THE SUPREME Court's ruling this week striking down the Government's risk equalisation scheme will create a further challenge for the VHI in its negotiations with the Financial Regulator over the company's insurance licence.
The VHI is in the process of securing a licence from the regulator which the company has said will give it "greater commercial freedom" to launch new products in different sectors of the insurance market, such as pension and investment policies, and start selling insurance policies in other countries.
The ruling means the VHI won't be receiving €41 million in payments for 2006 and 2007 due under risk equalisation.
The regulator demands non-life insurers have a 40 per cent solvency ratio - which determines how much the VHI must hold in reserve.
The VHI has a solvency ratio of 35 per cent, which would have risen to 38.7 per cent had it received the risk equalisation payments from its rivals.
The company has argued that its ratio should be closer to 30 per cent, but said it would make up the required difference from reinsurance, which would involve the company selling on some of its risk to other insurers.
VHI chief executive Jimmy Tolan has indicated that the company has no intention of seeking extra State capital to improve its solvency ratio.
After Wednesday's ruling, it looks like the VHI will be meeting reinsurers as well as the regulator before it can embark on its ambitious growth plans.
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