State fund to cover €40m claims bill owed to drivers following Setanta Insurance collapse
An Irish State fund will cover an estimated €40m shortfall owed to hundreds of drivers following the collapse of Setanta Insurance.
At this time about 1,600 people with claims which were being processed by the Maltese insurer have been left out of pocket as there is not enough funds left in the cofferes of collapsed insurance company to make payouts.
Paschal Donohoe, Minister for Finance said a State fund must now fill the gap in the insurance payouts and foot the bill associated with a shortfall of funds.
Setanta Insurance went into liquidation in 2014 and since then it has led to a long-running court case.
The Supreme Court eventually found that the Setanta Insurance Compensation Fund was liable to payout for third party motor claims.
That judgement meant the Insurance Compensation Fund is obliged to pay up to 65 per cent of any claim, or €825,000, whichever is the lower figure.
In response to this state of affairs, the liquidators said they did not have sufficient funds to meet all of the outstanding amounts that were owing to customers and as a result of the shortfall, Mr. Donohoe said the State would have to step in to pay the compensation.
“I have carefully considered the matter including recent legal advice I have received plus an update from the liquidator, and on the basis of this I have come to the conclusion that if the State steps in to pay the 35pc shortfall, it should be able to recover the bulk of what the third party claimants themselves would have received from the liquidator.”
He said that by taking this step now and compensating in full, it is hoped that this will encourage the settlement of outstanding claims as quickly as possible.
This same Supreme Court decision also applies to another insurer which has collapsed, the Gibraltar-based Enterprise Insurance, which was smaller in scale and affected around 14,000 motorists.
The estimated cost of this intervention will be in the region of €35m to €45m and will be financed by the ongoing 2pc Insurance Compensation Fund levy in place to recover money owed from the Quinn administration.
This means that it is highly unlikely that any funding and finance will be required by Exchequer funds.
What it does mean is that this 2pc levy which is due to run for another 10 years will be extended by about six to eight months.
No additional monies will have to be provided for by the Exchequer, the Department of Finance said.