Proposal for insurers to cover part of €600m Quinn levy burden
Demand on Irish policyholders could be reduced to €200m
Published 13/05/2011 | 05:00
The Central Bank is considering applying the Quinn Insurance levy to the international sales of Irish-regulated insurers, potentially reducing the demand on Irish policyholders to as little as €200m.
The news comes weeks after Quinn Insurance's administrators told the courts they would need about €600m from the levy-funded Insurance Compensation Fund to deal with the unsold parts of the Cavan insurer.
The expectation had been that the €600m levy would be borne entirely by Irish policyholders, who could pay about 3pc extra for motor, travel and home insurance policies until Quinn's claims were fully funded.
But industry sources last night confirmed that the relevant legislation allows for the levy to be spread across all revenue earned by Irish-regulated non-life insurers.
The Irish Independent understands that the Central Bank is considering imposing the levy in this way, though a final decision has not yet been taken. A spokeswoman for the Central Bank declined to comment.
The latest Insurance Statistical Review published by the Central Bank shows that some 68pc of insurance industry's €11.89bn revenue was generated from outside Ireland in 2009.
The figures suggest that if the levy was imposed on all revenue generated by Irish-regulated entities, about two-thirds of the money would be raised from policyholders outside of Ireland.
While the move would be welcomed by the Irish public, the prospect is already generating alarm among the insurers who put international business through Ireland and would face a massive bill.
Aviva and Zurich, who both do extensive international general insurance business from Ireland, declined to comment before the Central Bank had taken a decision on how the levy would be imposed.
Sarah Goddard, chief executive of international insurers' group DIMA, confirmed the international insurance industry was "discussing with the Department of Finance and other government representatives" the "various options around the implications of the Quinn financial situation and its potential call on the Insurance Compensation Scheme".
The Central Bank and the Department of Finance are likely to be cautious about damaging Ireland's international insurance hub, which is one of the most successful in Europe.
Others point out that insurers would be unlikely to stop routing business through Ireland if the levy was applied across all international premiums, since that approach is in line with evolving European policies.
Proposals for a new Europe-wide Insurance Guarantee Scheme suggest insures should pre-fund a scheme in their "home countries" by paying a levy based on their international sales.
The Irish insurance community at large is unhappy about the prospect of a levy to fund Quinn's shortfall, and the Irish Insurance Federation has written to Finance Minister Michael Noonan asking for clarification on the proposed levy.
The final structure of the scheme must be approved by the courts, as well as the Department of Finance and the Central Bank.