Insurance intervention
EU Commissioner Michel Barnier is investigating the Setanta Insurance case after lobbying by Fianna Fáil. The party now wants a wider review of the sector.
Fianna Fáil is seeking an urgent review of the insurance sector following the collapse of Setanta Insurance. The party’s finance spokesman, Michael McGrath, demanded action by the Central Bank after the company folded just before the Easter holidays. Around 75,000 people were left without cover as a result.
McGrath saw this as an “extremely disturbing development” coming after RSA’s recent bail-out and the 2010 decision to put Quinn Insurance into administration.
“The basis of the insurance market has to be public trust that the entity to which they are paying their premium will be around to settle a claim if one arises,” he remarked. “This is being significantly undermined by the series of crises that have hit the sector. In both instances, these firms [RSA and Setanta] had overseas parent companies. The Central Bank needs to review whether the model of regulation for the sector is fit-for-purpose.”
Setanta was registered in Malta but operated solely in Ireland. The Central Bank is not directly responsible for its regulation – due to its registration outside the State – but will require that Setanta notifies its former customers in accordance with Irish law.
The winding-up process is being overseen by the Malta Financial Services Authority with Heritage Insurance Management acting as the run-off agents. The EU’s Internal Market Commissioner, Michel Barnier, is investigating the case following a request from Fianna Fáil MEP Pat the Cope Gallagher.
“This situation is simply unacceptable,” Gallagher added. “It is essential that both the European Commission and the Irish Government provide immediate assurances to policy-holders that they will not be placed at a financial loss due to the liquidation process.”
Gallagher also queried why an insurance company was allowed to operate in Ireland without having the necessary funds.
The Insurance Compensation Fund allows individual policy-holders to claim up to 65 per cent of a claim (provided that it was incurred in the State) up to a maximum of €825,000. The terms of the fund are covered by the Insurance Act 1964.
McGrath added that a review needs to consider how to provide for future claims and also the difficulties in obtaining insurance cover for flood risk despite remedial work having already been carried out in affected areas.
The insurance sector needed to be “very high” on the priority list for the new Competition and Consumer Protection Commission. This will be a merger between the Competition Authority and the National Consumer Agency. A Bill to establish the organisation was presented to the Oireachtas in March.
Finance Minister Michael Noonan has not yet commented on the Setanta collapse but was expected to consider its consequences over the Easter recess.
The Department of Finance is reviewing the availability of flood insurance cover, following the winter storms, and the recommendations will then be considered by the Cabinet. €225 million of State funds have been allocated for flood relief from 2012 to 2016.
Minister of State Brian Hayes has also discussed how to set up a data sharing platform, which would transfer detailed information on completed flood relief schemes to the industry, to make their assessments more accurate.
