The collapse of the British Independent Insurance group could force the closure of Irish companies that are now facing potentially substantial claims.
PricewaterhouseCoopers, the provisional liquidator appointed to the insurer this week, yesterday said it was clear the company was insolvent. Joint provisional liquidator Mr Mark Batten said it was still trying to determine the extent of Independent's liabilities. Britain's Serious Fraud Office last night instituted a full investigation of the company.
A number of potentially large compensation claims are understood to be due shortly before the Irish courts involving construction companies. These will now have to be borne by their employers.
There are also concerns that some contractors may also be forced to bear the cost of claims incurred by subcontractors insured with Independent.
Small Firms' Association director Mr Pat Delaney called on the Tanaiste and Minister for Enterprise, Trade and Employment, Ms Harney, to take immediate action to help Irish companies affected by the collapse.
"Many Irish companies are now in the situation where they have no insurance, where the Irish market is cherry-picking and where companies will have to pay again for insurance cover at greatly increased premiums," he said.
Most of the companies affected are in the construction sector and had taken out employers' liability insurance with Independent. Many were forced to suspend work at building sites and seek fresh insurance cover from another company.
A spokesman for the Construction Industry Federation said its affected members had sorted out temporary cover and had resumed work.
However, a number of smaller companies are believed to be finding it difficult and very expensive to get adequate cover from another insurer.
Many of the major insurers have moved away from insuring the higher-risk end of the construction market, with Allianz and Lloyds among those willing to take on this type of business. As a result, the market has hardened and companies seeking new insurance cover are being faced with hefty premium increases, in some cases reported to be in the region of 50 per cent. The insurers are also being selective in the terms on offer.
Independent was a relatively small player in the Irish market but, as it specialised in employers liability, it managed to attract the high-premium, high-risk end of the construction sector. It is estimated to have insured between £30 million (#38 million) and £50 million of risks in the Irish market.
Irish companies affected will not qualify for any compensation from the UK Policyholders Protection Board unlike British companies with the same policies. British companies qualify for compensation because employers' liability is compulsory in Britain.
