Motorists to foot the bill for collapsed insurers
Motorists will end up being hit in the pocket after the Government approved changes to the law on insurance to boost the size of a compensation fund.
The decision by the Cabinet comes after a ruling in May by the Supreme Court on which fund should cover the cost of claims associated with collapsed Setanta Insurance.
Malta-registered Setanta collapsed three years ago. It had 1,750 claimants, most of whom have had to wait years to get a payout. Two months ago the Supreme Court said the State's Insurance Compensation Fund should cover the cost of the claims, and not the insurance industry's Motor Insurer's Bureau.
However, the Insurance Compensation Fund only meets 65pc of the cost of third-party claims.
Now the Government is to introduce a new bill so that in future the Insurance Compensation Fund covers the full cost of claims when an insurer collapses.
Insurers will be levied to meet the cost of boosting the compensation fund, but this is set to be passed on to motorists, experts said.
Setanta was incorporated and prudentially regulated in Malta but traded solely in the Irish market.
It offered some of the cheapest premiums in this market and had 75,000 policyholders when it was placed into liquidation in April 2014.
Now insurers will have to pay 2pc of their gross written premiums each year to ensure the Insurance Compensation Fund has sufficient funds to meet 100pc of third-party claims if another insurer collapses.
Insurance experts said that is likely to amount to around €27m a year, up to the point where the fund reaches €150m.
One expert said this is bad news for policyholders as insurers are certain to recoup this money from their customers.
Finance Minister Paschal Donohoe said the provisions of the Insurance (Amendment) Bill 2017 would provide certainty in the event of another insurer going bust.