Every motor insurance policyholders will ultimately foot the bill associated with a shortfall of funds following the collapse of insurance company Setanta.
Minister for Finance Paschal Donohoe announced on Tuesday that the State would ensure that Setanta third-party claimants were compensated in full through the mechanism of the Insurance Compensation Fund (ICF).
In 2014 Setanta Insurance was placed into liquidation, the subject of which was a protracted court case. The Supreme Court found that the ICF was liable in respect of third-party motor insurance claims. This meant the ICF had to pay up to 65 per cent of the claim or €825,000, whichever was less.
That left a shortfall of 35 per cent and while some of that shortfall could have been addressed from the assets of the liquidation, up to 22 per cent it was estimated, that could take several years.
While the general taxpayer will not have to pick up the remainder of the additional compensation, insurance policyholders will do so through the ICF, which was set up to recover money owed from the collapse of Quinn Insurance. This is collected through a 2 per cent levy on all motor insurance policies.
The Department of Finance expects this decision to extend the life of the ICF, which is due to run for another 10 years, by between six and eight months. It is estimated that the cost of this intervention will be in the region of €35 million and €45 million.
Full compensation
“I have carefully considered the matter including recent legal advice I have received plus an update from the liquidator, and on the basis of this I have come to the conclusion that if the State steps in to pay the 35 per cent shortfall, it should be able to recover the bulk of what the third-party claimants themselves would have received from the liquidator,” Mr Donohoe said.
“By taking this step now and compensating in full, it is hoped that this will encourage the settlement of outstanding claims as quickly as possible,” he added.
This decision also applies to the collapse of another insurer, Gibraltar-based Enterprise Insurance, which was smaller in scale and affected about 14,000 motorists.
Minister of State Michael D’Arcy noted that officials at the Department of Finance were currently discussing with the Attorney General’s office whether there are any competition or legal issues.
“Once clarity is obtained on this matter, we will announce further details on how we intend to facilitate such payments to Setanta third-party claimants,” he said.
Fianna Fáil spokesperson on finance Michael McGrath has welcomed the announcement that the State is to step in. “Today’s announcement is an important step forward but delivery is what really matters. I am raising the Setanta issue as a priority question during finance oral questions this afternoon and will continue to raise this issue in the Dáil until all outstanding claims from the Setanta collapse are settled in full.”
“The human toll for some of those mired in this mess continues to be enormous and they will want to know when the nightmare will end,” he added.
