• Unlimited liabilities from the failure of an insurer will be passed onto competitors
• Report a “Missed opportunity to bring some stability to the market” – Kevin Thompson
• Report “Opens the door to a future financial shock for Government, consumers and insurers” – Kevin Thompson

22nd July. Insurance Ireland has said the announcement today to proceed with a proposal that would expose insurers to the unlimited liabilities of a failed competitor poses a systemic risk to the motor insurance market.

The Department of Finance’s Review of the Framework for Motor Insurance Compensation in Ireland recommends that the liabilities of any future insurance failure be assumed by the Insurance Compensation Fund (ICF), with no upper limit on the exposure of insurance companies. Insurance Ireland supports the use of the ICF to resolve insolvencies but strongly opposes the deeply flawed funding model being proposed as liabilities are not capped.

Kevin Thompson, CEO of Insurance Ireland stated “This is a missed opportunity to bring some stability to the market by addressing how claims from a future insurance liquidation would be managed. Instead, this proposal makes any future failure potentially systemic by passing on unlimited losses onto other insurers”.

“This opens the door to a future financial shock for Government, consumers and insurers. Insurance Ireland has been clear in stating that insurance companies cannot assume unlimited liabilities of their competitors. No other business would be expected to do this and it makes no commercial sense as the risk has to be factored into premiums”.

“Insurance Ireland has been proactive and constructive by proposing a solution based on international best practice, including the French system, where the liability is capped.  This would ensure a fair contribution to cover outstanding claims while smoothing the impact over time. This would reduce the immediate impact of any liquidation”.

Kevin added “This decision cannot be viewed in isolation. We urgently need to bring stability to the motor insurance market to maintain capacity and ensure sustainable competitive choice for consumers, instead of adding additional unnecessary volatility”.

“Just today, it was reported that a motor insurance provider, Enterprise Insurance Company plc (Enterprise), a Gibraltar incorporated company selling motor insurance in Ireland is now subject to winding up proceedings as it is insolvent”. 

Kevin stated “The protection of their Irish customers is now paramount. Enterprise are not an Insurance Ireland member, however, Insurance Ireland has been highlighting the volatility in the motor insurance market for over 18 months and have stated that a development such as this was likely.”

Kevin concluded “Today’s announcement from the Department of Finance is a missed opportunity to develop a policy response that would have worked for consumers, the Government and insurers”.

Ends.

Media contact:

John Byrne

Communications Manager, Insurance Ireland

Tel: 01 644 7781 / 087 9383852

Nuala Buttner

Q4 Public Relations

Tel: 01 475 1444 / 085 174 4275

Notes for Editors:

• Chronology of engagements:

o    Actively engaging with Government since September 2015.

o   Met with Ministers Noonan and Donohoe in December 2015

o   Agreement to pull together an interdepartmental group to look at international practice on insurance compensation schemes

o   Met with the interdepartmental review group in early 2016

o   Asked for information on the size of the market disruption – commissioned independent actuarial consultancy

o   Met with Joint Review Group – 30th May

o   Responded on 3rd June and asserted Insurance Ireland needed to complete a due diligence process on the proposal

o   Formal response with counter proposal based on best international practice (UK and France) on 12th July

o   Notified of proposal going to cabinet on Tuesday 18th July

o   Proposals published on July 22nd