Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

I thank the three Members for raising this important issue and for their contributions to this exchange of views.

Setanta Insurance Company Limited is a Maltese incorporated company, which was both authorised and prudentially supervised by the Malta Financial Services Authority, MFSA. While its financial position is not supervised by the Central Bank of Ireland, as it has no role in that regard, the firm is supervised by the bank for conduct of business rules, that is, consumer protection obligations. I understand that the Central Bank has been in ongoing contact with the MFSA in respect of Setanta in recent times.

Under EU law governing non-life insurance, an insurer is required to inform the regulator in its home member state - its home regulator - that it intends to pursue business in another member state. The home regulator must then provide the host regulator with a certificate attesting that the insurer covers the EU solvency capital requirement, as well as the nature of the business which the insurer intends to undertake. The insurer may start to pursue business from the date that the certificate is communicated to the host regulator, in this case the Central Bank of Ireland.

Setanta was regulated at EU regulatory level in accordance with a directive known as solvency I which currently places requirements on the amount of regulatory capital European insurance companies must hold against unforeseen events. I understand that Setanta met its EU regulatory obligations and under EU law was, therefore, entitled to trade across EU borders. Following negotiations that were completed at European level in November 2013, a new regime known as solvency II will commence on 1 January 2016, which will further strengthen the EU regulatory framework. The solvency II EU directive sets out new, stronger Union-wide requirements on capital adequacy and risk management for insurers with the key aim of increasing policyholder protection. The new regime will also ensure greater co-operation between supervisors.

On 16 April 2014, Setanta Insurance Company Limited determined that it was insolvent. This means that Setanta did not have sufficient funds to honour its full obligations towards claimants, policyholders and other creditors. Policyholders can expect to be given two months' cancellation notification, in accordance with the Central Bank of Ireland's Consumer Protection Code 2012, during which period cover will remain in force. While policies will remain valid until the required notice period has been served, it is important to be clear that the amounts due under claims may not be fully recoverable in all circumstances. In this light, it is important to note that the Central Bank has advised all Setanta policyholders to arrange alternative cover without delay.

At a creditors meeting held in Malta today, a liquidator, Mr. Paul Mercieca, was formally appointed by the creditors and was approved by the Maltese regulator. The company has now, therefore, been formally placed into liquidation. The Motor Insurance Bureau of Ireland, MIBI, has indicated that it intends to accept all third party claims connected to Setanta policies. MIBI is a non-profit-making organisation, which was established by agreement between the Government and those companies underwriting motor insurance in Ireland. The principal role of MIBI is to compensate innocent victims of accidents caused by uninsured and unidentified vehicles. First party claims on personal insurance policies will be payable from the ICF. Claimants will be eligible for 65% of the amount due or €825,000, whichever is the lesser

I am informed that Insurance Ireland made arrangements for its member insurance companies to be open over the Easter period to assist Setanta policyholders in arranging alternative cover. In addition, the Insurance Ireland declined cases agreement was available to policyholders of Setanta. The current declined cases agreement was drawn up in 1981 and is adhered to by all motor insurers in Ireland. I am further informed that under the agreement, the insurance market will not refuse to provide insurance to an individual seeking insurance if he or she has approached at least three insurers and has not been able to obtain cover from them. I understand that Insurance Ireland is also making information available to those who have queries, complaints or difficulties in respect of this matter.

The Central Bank is in ongoing contact with the MFSA regarding Setanta, the impact on policyholders and the provision for relevant and appropriate information, particularly in regard to claims. The Central Bank has written to all brokers and has instructed them to write to all policyholders who hold a current Setanta motor insurance policy and inform them of the urgency of making alternative motor insurance arrangements. The Department of Finance and the Central Bank will review the circumstances relating to Setanta and will report to me on what lessons can be learned and how the regulatory framework can be strengthened. The European Commission has also indicated that it will review whatever issues are raised relating to the regulatory framework which require action.

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