03/10/2017
The recent insolvency of Gibraltar-based Enterprise Insurance Company has sent ripples of concern through the Irish motoring community. With an estimated 14,000 Irish motorists potentially affected, understanding the implications for existing claims and securing alternative cover is paramount. This situation, exacerbated by the previous collapse of Setanta Insurance, highlights systemic issues within the insurance sector and the urgent need for more robust policyholder protection schemes across Europe.
Understanding the Insolvency and its Immediate Impact
Enterprise Insurance, which began underwriting Irish car insurance policies in February of the previous year, has been declared insolvent. This means the company is unable to meet its financial obligations. The Central Bank of Ireland was only formally notified of the insolvency on Friday, leading to immediate advice for affected motorists to seek alternative cover. While the Gibraltar Financial Services Commission initially stated that all policies remained in force and no immediate action was required, the declaration of insolvency and the pending appointment of a provisional liquidator cast significant doubt on the ability to honour existing and future claims on current policies.
Policies were often arranged through local brokers via the Wexford-based underwriting agency, Wrightway Underwriting. This intermediary step means many policyholders may not yet be fully aware of the situation. The Central Bank is collaborating with Gibraltar authorities to identify and contact Irish policyholders. However, in the interim, any policyholder with concerns is strongly advised to contact their insurance broker as the first point of contact.
Lessons from the Past: The Setanta Insurance Precedent
The collapse of Enterprise Insurance is a stark reminder of the 2014 failure of Malta-registered Setanta Insurance. Setanta's demise left a staggering €90 million in outstanding claims and is widely cited as a contributing factor to the significant increase in motor insurance costs in Ireland. In the year leading up to June, motor insurance premiums rose by 39%, with industry experts attributing this escalation, in part, to a surge in bodily injury claims awards in court.
The handling of the Setanta cases has been complex. Initially, it was expected that the State-run Insurance Compensation Fund (ICF) would cover claims up to 65% of their value, capped at €825,000 per claimant. However, subsequent rulings by the High Court and Court of Appeal determined that the Motor Insurers' Bureau of Ireland (MIBI) – an industry-funded body responsible for claims against uninsured drivers – should settle the Setanta claims. The MIBI has since been granted leave to appeal this decision to the Supreme Court, underscoring the intricate legal and financial mechanisms involved in insurer failures.
Government Recommendations and Industry Response
Coinciding with the news of Enterprise Insurance's insolvency, the Irish Government released key recommendations for managing insurer liquidations, a report spurred by the Setanta Insurance aftermath. A joint working group, established by the Department of Finance and the Department of Transport, Tourism and Sport, has proposed a framework for future insurer failures. Their report suggests that third-party motor claims arising from insurer liquidations should be fully covered by the ICF. This would be partially financed through a 35% direct contribution from the insurance industry itself.
David Fitzgerald, Chief Executive of the Motor Insurers' Bureau of Ireland, expressed significant concern over the Enterprise Insurance news. He acknowledged the potential for market confusion and the difficulties faced by those affected. "Even before today the MIBI had been emphasising that a clearly defined process for handling business closures within the motor insurance sector was urgently required," he stated, highlighting the industry's awareness of the need for improved protocols.
It is noteworthy that Enterprise Insurance had been a member of the Motor Insurers’ Bureau of Ireland (MIBI) since 2013. This membership may have implications for how claims are handled, though the exact mechanisms are still unfolding.
A Wider European Perspective
The cross-border nature of Enterprise Insurance, with operations in France, Greece, Italy, Norway, and the UK, in addition to Gibraltar and Ireland, complicates the resolution process. Gibraltar authorities have indicated an intention to pass potential costs onto the compensation funds of these other countries. This approach underscores a point raised by Philip Lane, Governor of the Central Bank of Ireland, in May. He emphasised the critical need for greater European coordination regarding protection schemes for policyholders when insurance companies fail.
Governor Lane's remarks highlight a fundamental disparity in policyholder protection across the European Union. "The coordination of national protection schemes for policyholders remains unsatisfactory," he stated. "Should an insurance firm fail, citizens are covered in full, in part or not at all, depending on where they are and where their insurers are regulated." This lack of harmonisation creates a postcode lottery for insurance protection, leaving policyholders vulnerable in the event of an insurer's insolvency.
What Should You Do Now?
Given the uncertainty, policyholders affected by the Enterprise Insurance insolvency should take proactive steps:
- Contact Your Broker Immediately: Your insurance broker is your primary point of contact. They can provide the most up-to-date information and guidance specific to your policy.
- Gather Policy Documents: Ensure you have all relevant documentation, including your policy number, proof of insurance, and any correspondence from Enterprise Insurance or Wrightway Underwriting.
- Seek Alternative Cover: As advised by the Central Bank, begin exploring options for alternative motor insurance. Do not wait for official confirmation of claim status, as securing new cover promptly is crucial.
- Stay Informed: Monitor official communications from the Central Bank of Ireland and the Gibraltar Financial Services Commission. While the MIBI is involved, direct communication channels may evolve.
Key Considerations and FAQs
Q1: Are my existing claims still valid?
A: While Enterprise Insurance has been declared insolvent, the Gibraltar authorities initially suggested policies were still in force. However, the appointment of a liquidator makes the honouring of claims uncertain. It is best to assume claims may not be paid automatically and to follow the recommended steps to protect your interests.
Q2: Will the Irish Insurance Compensation Fund (ICF) cover my claim?
A: The proposed government recommendations suggest the ICF should cover third-party motor claims in future insolvencies, funded partly by the industry. However, it is unclear if these recommendations will be applied retrospectively to Enterprise Insurance. The handling of Setanta claims, where the MIBI became involved, suggests the process can be complex and may not directly involve the ICF initially.
Q3: What is the role of the Motor Insurers' Bureau of Ireland (MIBI)?
A: The MIBI is an industry-funded body that typically deals with claims against uninsured drivers. Following court rulings in the Setanta case, the MIBI was directed to handle those claims. As Enterprise Insurance was a member of the MIBI, the bureau may play a role in the claims process, though the specifics are yet to be clarified.
Q4: How does this compare to the Setanta Insurance collapse?
A: Both situations involve the insolvency of an insurer underwriting Irish motor policies, leaving policyholders in a state of uncertainty regarding their claims. The Setanta collapse resulted in significant outstanding claims and contributed to rising insurance costs. The response and proposed solutions, including the involvement of the MIBI and recommendations for the ICF, stem directly from the Setanta experience.
Q5: Why is there a difference in protection across Europe?
A: As highlighted by Governor Philip Lane, national protection schemes for policyholders are not harmonised across Europe. This means the level of protection, or indeed whether any protection exists, depends on the regulations in the country where the insurer is based and where the policyholder resides. This lack of coordination is a significant concern for consumer protection.
The Road Ahead for Policyholders
The insolvency of Enterprise Insurance presents a challenging situation for thousands of Irish motorists. The lack of a unified European approach to insurance company failures leaves policyholders exposed. While efforts are underway to identify and communicate with those affected, and new government recommendations aim to provide a clearer path forward for future insolvencies, the immediate priority for policyholders is to secure alternative insurance cover and to actively engage with their brokers for the latest information regarding their claims. The coming weeks will be critical in determining how existing claims will be processed and what support will be available to those impacted by this significant market event.
If you want to read more articles similar to Enterprise Insurance Insolvency: What It Means for Your Claims, you can visit the Insurance category.