3. Deputy Michael McGrath asked the Minister for Finance the status of a company (details supplied); his plans to publish the actuarial report on the liquidation of the company; when he expects to receive legal advice from the Attorney General; if he has consulted with the industry on the way in which to deal with the residual claims outstanding following the liquidation; and if he will make a statement on the matter. (Question 51248/17 asked on 30 Nov 2017)
Deputy Michael McGrath: This question relates to Setanta Insurance and the fallout from the collapse of that company in April 2014. This matter has developed into a nightmare for many of the policyholders concerned. I have discussed it with the Minister of State, Deputy D’Arcy, on a number of occasions. The current state of play is that many Setanta policyholders are being told, legally, that they are potentially on the line themselves. They are potentially exposed by way of judgments against them, including judgment mortgages against their homes, in respect of any shortfall that might be left at the end of the process. This is a disgraceful situation that really needs to be dealt with forthwith. I hope the Minister of State has an update on the matter.
Minister of State at the Department of Finance (Deputy Michael D’Arcy): Setanta Insurance was placed in liquidation by the Malta Financial Services Authority on 30 April 2014. As the company was incorporated in Malta, liquidation is being carried out under Maltese law.
As the Deputy is aware, the Supreme Court delivered its judgment on 25 May 2017 and overturned the previous decisions of the High Court and the Court of Appeal that the Motor Insurers Bureau of Ireland, MIBI, was liable in respect of third-party motor insurance claims made against the policyholders of Setanta Insurance. The consequence of this is that the insurance compensation fund, ICF, has been deemed responsible for the payment of such third-party claims. As a result, the industry has no liability for the residual claims outstanding following the liquidation.
Regarding the actuarial report on the liquidation of Setanta, the Deputy should note that it was the liquidator who commissioned actuarial consultants, Willis Towers Watson, to carry out an analysis of Setanta Insurance’s claims reserves as at 30 June 2017. The liquidator sought this report for the purposes of internal management reporting and to assist in determining the potential shortfall in assets available to cover the remaining liabilities as part of the liquidation process. The contents of the report are commercially-sensitive in nature and were provided to me solely for the purposes of assessing the likely shortfall in the amount due to Setanta third-party claimants. Consequently, I am not in a position to publish the report.
Finally, as indicated previously, there is a legal concern that any Government intervention to fully compensate third-party claimants and then step into the shoes of these claimants to recover directly any balance due from the Setanta liquidation could result in the Government having a lower status in the creditor hierarchy and, thus, significantly reduce the amount it could recoup from the liquidator. In this respect, my Department has just received legal advice from a Maltese law firm on this matter. Officials are considering this advice and may need to consult the Office of the Attorney General before the Government can decide what to do about this issue.
Deputy Michael McGrath: I thank the Minister of State for his reply. We have a situation here where Irish motorists took out valid insurance policies from a firm that was regulated here, albeit only for conduct of business purposes. The firm went bust and, three and a half years, later many of these policyholders are faced with the very real threat that they will be held personally liable for any shortfall in the context of outstanding claims. That is just not good enough. It is a stain on the industry and the Government must deal with the matter. The figures involved are relatively modest. The overall claims reserve was €112.9 million. We know that the ICF will deal with 65% of that. The liquidator is now saying that there will be approximately 22% left, which leaves a shortfall in the region of €14 million to €15 million. Has the Minister of State sat down with the industry to discuss this issue and to explore potential solutions? When can the Minister of State commit to coming back to the House with regard to the legal advice the Government has received from the Maltese firm and having consulted the Attorney General? These people are in a very bad way. They are getting legal letters, three and a half years on, telling them that they could be personally liable. It is a disgrace and the Government must deal with it.
Deputy Michael D’Arcy: The legal letter from the Maltese law firm only arrived in the past few weeks and I have not yet received advice from the Attorney General on it. I have asked the officials in the Department of Finance who are in charge of this section to progress the matter as quickly as possible in terms of getting a legal opinion from the Attorney General. At that stage, I intend to sit down with the insurance industry. I cannot do so until we analyse the aforementioned letter. We will then make a determination as to what is the next step for the Department and, potentially, for the industry.
The Deputy’s figures are broadly correct. We think that the shortfall will be somewhere between €15 million and €20 million. We do not know for sure because it will depend on the conclusion of the actuarial process. I am not insensitive to those individuals who are caught on the wrong side of this. As I said to the Deputy previously, while I cannot commit to any particular course of action, I am keeping every course of action open and available. I would like to have this matter concluded. I agree with the Deputy that it is a stain on the industry in terms of how people have been affected. I would certainly like to have the matter off the agenda sooner rather than later.
Deputy Michael McGrath: I ask the Minister of State to clarify when the next tranche of payments from the ICF can be made. I know, for example, that approximately one third of the outstanding claims have had the first payment made, which is up to 65% or €825,000 but my understanding is that such payments can only be made every six months. I ask the Minister to clarify when the next bundle of payments will be made. If they are ready, is it a legislative barrier that is preventing that from happening more quickly? If so, I am sure there would be agreement in this House to deal with that issue so that at least the payments can start to be made, even if only up to the 65% cap. That is one very practical, short-term step that the Minister of State could take to alleviate the burden somewhat. We must find a way of giving comfort to the policyholders who are faced with the frightening prospect, three and a half years on, of being personally liable. I think the Minister of State agrees that it is not good enough. We need to find a solution and time is important. This has been dragging on for a very long period. People need to be reassured that they are not going to be held liable and end up out of pocket themselves.
Deputy Michael D’Arcy: I am told that the next round of payments, up to 65%, will be in February. I will check if there is a legislative gap and if that is the case, I will come back to the Deputy on that. If it is a legislative issue, it will probably be difficult enough to resolve because as the Deputy knows, the insurance Bill is awaiting pre-legislative scrutiny. If it is not a legislative gap but something that could be done, I will consider it. If the term is every six months, we may be able to reduce it to every three months. However, I cannot commit to that until I determine whether it can be done. If it can be done, I will certainly try to do it.