High Court ruling on

Setanta will push car

premiums up
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.
Court orders MIBI to pay outstanding Setanta insurance claims
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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 MIBIs 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.