Mr. Seán Quigley:

I thank the Chairman and members of the committee for the invitation to attend the meeting and brief the committee on the operation of the Insurance Compensation Fund, with particular reference to Setanta Insurance Company. I am joined by Ms Denise Mullins from the accountant's office. I am conscious of the time constraints so I will keep my opening statement as brief as possible. However, I wish to take the opportunity to briefly outline the background to the fund, how it operates and some significant activity in managing the fund, particularly since 2011. I will also update the committee on the current position regarding the Motor Insurance Bureau of Ireland, MIBI, relating to Setanta Insurance.

The Insurance Compensation Fund was established under the Insurance Act 1964 to make arrangements to meet certain liabilities of insolvent insurers. The fund is maintained and administered under the control of the President of the High Court acting through myself, the Accountant of the Courts of Justice. Amounts are paid from the fund, with the approval of the High Court, to a person in relation to an insurer in liquidation or administration, in respect of claims under policies issued by the insolvent insurer in circumstances where it seems unlikely that the claims can be met otherwise. In regard to claims for companies in liquidation, all payments are subject to a limit of 65% of the amount of the claim or €825,000, whichever is the lesser. The fund will also pay the full amount of legal and other costs necessarily and reasonably incurred by the person endeavouring to secure payment from the fund.

As was stated earlier, the Minister for Finance puts the Insurance Compensation Fund in funds where there are insufficient moneys to pay out. From October 2011 to the end of December 2014, the State has advanced a net€833.3 million to the Insurance Compensation Fund. The total interest charged by the Minister for Finance on amounts advanced during this period amounted to €80,390,482. The closing balance on the loan from the Minister for Finance to the fund at the end of December 2014 was €913,690,482. The current balance on the Insurance Compensation Fund is€96 million.

A levy was introduced in 2012 and €190.3 million has been paid into the fund by the Revenue Commissioners in respect of that levy up to the end of December 2014. I provide an annual statement on the fund to the Department of Finance and the Central Bank.

Furthermore, the Accountant of the Courts of Justice is, in respect of any amount paid out of the fund, a creditor of the insolvent insurer which has received the funds. The total creditors of the fund at 31 December 2014 amounted to€1.361 billion. The details of that have been provided to the committee.

To focus on some of the activity since 2011, since the introduction of the Insurance (Amendment) Act 2011 there has been significant activity for the accountant’s office in managing the fund. I will give a brief summary of the main areas of activity.

In March 2010, by order of the High Court following an application by the Financial Regulator, joint administrators were appointed to Quinn Insurance Limited, QIL. Between November 2011 and December 2014 the fund made nine payments amounting to €1.158 billion to the Quinn Insurance administrators. In 2014, the fund received €100 million back, which was forwarded to the Department of Finance as part repayment of the loan. The net payments to Quinn Insurance administrators have amounted to €1.058 billion to date. The last payment to Quinn Insurance was in November 2013, which was €40 million, at which time the President of the High Court set a limit of €1.158 billionon the amount that would be paid to Quinn Insurance administrators.

Another claim on the fund arose in respect of Lemma Europe Insurance Company Limited, in liquidation. Lemma Europe Insurance Company Limited is a Gibraltar registered company and the Supreme Court of Gibraltar ordered its winding-up on 24 January 2013. In November 2013, a claimant against Lemma Europe Insurance Company wrote to my office making an application to the fund. Our legal advisers reviewed this claim and were satisfied that it was valid. I subsequently made an application to the High Court in July 2014 to pay out 65% of the total claim. The amount that was paid was €29,166. The Lemma Europe Insurance Company liquidator has indicated that there are potentially 14 other claims. However, these claims have not been settled and we are not in a position to give a value for these potential claims. One distinction between Lemma Europe Insurance Company and Setanta Insurance is that the former did not issue motor insurance policies.

As the committee is aware, Setanta Insurance went into liquidation in April 2014. It was a Maltese incorporated company. While this company was based and regulated in Malta, all of its policies covered motor insurance risks in the Republic of Ireland. Following Setanta Insurance going into liquidation in April 2014, the Office of the Accountant of the Courts of Justice has had significant engagement with the Department of Finance and the liquidator through his representatives in Dublin. There were a number of legal and administrative issues to be resolved, which also required extensive engagement with our own legal advisers. This was the first time we had to deal with an insurer in liquidation on this scale and the first time we had to deal with one that was registered in another EU state. The processes are different compared with an insurer in liquidation registered in the State. The essential differences are, first, it is the accountant and not the liquidator who makes application to the fund and, second, claims on the fund can only be made very six months.

The Setanta Insurance liquidator indicated at an early stage that there would be a significant shortfall between the funds available from the liquidation and the value of the claims. The available funds after liquidation would not exceed 30%. On this basis, given the cap on the payment that can be paid from the Insurance Compensation Fund of 65%, as the Accountant of the Courts of Justice, I decided to facilitate the processing of payments from the fund as soon as possible, and therefore it was agreed to make advance applications to the fund before the liquidation process was completed. The liquidator had advised that settlements could only be paid out by him after all of the company's liabilities were quantified, including claims.

The legislation provides for the recovery of amounts that, in the aggregate, exceed a sum due to claimants from an insurer in liquidation in respect of a risk situate in the State. These provisions and penalties give me, as the accountant, sufficient comfort should a situation arise where an overpayment is made. I will only make an application to the President of the High Court where I am satisfied that claims qualify under the provisions of the applicable legislation. To ensure this is the case, we have been working closely with the liquidator of Setanta Insurance to identify eligible claimants in accordance with the Insurance Act 1964, as amended. I am also pleased to inform the committee that the State Claims Agency agreed to my request to provide expert advice and input that was not available within my office to validate claims before they are brought forward to the High Court.

The accountant's office had all of the necessary arrangements in place to deal with Setanta Insurance claims by the end of December 2014 and it was expected that the first tranche of claims would be submitted to the High Court in the first quarter of 2015. The first tranche of claims reviewed by the State Claims Agency on my behalf included 189 claims with a value of some €4 million, together with legal costs of approximately €132,000.

There was one other matter we had to deal with in respect of the Insurance Compensation Fund in recent years. This was a judicial review relating to an insurer, Independent Insurance Company Limited, a UK insurer that had gone into liquidation in 2001. I refused an application for payment from the fund, as the liquidation occurred before the introduction of the Insurance (Amendment) Act 2011 and, as such, the claimant was not deemed eligible under the provisions of the Act. The claimant did not agree with this decision and initiated judicial review proceeding against the Accountant of the Courts of Justice. This matter came to court in July 2014 and the position taken by the accountant was upheld.

Finally, I will address the issue of the Motor Insurance Bureau of Ireland, MIBI, in relation to Setanta Insurance. The issue of the possible liability of MIBI for claims from policy holders arising from the Setanta Insurance liquidation was raised with me at meetings in the Department of Finance in August and September 2014. I was advised that MIBI was not liable. This was confirmed in an e-mail dated 29 September 2014 from the Department of Finance. I was informed that this position was based on the advice of the Attorney General. While I did not receive a copy of the Attorney General’s advice, details of the key points considered by the Attorney General in arriving at the decision were provided to me by the Department. At that stage, taking account of the Attorney General’s advice, I had no reason to believe that MIBI was liable for Setanta Insurance claims.

I then proceeded, as a matter of priority, to address the legal and administrative issues that had to be resolved to enable claims to be made on the fund.

As I mentioned, we had all the necessary arrangements in place to deal with claims in December 2014. In late January 2015 the President of the High Court received representations from the Law Society expressing serious concerns regarding the exclusion of the Motor Insurers' Bureau of Ireland, MIBI, from the process of dealing with Setanta claims. Having immediately reviewed the matter with the President of the High Court, we agreed that the matter needed to be resolved, in the interests of protecting taxpayers’ money, before we could proceed to make any payments from the fund. As you will appreciate, the President, as the person who controls the fund, needed to be satisfied that any payments made from the fund complied with the legislation. I immediately sought the opinion of senior counsel on the matter. That opinion was received on Thursday, 19 March 2015. While I cannot disclose details of the opinion, I can give the committee an extract from it:

I believe there is an arguable case that the MIBI could have a liability in respect of Setanta claims. It would be incumbent upon the Accountant, and ultimately the Court, to ensure that before payments can be made out of the fund, a view is formed as to whether it is unlikely that the relevant claims can be met by the MIBI before approving payments from the fund. I do not believe that the Accountant or the Court can be satisfied of that without having the issue judicially determined.

Arising out of that, since Thursday, 19 March 2015 I have been actively engaging with my legal advisers to progress the matter of having the issue judicially determined as soon as possible. The President of the High Court has indicated to me that this matter will get priority in terms of scheduling of hearings. It is hoped that it can be concluded by July 2015. On Thursday, 26 March 2015, my legal advisers wrote to the Minister for Transport, Tourism and Sport, the Minister for Finance, the Motor Insurers' Bureau of Ireland, and the Attorney General regarding the matter. The letter indicated that I, as the accountant of the Courts of Justice, would be making an application by way of a special summons to the High Court, pursuant to Order 3, Rule 22 of the Rules of the Superior Courts, for a trial of an issue of law to determine whether the Motor Insurers' Bureau of Ireland is liable for claims made under the Setanta policies. My legal advisers are currently finalising this application to the High Court and I expect it will be filed during the first week of the next law term, which is the week beginning Monday, 13 April 2015. As of this morning I have agreed the wording of the special summons, an affidavit with my legal advisers, and this will be filed very shortly with the central office in the High Court. That is a very brief overview of what is a large and complex matter. I am happy to take any questions from the members.