvan.ie said the ruling could eventually see reductions in insurance premiums.
“I think [insurance companies] initially would have reacted by putting prices up had it not gone their way,” he said. “They would have put a levy in themselves to pay for the Setanta policy holders claims and also to protect themselves from future insurance companies going into liquidation or going bust.”
“The fact that that hasn’t happened is good for everybody and I think the fact that the insurers have stated that this was contributing to the increased premiums means that I think we will start to see slow reductions in premiums.”
There are 1,600 outstanding claims against Setanta, with insurance companies citing the collapse as one of the major factors in the ongoing rise in Irish insurance premiums.
In a statement this afternoon, Fianna Fáil finance spokesperson Michael McGrath said the “clock is now ticking” for the government to ensure the claimants receive their full compensation in a “timely manner.”
He said the ICF compensation cap must be lifted for Setanta claimants.
“This cannot be allowed to stay as is,” he said. “Claimants must not be left to foot the bill.”
“As I have said previously, the Government must ensure fairness is applied and if this requires both policy and legislative change, then so be it."
He warned that the ruling has left claimants unsure as to when their case will be dealt with, and what level of compensation they will receive.