Setanta Insurance saga nears end of road after High Court ruling

The ruling on Monday in connection with Setanta Insurance by High Court President Mr Justice Peter Kelly was a significant step towards ending a legal wrangle that began in April 2014 when the company went into liquidation.

Malta-based Setanta left an estimated €90 million in outstanding claims against its policies when liquidator Paul Mercieca, a previous managing partner of Deloitte in that country, was appointed more than four years ago.

Justice Kelly has ordered that the State Claims Agency (SCA) pay €20.6 million in three different tranches to some of those seeking compensation from the defunct insurer.

About €45 million to €50 million has already been paid out against Setanta’s policies. It is understood a number of claims remain to be finalised, and there are likely to be further hearings as that process continues.

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There have been many twists and turns in the four-year Setanta saga. While the SCA is making the payments, it is acting as an administrator for the Insurance Compensation Fund, which was landed with the bill when the Supreme Court ruled last year that it was liable for Setanta's unpaid claims.

Setanta began trading in 2007. It was incorporated and regulated in Malta, but sold insurance solely in the Republic, where its cheap policies helped recruit about 75,000 customers, many of them motorists.

Outstanding claims

The company's liquidation threw up questions about which body would ultimately pick up the tab for the outstanding claims – the Motor Insurance Bureau of Ireland (MIBI), which pays out on validated claims against uninsured drivers, or the State's Insurance Compensation Fund.

A previous president of the High Court, Mr Justice Nicholas Kearns, invited solicitors' body, the Law Society of Ireland, to take a public interest case to clarify this. The issue not only affected Setanta claimants, but also had implications for general insurance costs.

That process ended with a landmark Supreme Court ruling last year declaring that the Insurance Compensation Fund was liable for the entire amount due against Setanta’s policies.

The Insurance Act 1964 established the compensation fund to pay claims due against insolvent underwriters. The SCA does the work on the fund’s behalf.

The SCA, which is part of the National Treasury Management Agency, validates the claims and pays out the money, which is why that body went to the High Court on Monday seeking an order allowing it to pay the money to the Setanta claimants.

Validated and settled

Justice Kelly noted that the court had previously dealt with four other motions relating to the Setanta case. It is understood that there are likely to be more, as further claims are validated and settled.

This will take some time. Some claimants may be challenging whatever was offered to them under the original Setanta policies, which they are entitled to do. In other cases, the actual amount due may not yet be finalised.

Ultimately, motorists will pay for the Setanta failure. The Government borrows the money, which the Insurance Compensation Fund passes on to claimants. The fund then repays this cash through a levy on insurance policies taken out in the State.

Under a change to the law passed by the Oireachtas this year, in future insolvencies the Insurance Compensation Fund will pay 65 per cent of what is due to claimants while the industry will contribute 35 per cent. Either way, the cost will be passed on to motorists.