The Central Bank has advised 14,000 Irish motorists caught up in the collapse on Friday of a Gibraltar-based insurer, Enterprise Insurance Company, to seek alternative cover.
Many of the people affected may not be immediately aware, as policies were written through brokers around the country via Wexford-based insurance underwriting agency Wrightway Underwriting. While the Central Bank in Dublin is working with Gibraltar authorities to ensure that Irish policyholders are identified and communicated with, it said that any concerned policyholder should contact their broker in the first instance.
The Central Bank in Ireland was only informed of the insolvency on Friday. Its advice comes even as the Gibraltar Financial Services Commission, the insurer's regulator, said last night that all policies are still in force and that customers do not need to take any action at this stage.
As Enterprise Insurance has been declared insolvent and facing the appointment of a provisional liquidator, it is not clear how existing claims, or indeed future claims on current policies, can be honoured.
The implosion of Enterprise Insurance, which started writing Irish car business in February last year, comes two years after that of Malta-registered Setanta Insurance, which has left €90 millon of outstanding claims and contributed to the soaring cost of motor coverage in this country.
Motor insurance costs have increased by 39 per cent in the year to June, although this has largely been driven by rising bodily injury claims awards in court, according to the industry.
Potential costs
While Setanta only sold insurance in Ireland, Enterprise Insurance also had businesses in France, Greece, Italy, Norway, and the UK. The Gibraltar authorities indicated last night that they plan to pass the potential costs on to the compensation funds in the other countries.
The news comes on the same day the Government published its key recommendations in relation to the liquidation of an insurer. This was produced in the wake of Setanta Insurance’s demise.
It was initially expected that the State-run Insurance Compensation Fund would settle the bill for Setanta up to a limit of 65 per cent of claims and a ceiling of €825,000 per claimant. However, both the High Court and the Court of Appeal have ruled that Motor Insurers Bureau of Ireland, an industry-funded body which deals with claims against uninsured drivers, should settle the Setanta cases, although the bureau has been granted leave to appeal to the Supreme Court.
Friday’s report by a joint working group established last year by the Department of Finance and the Department of Transport, Tourism and Sport recommends that third-party motor claims arising from the liquidation of an insurer should be met in full by the ICF and part-funded by a 35 per cent direct contribution from the industry.
Enterprise Insurance was a member of the Motor Insurers’ Bureau of Ireland (MIBI) since 2013.
Last night MIBI chief executive David Fitzgerald said: “This news will be a cause of great concern and this is likely to be exacerbated by the confusion in the market about what will happen next. We understand how difficult this must be for all those involved.
“Even before today the MIBI had been emphasising that a clearly defined process for handling business closures within the motor insurance sector was urgently required.”
Central Bank governor Philip Lane said in May that Europe needs to be more co-ordinated on protection schemes for insurance companies in the event of a firm failing.
“The coordination of national protection schemes for policyholders remains unsatisfactory,” he said. “Should an insurance firm fail, citizens are covered in full, in part or not at all, depending on where they are and where their insurers are regulated.”
