---

How Central Bank could step in on insurance row

Lawyers at Ronan Daly Jermyn have identified ways in which they believe the Central Bank could act in the row between businesses and insurance companies over whether policies cover firms for pandemic disruption.

In a blog post, Brian Hunt and Michael Quinlan say a number of businesses have already initiated proceedings against insurers where there is a stark difference of opinion as to what is and is not covered by a particular policy.

FCA case

In May, the UK’s Financial Conduct Authority said it intended to obtain a court declaration to resolve contractual uncertainty in business interruption insurance cover.

It indicated that it would do this by identifying a representative sample of cases with the most frequently used policy wordings and presenting these to court. That case is due to open on 20 July.

Central Bank of Ireland Governor Gabriel Makhlouf (pictured) told an Oireachtas committee last week that it had spoken to the FCA and was taking advice on whether it could act in the same way.

Legislation

The RDJ lawyers say that while there does not appear to be a provision within the Central Bank Acts that would provide a clear and unequivocal basis for the bank to pursue such a course of action, it is possible to identify some provisions within its governing legislation that could potentially serve as a basis upon which the regulator could act.

They point to Section 5A(1)(f) of the Central Bank Act 1942, which states that the bank is responsible for “monitoring the provision of financial services to consumers of those services to the extent that the Bank considers appropriate, for the purposes of protecting the public interest and the interests of consumers;”.

Under section 5A(2), the bank “has power to do whatever is necessary for or in connection with, or reasonably incidental to, the performance of its functions.”.

Directions

Hunt and Quinlan say that, when read together, these provisions combine to give the Central Bank broad powers in relation to protecting the interests of consumers.

“It is arguable that the above provisions could serve as a basis for the Central Bank to pursue a course of action similar to the FCA,” they add.

The RDJ lawyers suggest that another approach might be for Central Bank to issue directions to insurers, as it has the power under legislation to do this “in circumstances where the firm is conducting business in such a manner as to jeopardise or prejudice the rights and interests of customers”.