Saturday 22 October 2016

Warning of more motor cover hikes after court's €90m Setanta ruling

Charlie Weston and Ray Managh

Published 05/09/2015 | 02:30

Mr Justice John Hedigan
Mr Justice John Hedigan

Insurance companies have warned that motor premiums will rise again after a High Court decision that means all insured drivers will end up covering the full cost of claims against collapsed Setanta Insurance.

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Mr Justice John Hedigan ruled that the Motor Insurance Bureau of Ireland (MIBI) must pay out on the 1,750 outstanding claims following the collapse of the Setanta.

The MIBI is used to compensate drivers hit by an uninsured drivers, and is funded by a levy imposed on all insurers.

The judge rejected arguments that the State's Insurance Compensation Fund - used up now to cover claims of insolvent insurance companies - should foot the €90m cost of Setanta claims.

All motor premiums have 5pc in levies imposed on them to finance the Insurance Compensation Fund. It has so far paid out €1.158bn to cover claims associated with Quinn Insurance.

However, the fund only pays 65pc of a claim, or €825,000 at most. The MIBI pays out in full.

Insurance Ireland, which represents insurance companies, said it had serious concerns about the judgment.

Already the operation of the MIBI costs €60m a year, which works out at €30 on the average premium. The costs of the MIBI, which is run by insurers, will now go up by €90m.

Insurance Ireland said the judgment meant "there will be upward pressure on premiums and a risk of motor insurers exiting the market".

It said the decision had severe implications for the viability of the motor insurance market.

Insurers are losing money on motors, prompting them to push up premiums by 20pc in the last year.

There are indications that the judgment is to be appealed, which could further delay the claims being paid.

Mr Justice Hedigan, in a reserved High Court judgment, said that following the liquidation of Setanta on April 30, 2014, around 1,750 claims by and against Setanta policyholders remained in existence.

He said an issue had arisen as to who was liable to cover these claims, the MIBI or the Insurance Compensation Fund. The Law Society had asked the court to determine the matter.

Judge Hedigan said Setanta was a Maltese-registered company and at an extraordinary general meeting in April last year decided to surrender its insurance business licence and be immediately dissolved.

The company was a member of the MIBI. Setanta had issued 75,000 motor insurance policies, all of which had been cancelled from May 29, 2014.

He said there still remained approximately 1,750 claims by and against Setanta policyholders.

The President of the Law Society had written to the MIBI stating that solicitors had been inundated with queries from concerned Setanta customers as to the consequences of the liquidation.

Irish Independent

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