Insurers 'should pay into fund' to cover claims if rival goes bust
ICF should cover third-party claims, says report ordered after Setanta Insurance row
The report follows the 2014 collapse of Setanta Insurance, which has led to a dispute over who should pick up the tab for the 1,700 open claims that could cost up to €95.2 million to settle
Third-party motor claims arising from the liquidation of an insurer should be met in full by the Insurance Compensation Fund (ICF) and part-funded by a 35 per cent direct contribution from the industry, according to a review carried out for the Government.
A joint working group established last year by the Department of Finance and the Department of Transport, Tourism and Sport has also recommended that administration of the ICF be handed over to the Central Bank of Ireland and that insurers should be required to provide more detailed information on customer policies to help improve Garda enforcement.
These are among four key recommendations that will be presented to the Cabinet today in a report, seen by The Irish Times, entitled Review of the Framework for Motor Insurance Compensation in Ireland.
It comes in the wake of the collapse in 2014 of Malta-based Setanta Insurance, which has led to a dispute over who should pick up the tab for the 1,700 open claims that could cost up to €95.2 million to settle.
It was initially expected that the ICF would settle the bill for Setanta up to a limit of 65 per cent of claims and a ceiling of €825,000 per claimant.
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MIBI provides compensation for property damage or personal injury caused by unidentified vehicles or uninsured drivers. The bureau is liable up to a limit of €1.125 million per claim for property, and the full claim in the case of personal injury.
The joint working group was tasked with bringing clarity to the issue.
It has recommended that coverage of the ICF be extended to include third-party motor claims in the event of a liquidation of an insurer. This proposal was made by the industry last year.
So, in the event of a liquidation, claimants would be covered to the same extent as victims of an uninsured or untraceable vehicle. Again, this was a proposal from the industry.
The group has recommended that the increased coverage of the ICF be funded by a “direct contribution” from the motor insurance industry, via MIBI.
The insurance industry has challenged this recommendation, arguing that it would result in “open-ended liabilities” arising from the failure of a competitor.
In a letter sent last week to Aidan Carrigan, an assistant secretary general in the Department of Finance, Insurance Ireland chief executive Kevin Thompson said the proposal would be “detrimental” to motor insurers as it would require them to reserve capital to meet this risk.
Instead, he suggested a “small levy” to “pre-fund a reserve”to meet the cost of claims, similar to the model used in France.