Global motor insurer scraps plans to provide cover in Ireland

Global insurer AmTrust International Underwriters Ltd has scrapped plans to provide motor cover in Ireland to avoid being saddled with paying part of the potential €95 million bill needed to settle claims relating to Setanta Insurance, which collapsed here in 2014.

In order to write motor insurance in Ireland, AmTrust was required by law to join the Motor Insurers Bureau of Ireland (MIBI), which was established in 1955 to meet the costs of claims connected with uninsured drivers or unidentified vehicles.

The Irish Times has learned that AmTrust joined MIBI in 2015 but resigned its membership in recent weeks without having actually written any motor insurance cover.

Its decision to quit MIBI is linked with concerns about having to contribute to the costs of settling the near 1,700 claims associated with the liquidation of Malta-registered Setanta.

MIBI paid out €51.4 million in 2014 and €61 million the previous year, costs that were shared out among its member firms. These were connected with uninsured drivers and untraced cars.

Setanta collapse

However, on foot of a High Court ruling, later upheld by the Court of Appeal, MIBI now faces being saddled with the cost of meeting the claims arising from the collapse of Setanta, which had 75,000 policyholders in Ireland.

The matter is under appeal to the Supreme Court, with MIBI arguing that the bill should be met by the Insurance Compensation Fund, which was designed to facilitate payments to policyholders in the event of a liquidation or administration of a non-life insurer here.

The ICF meets the cost of claims via a levy placed on insurance policies over a number of years, and stepped in when Quinn Insurance was placed into administration in 2010.

MIBI has argued that the Setanta ruling has implications for an insurer’s cost of capital and their reserving of claims, and these concerns appear to have played a role in AmTrust’s decision not to offer motor insurance here.

MIBI operates under a pay-as-you-go funding model with each insurer making a contribution based on the proportion of premiums they held in the previous year.

Court judgment

The High Court judgment on the Setanta case, if not overturned by the Supreme Court, puts all motor insurers operating in Ireland on the hook for claims relating to the failed insurer, regardless of whether they were active in the market at the same time as Setanta.

Additionally, the legal precedent established means that claims relating to other motor insurers who go out of business, such as the recently closed Gibraltar-registered Enterprise Insurance, are likely to also be borne by the other motor insurance providers.

AmTrust has had a business in Ireland since 1991, largely providing non-life insurance cover in the US and European markets.

AmTrust International Underwriters Designated Activity Company is authorised and regulated by the Central Bank of Ireland with an office in Dublin.

Its latest accounts show that it made a profit of €45.6 million in 2014, a year when its gross premiums written amounted to €314 million. The company employed an average 42 staff in Ireland in that year.

No comment was available from AmTrust’s operation in Ireland.

Formed in 1998, AmTrust has platforms in the US, Europe and Bermuda providing a portfolio of insurance products.

There are more than 30 AmTrust offices around the world, with AmTrust Financial Services Inc listed on the Nasdaq Global Market since November 2006.