A High Court ruling which says that the Motor Insurance Bureau of Ireland (MIBI) is liable to pay out 1,750 claims still outstanding after the collapse of Setanta Insurance last year will ultimately push up premiums for all motorists, it has been claimed.
In a reserved High Court judgement published on Friday morning, Mr Justice John Hedigan said that following the liquidation of Setanta in April 2014 around 1,750 claims by and against Setanta policyholders were still in existence.
An issue had arisen as to who was liable to cover these claims - the MIBI or the Insurance Compensation Fund - and the Law Society had asked the court to determine the matter.
The company was a member of the MIBI, which had been set up by the Minister for Transport to meet claims against uninsured or untraced motorists, and at the time had issued approximately 75,000 motor insurance policies, all of which had been cancelled from May 29th, 2014.
The president of the Law Society had written to the MIBI stating that solicitors had been inundated with queries from concerned Setanta customers as to the consequences of the liquidation.
The MIBI claimed it did not have to satisfy awards against policy holders where the insurer was unable to pay all or part of the award because of insolvency. The Department of Transport shared the MIBI’s view and the Minister for Transport suggested policyholders should pursue claims with the liquidator of Setanta.
Judge Hedigan said it was clear that the background to the MIBI agreements was the obligation to protect the innocent victims of uninsured drivers. This obligation had been placed on insurers in return for the introduction of compulsory insurance in 1932.
He said that from the evidence and legal argument before the court it seemed to him that the wording of the 2009 MIBI Agreement meant that it had a liability to pay out in respect of claims against persons who had been insured by an insurer which had become insolvent.
Insurance Ireland today expressed “serious concerns” about the ruling and said the judgement would have far-reaching implications.
It said the Insurance Compensation Fund, established in 1964, has historically intervened in the event of insurance company insolvencies. The role of the MIBI on the other hand was is to compensate the victims of uninsured or untraced drivers.
“The MIBI is maintained by levies imposed on motor insurers operating in the Irish market,” it said in a statement. “The cost of uninsured driving amounts to approximately €60m annually, which equates to €30 on the average motor premium. This judgment alone adds approx. another €90m to that bill,and this does not include the potential cost of future motor insurer insolvencies.”
It said that following the ruling every motor insurer no matter how prudent would now have to underwrite the least prudent motor insurer in the market and said this “reality will have to be factored into insurers’ solvency and capital considerations”.
It warned that liquidation would now be “a viable option for imprudent insurers who will be able to” dump” their losses on surviving insurers” and said motor insurers in Ireland would “struggle to obtain capital within their groups in order to operate in the Irish market, given that motor insurers in Ireland are now expected to become guarantors for their competitors”.
And it also warned of “upward pressure on premiums and a risk of motor insurers exiting the Irish market”.
