There will be more Setanta type failures with the current EU insurance regime in place – Hayes
Brian Hayes MEP today said that the lack of proper supervision for companies like Setanta insurance that operate on a cross-border basis in the EU will lead to more insurance company failures in Ireland if the EU insurance regime is not improved.
“We are bound to have more Setanta type insurance company failures with the current EU insurance rules that are in place. When a company that offers insurance on a cross-border basis, like Setanta did, there are 3 regulators involved in supervision – the home country regulator, the host country regulator and the European supervisory authority EIOPA. Yet the division of supervisory tasks is flawed and gives too much control to the home country regulator.
“In the case of Setanta insurance, the Central Bank of Ireland did not have enough tools at its disposal to ensure that the company was properly solvent and that Irish consumers were adequately protected. The Maltese regulator had sole responsibility for ensuring the solvency of Setanta insurance, even though Setanta conducted most of its trading in Ireland and all its consumers were Irish. The Central Bank of Ireland had no role or power to take action against Setanta for any solvency problems and was not able to properly investigate the solvency position of Setanta.
“At the same time, EIOPA, the European supervisory authority for insurance firms has little or no power to get involved when there are risks of insurance company failures. All EIOPA can do is recommend best practices and arrange good collaboration between national regulators.
“We need a strengthened role for EIOPA to be able to intervene when they detect risks in insurance companies that offer cross-border business. There needs to be a strengthened role for the host country regulator to be able to address solvency problems to protect consumers. The Central Bank of Ireland should be able to properly monitor any non-Irish insurance company that offers products to Irish consumers. It should be equipped with the right tools to ensure that such companies are financially viable and should be able to take action if it detects breaches to EU solvency requirements.
“If we get more of these Setanta-type failures, the more car insurance premiums could rise for motorists. The government should be committed to preventing any of these failures from happening and working at a European level to ensure that supervision tools are improved.
“Last year an insurance company called Gable Insurance AG, a Lichtenstein-based insurance company, went bankrupt. It was selling insurance products in various countries including Ireland, the UK, Germany, Sweden and Denmark. The failure of the company led to huge losses for homeowners and businesses all over Europe. If we don’t get the EU supervisory framework for insurance right, painful bankruptcies will keep happening.”