Up to 75,000 van and car drivers have been advised to urgently seek alternative insurance cover following the collapse of Dublin-based Setanta Insurance.
The insurance firm, which was licensed by the Maltese Financial Services Authority (MFSA), had been in the process of winding down its business here since January.
However, at an extraordinary general meeting on Wednesday, shareholders were informed that the proposed solvent run-off of the business was no longer possible, and a decision was made to immediately dissolve the business.
As a consequence, the insurer has suspended all payments that were already in the process of being issued.
The company, which has offices in Blanchardstown, had been selling mostly commercial motor insurance through a network of brokers in the Republic since 2007. It had been popular with smaller businesses who use vans for their deliveries and trading.
The Central Bank said Setanta was not in a position to confirm if claims will be met in full since any and all claims will be subject to the relevant liquidation process, which will be overseen by the Maltese authorities.
“Policyholders should therefore make arrangements for alternative cover without delay,” it said.
The Central Bank — which has no regulatory authority over Setanta — said it was notified by the financial authorities in Malta that Setanta shareholders were winding up the company.
“The Central Bank will require Setanta to write to all policyholders to advise them of the situation and its implications for them,” it added.
It is understood the company has about 75,000 Irish-based customers on its books, down from the 100,000 it had just prior to its winding-down announcement in January.
Setanta Insurance said in a statement on its website that policyholders would be covered until they are notified of their policy being cancelled.
But it added: “Policyholders may wish to consider their right to cancel their policy and seek alternative coverage.”
Although it only trades in the Republic, the insurer was established by former chief executive Mike Matthews in Malta in 2007, with backing from a number of individuals linked to the insurance industry here.
Industry sources said the regulatory regime in Malta was considerably less onerous than in the Republic. The company never sought authorisation from the regulator to trade here but was permitted to under EU rules.
Those who were sufficiently unfortunate to buy new policies or renew their existing policies in December will lose coverage from the remaining eight months of the year.
Rachel Doyle of Piba, which represents financial brokers in Ireland, said policyholders face "a long drawn out affair" in getting claim payouts.
“Even though cover will remain in force for this period, if the insured person has an accident it is questionable whether Setanta will be able to honour the claim due to their financial situation,” she said.
“If (motorists) cancel their policy they can request a pro-rata refund.However, being realistic, given the circumstances, there is a strong possibility that refunds of premiums will not be given.”
Ms Doyle said it was unfortunate that Setanta has suspended all payments that were already in the process of being issued.
President of the Irish Brokers Association John Bissett called on the Central Bank to ensure that compensation was available to cover those consumers impacted by the sudden liquidation of Setanta Insurance.
“In the era of heightened regulation, Irish consumers need to know that they are protected regardless of where that entity is regulated.”
Setanta Insurance, a subsidiary of Malta based Setanta Insurance, was established in 2007 and was authorised to write business in Ireland by the Malta Financial Services Authority on a freedom of services basis.