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Brokers slam regulation after Setanta

Written by Business World, on 25th Apr 2014. Posted in EU

article headlineIrish brokers today slammed what they called an "overly lax" insurance regulatory regime in Europe that allows firms like the now defunct Setanta shop around for "soft" rules. The Irish Brokers Association (IBA) is calling for access to the Insurance Compensation Fund to cover unpaid claims relating to the Setanta debacle. In a statement from the Association today, John Bissett, President, said that the European regulatory system needs a radical overhaul. "The system in its current state allows insurance companies, which are primarily owned by Irish people and principally based in Ireland, to sell exclusively to Irish customers - but to be regulated in a different jurisdiction. The Setanta debacle is a clear example of how this regulatory structure is not appropriate and is not protecting Irish consumers. Insurance entities operating in Ireland, selling to Irish consumers should be regulated by the Central Bank of Ireland," he said. The IBA said it expects the Central Bank to put urgent pressure on Malta's Financial Services Authority to ensure that the Irish taxpayer does not have to pick up the bill. "We (the IBA) are also calling on the Malta appointed liquidator to apply to the Irish High Court to ensure that policyholders can access the Insurance Compensation Fund. The Irish Government needs to play their part in ensuring that compensation is available to those consumers impacted by the sudden liquidation of Setanta Insurance. In an era of heightened regulation, Irish consumers need to know that they are protected regardless of where that entity is regulated," said Mr Bissett. "Setanta Insurances' Directors and the European and Maltese regulatory authorities need to account for their actions which have put innocent Irish policy holders in this position - they need to provide an explanation as to how this occurred. Responsibility for the regulation and for the solvency of insurance companies lies with the Regulators who have unfettered access to the inner financial workings of those companies and who maintain regular close contact with those companies and who also audit them. Brokers do not have access to this information so are not in a position to identify which companies may have solvency issues and must therefore rely on Regulators to do this. In the case of Setanta Insurance, this function was solely the responsibility of the Malta Financial Regulator," he added. Malta Financial Services Authority's communication on the 27th January following the closure of Setanta to new business specifically referenced the issue of Setanta's ability to pay claims. The communication stated that Setanta Insurance "had advised the Malta Financial Services Authority that it is business as usual in terms of payment of claims". It seems incredulous that the Malta Regulator would simply accept the assurances of Setanta in a situation such as this. "A full investigation is now required to understand what happen and to ensure that a similar situation doesn't arise again in the future," the IBA said.

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