Michael D'Arcy (Wexford, Fine Gael) | Oireachtas source

Setanta Insurance was placed into liquidation by the Malta Financial Services Authority on 30 April 2014. As it was a Maltese incorporated company, the liquidation is being carried out under Maltese law.

As the Deputy is aware, the Supreme Court delivered its judgment on 25 May 2017 and overturned the previous decisions of the High Court and the Court of Appeal that the Motor Insurers' Bureau of Ireland, MIBI, was liable in respect of third-party motor insurance claims made against the policyholders of Setanta Insurance. The consequence of this is that the Insurance Compensation Fund, ICF, has been deemed responsible for the payment of such third-party claims subject to a limit of 65% or €825,000, whichever is the lesser, due to relevant claimants.

As the Minister for Finance, Deputy Paschal Donohoe, has previously indicated, there was a legal concern that any Government intervention to compensate third-party claimants over and above the 65% limit and then "step into the shoes" of these claimants to recover directly any balance due from the Setanta liquidation could result in the State having a lower status in the creditor hierarchy, and thus significantly reduce the amount it could recoup from the liquidator.

As indicated in recent parliamentary questions on this matter, the Department of Finance sought and received advice on this matter from a Maltese law firm which the Attorney General subsequently reviewed. This advice confirmed our original concern that the State would have a lower status in the creditor hierarchy and therefore could jeopardise its ability to recover any payments it made to third-party claimants. However, on the basis that the Department has established from the liquidators that the third-party claimants make up by far the largest percentage of creditors, the impact on the State’s ability to recover what would otherwise have been paid to these claimants is significantly less than anticipated.

As the Deputy is aware, the Government has decided to address the uncertainty this case has highlighted around compensation arrangements for third-party motor claimants in the event of any future insolvency of a motor insurer.  In this regard, it has been decided that coverage of the ICF should be increased from 65% to 100% for personal injuries, and to €1,225,000 per claim for property, in order to bring it into line with the compensation levels paid out by the MIBI.

Additional information not given on the floor of the House

The increased coverage of the ICF will be funded by a direct contribution to the ICF from the motor insurance industry via the MIBI to the value of 35% of the third-party motor insurance claims. The Department is currently working with the Office of the Parliamentary Counsel, OPC, and other relevant stakeholders to progress the drafting of the Insurance (Amendment) Bill 2017 to implement these changes.

As a result of his consideration of this matter, the Minister for Finance has made a decision in principle that the State should step in to pay the balance of 35% to Setanta third-party claimants. This will most likely be done through the Insurance Compensation Fund.  However, the Deputy should note that while the Department is of the view that there are no legal or competitive issues associated with this decision, it is currently exploring the matter with the Office of the Attorney General. Depending on the outcome of those discussions, legislation may be required to facilitate this payment. This is likely to be done through the Insurance (Amendment) Bill 2017.

Finally, while the Government hopes that this will bring the matter to a close, it is important to note that before the State can step in to pay the 35% balance of any individual case, the claim itself has first to be settled between the liquidator and the claimant. As I hope the Deputy will appreciate, this is a matter completely outside the Government's control.

See this speech in context