Minister for Finance and Public Expenditure & Reform, Paschal Donohoe T.D., and Minister of State with special responsibility for Financial Services and Insurance, Michael D’arcy TD, have today (Wednesday) announced that the Government has approved the drafting of the Insurance (Amendment) Bill 2017.
The purpose of the Bill is to repeal and replace certain provisions of the Insurance Act 1964 in order to implement the recommendations of the Review of the Framework for Motor Insurance Compensation in Ireland which was endorsed by Government in July 2016. The thrust of the Bill is aligned with the Supreme Court ruling on Setanta which found that the Insurance Compensation Fund (ICF) is liable for third party claims arising from a motor insurer insolvency.
The Bill, when enacted, will increase the level of insurance compensation fund coverage for all future third party motor claims from its current 65% level to 100%[1] in order to bring it into line with the compensation levels paid out by the Motor Insurer’s Bureau of Ireland (MIBI). This additional coverage will be financed by the motor insurance industry through the establishment of an ex-ante fund into which industry will make regular contributions. This fund will be held and managed by the MIBI. The Bill also provides for the transfer of the administration of the ICF from the Accountant of the Courts of Justice to the Central Bank of Ireland, as well as a more formal role for the State Claims Agency in the event of a failure of an insurance company.
Welcoming the Government decision approving the drafting of the Insurance (Amendment) Bill 2017, Minister Donohoe said: ‘I am pleased to announce the publication of the Heads of the Insurance (Amendment) Bill 2017. The failure of Setanta and the uncertainty that followed over the compensation arrangements for claimants highlighted weaknesses with the current insurance compensation framework. These have been recognised in the Review of the Framework for Motor Insurance Compensation in Ireland Report – which was endorsed by Government last year. The Bill will implement the recommendations of this Report and thereby provide greater certainty for both consumers and industry, regarding the insurance compensation framework in Ireland’.
The Minister of State for Insurance and Financial Services, Michael D’arcy TD, said: ‘A key focus of the Government is on ensuring that the compensation paid to third party motor insurance claimants in any future insolvencies is in line with the amounts paid by the Motor Insurance Bureau of Ireland to those involved in collisions with an uninsured driver. This difference in compensation levels was the basis for the Setanta case and needs to be appropriately addressed in legislation. I welcome this Bill which seeks to ensure that confidence is maintained in the motor insurance system in Ireland’.
Summary of the proposed Insurance (Amendment) Bill:
(a) to increase the level of insurance compensation fund coverage for all future third party motor claims from 65% to 100% for personal injuries and to €1,225,000 per claim for property, regardless of the number of claimants, in order to bring it into line with the compensation levels paid out by the Motor Insurer’s Bureau of Ireland (MIBI);
(b) to require that the increased coverage of the ICF be funded by a contribution from the motor insurance industry to cover this extra 35%;
(c) to provide a legal basis for motor insurers operating in the Irish market to contribute an amount equivalent to 2% of gross written motor premiums to an ex-ante fund to be held by MIBI in order to build up a fund to enable industry meet its 35% commitment should a motor insurer be liquidated in the future;
(d) to provide that where there is a shortfall in the industry ex-ante fund that the ICF act as a backstop and covers the amount outstanding. In such a situation, it is proposed that industry increase their contribution to their fund to an amount equivalent to 3% of gross written motor insurance premiums in order that the Exchequer is repaid as quickly as possible;
(e) to provide for the transfer of the administration of the ICF from the Accountant of the Courts of Justice to the Central Bank of Ireland;
(f) to provide for a more formal role for the State Claims Agency in the event of a failure of an insurance company resulting in a draw on the ICF;
(g) to amend the time limit for making applications to the High Court for payments from the ICF from once in any 6 month period to once in any 3 month period, to allow payments to be made more frequently.
Ends
[1] Notes for editors
Coverage of the ICF will increase from 65% to 100% for personal injuries and to €1,225,000 per claim for property.