Call to close insurance loopholes

The finance minister has been asked to lobby at EU level to close loopholes which allowed Setanta to leave 75,000 insurance customers without cover when it went bust.

Call to close insurance loopholes

The Irish Brokers Association has written to Michael Noonan asking that anomalies are ended which allow companies which only transact business in one country to be regulated in another jurisdiction.

Setanta Insurance only sold insurance in Ireland but was regulated in Malta. When the company collapsed, the Maltese regulator did not move to repay premiums or cover those who had paid upfront.

In the letter, the IBA wrote: “None of the EU directives and initiatives for harmonising services envisaged that customers would be treated differently by virtue of the territory in which the provider was registered.”

The IBA wishes to see a review of the “passporting in/out” requirements at EU level to ensure equal treatment for all regulated policyholders, and to ensure standards are harmonised across all jurisdictions to protect consumers of insurance products.

It also once again questioned why the Department of Finance, which had concerns about the insolvency of Setanta in November last year, did nothing to warn customers and brokers or to stop the continued operation of the business.

The IBA has questioned why the Maltese Financial Services Authority (MFSA) did not put Setanta into administration rather than liquidation so that premiums were protected and claims paid.

The IBA also said it was aware of serious financial shortcomings in two different motor insurance providers.

“While we accept the concept of the free market, it is surely not in the interest of any stakeholder to allow providers offer products that are clearly priced at an uneconomic rate. The IBA would support supervisory oversight of pricing in the market in line with the requirements for improved actuarial evaluation and assessment of risk exposure,” chief executive Ciaran Phelan wrote.

Setanta Insurance primarily focused on providing van insurance to small and medium enterprises.

Earlier this month, cancellation notices were sent to all Setanta customers.

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