MOTOR INSURANCE INSOLVENCY COMPENSATION LEGISLATION ENACTED
The Motor Insurers’ Bureau of Ireland (MIBI) has described the formal enacting of the Motor Insurance Insolvency Compensation Act as an “important and progressive moment for the protection of motor insurance policyholders”.
The Act was formally signed into law by President Michael D. Higgins this week.
The legislation enables the provisions of Articles 10a and 25a of the EU Motor Insurance Directive 2021/2118. Specifically this provides an important enhancement to the protection of motor insurance policyholders, further protecting customers and injured parties when a motor insurer becomes insolvent.
The legislation also streamlines the compensation process by authorising a compensation body, i.e. MIBI, and legislating for prescribed timelines for payment of compensation (with a reasoned reply required to a claim within 3 months). The legislation establishes the MIBI as the Motor Compensation Body for Ireland, which effectively enables the MIBI to act as a ‘one-stop shop’ for the victims of motor insurance insolvency, as it will also cater for the accidental/ own damage motor claims of the insolvent insurer’s policy holders.
The legislation also establishes the Home Authorising EU Member State as ultimate paymaster.
Other measures covered in the legislation include:
- The Irish Motor Compensation Body’s official name is Comhlacht na hÉireann um Chúiteamh Mótair.
- The legislation defines events covered, e.g. winding-up required (notified via the Central Bank of Ireland (CBI) within 5 days).
- Provides for funding for claimants and cost and expenses (by the CBI via the Insurance Compensation Fund).
- Provides for reimbursements, recoveries and subrogation.
- Covers the mechanics of reporting and processing of claims.
- Addresses data protection considerations.
- Establishes reporting requirements to the Minister of Finance.
- Enables information exchange and co-operation with other stakeholders.
- Allows compensation bodies to sign agreements amongst themselves. This has been done by all EU compensation bodies, including MIBI, via the COB in Brussels and has been accepted by the European Commission.
- Establishes a governance role for the State Claims Agency (SCA) with annual audits of a sample of certain completed claims below a limit set by the Minister, and audits/ pre-approval of certain uncompleted claims. An evaluation of the effectiveness of the governance by the SCA is also required 24 months after 1st Winding Up (i.e. an Insolvency).
Speaking about the legislation, David Fitzgerald, CEO of the MIBI said, “This is an important and progressive moment for the protection of motor insurance policyholders in this country. It is fair to say that the insolvencies of Setanta and Enterprise Insurance caused a shock to the system and exposed some gaps that left both policyholders and the wider insurance sector exposed. This legislation effectively closes those gaps and ensures that should any similar insurance insolvencies arise again in the future, there will be a robust system in place to help address any claims’ aftermath that may arise,” Mr. Fitzgerald concluded.