Remember Setanta Insurance? It was incorporated and prudentially regulated in Malta but traded solely in the Irish market.

It offered some of the cheapest premiums here and had 75,000 policyholders when it was placed into liquidation in April 2014. Some 27 months later, 1,700 claims that are potentially eligible for compensation await settlement.

The liquidator has advised that the cost of settling the claims could be between €87.7 million and €95.2 million. In round terms, that’s an average of between €51,600 and €56,000.

“It is expected that no more than 30 per cent of each claim will be available from the liquidation process,” states a new report from a joint working group set up by the departments of finance, and transport, tourism and sport to review the framework for motor insurance compensation in Ireland.

So who pays the 70 per cent balance? This is a matter of debate between the Government and the industry on one side, and the Law Society of Ireland on the other.

It had been assumed that the Insurance Compensation Fund (ICF) would pick up the tab, up to a limit of 65 per cent of claims. Established in 1964, it was designed to facilitate payments to policyholders in the event of a liquidation or administration of a non-life insurer here.

It stepped in when the likes of PMPA and Quinn Insurance went into administration but different rules applied in those cases as continuity of insurance cover was ensured and claims were paid in full.

Exchequer loans

The ICF pays claims via loans from the exchequer, which get repaid annually through the collection of a levy on non-life insurance policies. By the middle of this year, the amount owed to the exchequer by the ICF was €812 million.

Some €70 million was raised by the levy last year, indicating that it will be 12 years before the exchequer is repaid in full.

In the finish, on foot of a legal action taken by the Law Society, the High Court decided that the Motor Insurers Bureau of Ireland should pay the Setanta bill.

The MIBI was set up in 1955 to deal with cases involving road traffic accidents caused by uninsured drivers or unidentified vehicles. It paid out €51.4 million in 2014 and €61 million the previous year.

It is a not-for-profit company set up by motor insurers here and operates under the terms of an agreement with the Government. It fulfils Ireland’s obligations under EU motor insurance directives and all companies providing motor insurance here are required to be members of the MIBI.

The High Court’s ruling on Setanta rocked the industry, as it has implications for an insurer’s cost of capital and their reserving of claims.

A case was taken to the Court of Appeal, which upheld the earlier decision and the industry has since been given leave to take the matter to the Supreme Court.

In the meantime, Setanta claimants continue to wait for their payouts.

In a bid to bring some certainty to this area, the joint working group was tasked with drafting recommendations for a future compensation framework here.

In June, it produced a 44-page report, which was submitted to the Cabinet yesterday.

The Minister for State for Financial Services Eoghan Murphy will today chair an interdepartmental group to consider the report and draw up a plan of action that would produce final recommendations by year end for the Minister for Finance Michael Noonan.

Industry perspective

For the most part, the industry and the working group are on the same page. In future, the ICF would be liable to meet 100 per cent of claims in the event of a liquidation (as opposed to 65 per cent currently).

It would also be regulated by the Central Bank of Ireland while insurers would be required to provide more detailed information on policies for a central database that would assist gardaí in traffic enforcement.

The major sticking point is that the working group has suggested that the MIBI should pay a direct contribution to allow the ICF to bridge the gap between the existing 65 per cent payout of claims and the 100 per cent it has recommended.

MIBI members would prefer that the whole cost be levied on policyholders.

A compromise may well be hammered out before these recommendations are set in stone. Either way, there will be certainty around compensation payouts if ever another motor insurer goes bust.

But that won’t help the Setanta claimants, who remain in limbo while the legal squabbles over their payouts rumble on.

More than two years after Setanta went wallop, they still have no certainty about when they might receive their money.

It is a wholly unsatisfactory situation and one that – legal principle or no legal principle – the Government and the industry should sort out without any further delay. Where there’s a will, there is always a way.

Twitter: @CiaranHancock1