The Central Bank will reduce the Insurance Compensation Fund Levy to 1 per cent from January 2026 and has urged insurance companies to pass on the savings to customers.
The decision to reduce the levy for the fund, which is used to compensate policy holders should their insurer go into liquidation, was made after engagement with insurers and the Department of Finance.
The reduction in the levy marks the first change to the levy in 14 years and a rate of 1 per cent is thought to be sufficient to repay the existing loan balance and cover anticipated calls on the fund next year.
The reduction in the levy will apply to non-life insurance policies such as home and motor insurance policies in which the insurer is regulated by the Central Bank of Ireland.
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The Central Bank’s deputy governor Mary-Elizabeth McMunn said the changes to the fund “reflect the financial position of the fund”. She said the reduction in the levy will “positively impact a large cohort of policyholders in Ireland”.
“We expect firms which charge this levy to act in the best interests of consumers by ensuring that any reductions on eligible policies are passed on immediately,” Ms McMunn said.
She said the Central Bank has been engaging with Department of Finance, Insurance Ireland, the Revenue Commissioners and insurance companies on the change and will carry out another review of the fund next year.
“It is the responsibility of insurance firms to pay the correct levy and it is important that they are ready to implement the change from 1st January 2026,” she said.
The Central Bank said it expects firms to “act in the best interests of consumers”.
Minister of State at the Department of Finance, Robert Troy TD said the reduction in the levy is “good news for the insurance sector and for policy holders”.
Mr Troy said the change “reflects the significant progress made in restoring stability to the wider market”.
“It is now essential that insurers pass on this reduction to their customers. Trust and transparency is paramount for the sector, and it is vital that insurers act responsibly,” he said.
