Ireland's insurance fund may have to pay claims from collapsed insurer Qudos
The Insurance Compensation Fund in this country could be forced to pay the outstanding claims of the policyholders here from the collapsed Danish insurer, Qudos.
The fund is already being used to fund claims related to the multi-billion euro black hole in Quinn Insurance and claims related to Setanta Insurance.
And the bankruptcy of another Danish insurer that did business here, Alpha, may see the compensation fund called on to pay any claims related to that firm.
It had been hoped that the 1,400 Qudos claims here awaiting settlement would be covered by the Danish Insurance Guarantee Scheme.
Now it has emerged that a change in the law in Denmark last May could mean the Danish scheme will not be liable to meet Irish claims.
This will be the case if Qudos is declared bankrupt after January 1 next.
Qudos was authorised and regulated in Denmark, but was able to trade here under European Union freedom of services rules, selling through Wexford-based agent Patrona. It had 50,000 customers here.
In a Dáil reply to Fianna Fáil's Michael McGrath, the Finance Minister Paschal Donohoe admitted there was now a doubt the Danish compensation scheme would cover the cost of the Qudos claims.
Mr Donohoe said his officials had been in contact with the Danish Finance Ministry, which indicated that if Qudos is ultimately placed into bankruptcy, and this happens after 1 January 1 next year, then the Danish scheme will not be liable.
He said that in such an instance, claimants may instead be eligible for cover from the Irish Insurance Compensation Fund (ICF).
It is not yet clear what the final bill could be to the fund, but industry sources said it would run into tens of millions of euro.
Mr McGrath commented: “Apart from the serious uncertainty the collapse of Qudos has caused to policyholders and claimants, there is now the distinct possibility that we will be left with a hefty bill to the tune of tens of millions of euro because of a failure of regulation in Denmark.
Last month the High Court approved payments of more than €20m from the Insurance Compensation Fund to meet a shortfall in awards related to collapsed Malta-based insurer Setanta.
It went into liquidation in 2014.
The estimated cost of around 1,750 claims arising from the collapse of Setanta Insurance in 2014 is thought to be around €95m.
The Insurance Compensation Fund is paid for by a 2pc levy on general insurance policies, such as home and motor cover.
A new 2pc levy will apply on all motor insurance policies from the start of this month.
It will affect all motor insurance, personal, fleet and commercial and will be used to fund a new motor insurers’ insolvency compensation fund to cover future collapses of insurers.
The new levy is being imposed on insurers, and it is not clear if it will be passed on directly to policyholders.