Taxpayers may end up paying for collapse of Setanta Insurance

Taxpayers may end up footing the bill for third-party claims related to the collapse of Setanta Insurance.

The Maltese-registered insurer went into liquidation in April leaving 75,000 motor policyholders in Ireland with no cover.

It had been selling mainly commercial motor insurance through brokers and was known as a low-cost operator.

Initially Minister for Finance Michael Noonan signalled the industry-funded Motor Insurance Bureau of Ireland (MIBI) would cover all outstanding third-party claims emanating from the collapse.

However, on foot of legal advice, the department has informed the Oireachtas Finance Committee that the MIBI would not now be playing a role in compensating claimants due awards under Setanta policies.

"In all likelihood these claims must now be sent to the Insurance Compensation Fund(ICF), funded by the insurance levy, which itself must queue up and stake its claim under the liquidation process," Sinn Féin finance spokesman Pearse Doherty said.

“From the outset of the Setanta fiasco Minister Noonan has said that the MIBI will be in a position to cover all third party claims.”

“Today his department has confirmed that this is not the case. In practical terms this seems to mean that the State through the liquidation process will now be seeking a bigger slice of what we know to be a small pie.”

“It seems unfair and irresponsible of the industry to drop this bombshell so late in the day. The Minister should make a clear public statement as to how the third party claimants will be treated,” Mr Doherty said.

In April, the Maltese Financial Services Authority appointed liquidator Paul Mercieca to administer the company's assets and liabilities.

It is unclear at this stage how much the outstanding third-party claims left in the wake of Setanta’s collapse will amount to as many are still being processed.

The ICF, which is administered by the High Court, can pay out up to 65 per cent of the sum due to the policyholder, or €825,000, whichever is lower.

The €1.65 billion crater left by the collapse of Quinn Insurance in 2010 put such a strain on the fund that a 2 per cent levy was imposed on insurance customers.