The liquidation of Setanta Insurance, which collapsed in April of this year, may “take some time”, director of consumer protection at the Central Bank Bernard Sheridan said today.
Speaking before the Joint Oireachtas Committee on Finance, Public Expenditure and Reform, Mr Sheridan said that the liquidator is currently in the process of assessing the level of potential claims and the assets and liabilities of Setanta in order to estimate the actual shortfall.
“This process could take some time, particularly as some claims may not as yet have been submitted and also some claims may be ongoing for some considerable time,”he said, adding that policyholders or third party claimants, who have not yet submitted their claim to the liquidator, should do so as soon as possible.
“This will ensure that the claimant will be included as a creditor of Setanta when its liabilities are being assessed. Our understanding is that premium refunds are automatically included on the creditors list.”
The insurer, which was established in Malta in 2007, was authorised and supervised by the Malta Financial Services Authority (MFSA) and it sold insurance in Ireland on a Freedom of Services basis from an administrative office in Blanchardstown. Setanta was required to comply with conduct of business requirements of the Central Bank when selling to Irish consumers.
Setanta provided private and commercial motor insurance policies to Irish consumers and sold exclusively through 230 brokers. When it went into liquidation, Setanta had approximately 75,000 policyholders, two thirds of which were commercial motor insurance policies and one third was private motor insurance policies.
In his presentation today, Mr Sheridan gave a summary of the regulator’s involvement in the process.
The Central Bank, he said, first became concerned about the financial position of Setanta in September 2013, based on market intelligence. As a result it contacted the MFSA, on a regulator to regulator basis, seeking confirmation that Setanta was solvent and that it had sufficient assets to meets its liabilities to Irish policyholders.
At the time, the MFSA confirmed that it received monthly management accounts and solvency calculations and, according to its latest management accounts, Setanta was meeting the relevant solvency requirements in terms of the EU Solvency 1 Directive.
The following month the Central Bank conducted an inspection of Setanta to examine its practices in relation to claims handling, and in November, it met with Setanta to discuss the findings of the inspection, including its concerns about how the company was reserving for its claims. The Central Bank also contacted the MFSA to share its findings and a copy of its inspection report was forwarded to the MFSA requesting that they take appropriate action.
The Central Bank continued to engage very closely with the MFSA, and in January 2014, the Central Bank received further market intelligence which raised further concerns. It again raised these with the MFSA, and also wrote to the Department of Finance outlining its concerns and advised them of the possibility of a potential call on the Insurance Compensation Fund in the event of failure of this firm.
On January 16th, the MFSA notified the Central Bank that they had received initial indications from the liability loss adjuster that there was a material shortfall in Setanta’s reserves, and it then directed Setanta to cease writing new business and issuing renewals with effect from the close of business on January 24th 2014.
Subsequently, Setanta handed back its licence to the MFSA in April, and on April 17th the firm announced that it was commencing a creditors’ voluntary liquidation as it was unable to meet its outstanding claims in full. A creditors meeting was held on April 30th 2014 in Malta at which a liquidator was appointed to administer the liquidation of Setanta. All policies were cancelled by the liquidator with effect from May 29th 2014.
