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Wednesday 21 February 2018

Central Bank 'acted too slowly to stop motor insurance premium crisis'

Premiums have shot up by 70pc in the past three years Photo: Getty Images/iStockphoto
Premiums have shot up by 70pc in the past three years Photo: Getty Images/iStockphoto

Charlie Weston Personal Finance Editor

The Central Bank was accused of acting too slowly to stop the motor insurance crisis that has seen premiums surge.

Deputy governor of the Central Bank Cyril Roux was told at an Oireachtas Committee he and his staff had done too little to force insurers to shore up their reserves when problems started to emerge.

Mr Roux was asked repeatedly when the regulatory authorities first become aware that there was a problem with insurers.

Premiums have shot up by 70pc in the past three years, as insurance companies have been accused of under-pricing motor policies and of not putting aside sufficient reserves to meet claims.

The Joint Committee on Finance and Public Expenditure was told insurance companies were allowed to act imprudently and erode their capital base.

Sinn Féin finance spokesman Pearse Doherty asked Mr Roux at least five times when the Central Bank had first become aware there was a problem with insurers.

He quoted from a letter from former Governor Patrick Honohan to Finance Minister Michael Noonan pointing out that insurers had acted imprudently.

Mr Roux was accused of avoiding answering the question by failing to state when the regulators became aware their was a problem.

“When did you become aware of this?” Mr Doherty asked on a number of occasions.

The TD added: “You did nothing, absolutely nothing. They acted imprudently and eroded their capital base and consumers are paying for it. Why did you not stop it?”

Eventually Mr Roux admitted that in 2014 the Central Bank realised that there was a trend of sustained underwriting losses for insurers.

“That is when the underwriting cycle had become acute, but we had acted by then,” he said.

Insurers were told by regulators to review their business models, to budget for losses and to examine their re-insurance arrangements, Mr Roux said.

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