Immediate solvency ‘will force VHI to lose not-for-profit status’
Internal Market Commissioner, Charlie McCreevy, has written to the Irish Government saying the VHI should adopt solvency rules immediately.
The VHI, which provides over 80% of Ireland’s health insurance cover, has five years to build up reserves of about €370 million.
But VIVAS, the country’s smallest health insurance group, told the commission that since it had to set aside up to 40% of its premiums to meet solvency rules, the VHI should also.
VHI chief executive, Vincent Sheridan, said this would be impossible.
Last year it made a loss of €30m and it has just over €220m of the estimated €370m needed in reserves.
Mr Sheridan also said it would have difficulty meeting the Government’s five-year deadline.
“The only way we could meet this is if we go out and look for outside capital which would mean the end to our not-for-profit status — which is something we do not want to do and I am sure this is something that people would not be very happy with either,” he said.
Mr McCreevy’s argument, reflecting the complaint from VIVAS, is that the VHI has evolved into a different company than the one it was when the EU agreed to it being exempt from the solvency requirement. It bases this on the fact that the VHI acts as agent for a number of products and services including dental and travel insurance and has an online shop.
Mr Sheridan said that the VHI would prefer to operate these ancillary services under a subsidiary but unlike VIVAS and BUPA it is precluded from doing so at present, but incoming legislation will change this.
After Mr Sheridan’s meeting with Mr McCreevy, he said that while the solvency issue is a matter for the commission and the Government, he believed that it was important for the VHI to provide their perspective on the issue and on the market in general.
The Government’s reply to Mr McCreevy’s letter is due later this month.
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