The Central Bank is taking “live” steps in the row involving pubs and restaurants over pandemic insurance and expects insurers to pay up where the contracts specifically demand it, governor Gabriel Makhlouf has said.
At the Oireachtas Covid-19 Committee, challenged over the bank’s dual role in looking after consumers as well as protecting the financial system, Mr Makhlouf said the regulator was taking advice on whether it could intervene in the insurance dispute and it was determined to resolve the matter.
“We are pursuing a multi-pronged approach which we believe is the most effective way forward in terms of producing clarity,” the governor said.
“I cannot really talk about the actual interventions which we have made which are extremely live because we are basically in the public domain right now but I can absolutely assure the committee that we are focused on this issue and we do want to see a rapid resolution and clarity to all businesses who are looking for a bit more certainty right now,” he said.
In late March, the Central Bank wrote to the CEOs of the insurers saying they must personally oversee pandemic interruption claims and make “determinations of whether claims are covered or not in the context of Covid-19” in the best interest of their customers.
Since then, some publicans have taken legal action against FBDin a case scheduled to start later this year and some other businesses including restaurants have threatened to sue their insurers too.
Pearse Doherty, Sinn Féin finance spokesperson, said businesses such as hairdressers or small restaurants shouldn’t be required to take on insurers and claimed the pandemic insurance row was building into a repeat of the €1bn tracker mortgage scandal.
“Rest assured, we are absolutely focused on getting this issue resolved as quickly as possible,” Mr Makhlouf said.
The governor said the Central Bank has got lawyers and others involved in what is “essentially a legal issue”.
“We are absolutely determined that insurance companies should pay up where they have to pay up. They shouldn’t be obligated to pay up if there is nothing that is required in the contract. It is inevitable that in some cases this is something that needs to be taken to the courts,” he told the committee.
Mr Makhlouf said the guidelines on banks over payment breaks do not automatically require the accrual of interest rates and do not trigger a default of the loan as long as the rules are followed.
He said that banks shouldn't have an “indiscriminate” policy in refusing loans if borrowers are on government pandemic supports, adding lenders are required to assess the creditworthiness of their borrowers.
On the planned stimulus measures by the Government, Mr Makhlouf said the package will have to be “sizeable”, involing the difficult task of identifying and targeting viable businesses to keep them from going to the wall.
He said the Central Bank was organising "round table” discussions about the potential for mortgage arrears from the Covid-19 fallout.
Appearing with NTMA director Frank O’Connor, Mr Makklouf said Ireland’s debt was manageable, even under a second-wave of the Covid-19, but that preparations need to be taken for the next crisis.
Mr O'Connor told the committee the State was in good shape to deal with the additional debt, helped by the profile of redemptions in the coming years and the €1 trillion bond-buying programme by the ECB which will likely mean that the cost of government borrowings in the eurozone will remain low.