Issued Wednesday, 2 March, 2016.  This judgement has far reaching implications for customers, claimants and the sector. Liquidation becomes a viable option for imprudent insurers who will be able to “dump” their losses on surviving insurers, creating a distortion in the insurance market that no other sector would be expected to function under. 

Today’s judgment immediately adds a further €90m in costs to the entire insurance sector arising from the liabilities of Setanta Insurance.  This adds to the current volatility in the insurance market generally, which is already under significant pressure from the increased cost of claims. The additional burden of €90m will place more strain on the sector in Ireland and will inevitably feed through to pricing, creating uncertainty for both the sector and its customers.

Speaking about the Court of Appeal decision, Kevin Thompson, Chief Executive of Insurance Ireland said “We appreciate and sympathise with the difficulties experienced by claimants who were left stranded by the liquidation of Setanta Insurance.  However, we don’t support the concept of the sector being guarantors for less prudent operators.”

, “The role of the MIBI is to compensate the victims of uninsured or untraced drivers, for example, when someone who has deliberately not purchased motor insurance has gone on to injure someone in a road traffic accident.

Today’s judgment underlines the need for urgent legislative change to ensure that this does not happen again. Insurance Ireland has been calling for this for the past eighteen months.”  

Any motor insurer wishing to operate in the Irish market must be a member of the MIBI. The position following today’s Court of Appeal decision is as follows:

•Every motor insurer, no matter how prudent, will be underwriting the least prudent motor insurer in the market.

•This reality will have to be factored into insurers’ solvency and capital considerations.

•Motor insurers in Ireland will struggle to obtain capital within their groups in order to continue to operate in the Irish market, given that motor insurers in Ireland are now expected to become guarantors for their competitors.

•There will be upward pressure on premiums and a risk of motor insurers exiting the Irish market.

The decision has severe financial and other implications for the viability of the Irish motor insurance market.

Notes for Editors

The MIBI is funded by  motor insurers operating in the Irish market. The cost of uninsured driving amounts to approx. €60m per annum, which equates to approx. €30 on the average motor premium

In order to protect customers who purchase motor insurance it is vital that an interim amendment is made to the 2009 agreement between the Department of Transport and the MIBI. A failure to take this action will mean that there is no backstop against the full cost of future failures being passed directly onto customers. 

Ends