The head of the Central Bank of Ireland has said he expects insurance companies to “absolutely pay up” on business interruption claims.
Governor Gabriel Makhlouf said the regulator wants a rapid resolution and clarity for all businesses.
Firms have complained that their insurers will not pay out on business interruption cover because they were not legally forced to close by the Government over the coronavirus crisis.
Mr Makhlouf told the Oireachtas Committee on the Government’s Covid-19 response that the Central Bank wrote to chief executives about how the industry should respond.
Fianna Fail’s Cormac Devlin said the issue has been to the fore over the last few weeks and months.
“We are hearing widespread reports of insurance companies failing to pay out of claims,” he added.
Mr Makhlouf said it is a “very important and live issue”.
“We know that policies come in three types in the case of business interruption insurance. We know that there are some policies where there is no entitlement to business interruption,” he said.
“We know there are some policies where there is absolutely entitlement to business interruption insurance and in those circumstances I have made it very clear that we expect companies to pay up.
“We do not expect them to drag things out, we absolutely expect them to pay up.
“Then there is a third category where it is unclear what they are entitled to.
“We know there is legal action being taken by some entities who are challenging the non-payments.
“We are focused on this issue and we want to see rapid resolution and clarity to all businesses who are looking for a bit more certainty.”
Sinn Fein TD Pearse Doherty said that thousands of businesses and community groups across Ireland are willing to take insurance companies to court.
“But why should it be down to the local hairdresser, the community group, or the little restaurant to take on the insurance industry when the Central Bank has a consumer protection role?” he asked.
“What we are facing into is a tracker (mortgage) scandal mark two, exactly the same situation.
“It’s above scandalous what they are doing to businesses.”
Central Bank officials are predicting a significant slump in housing output this year due to #Covid19.— Cormac Devlin TD (@CormacDevlin) July 7, 2020
Mark Cassidy from the bank told me that best case they expect output to drop to 16,000 units this year and 22,000 units next year. https://t.co/UAW6hm7A8M
Meanwhile, Mark Cassidy, director of economics and statistics at Central Bank of Ireland, said 20,000 fewer new homes will be built over the next two years because of the crisis.
He said the pandemic has had a significant impact on the housing market.
“As the construction sector was temporarily put to sleep, housing supply came to a standstill,” he said.
“We’ve seen a gradual return but the slowdown witnessed will have an impact on housing supply this year.
“Before the virus, we were estimating about 26,000 new housing units to be produced this year, rising to almost 32,000 in 2022.
“Our current estimates, in our baseline scenario which assumes the economy continues to open up, housing output will be 16,000 this year, so 10,000 fewer units than previously expected. By 2022 we expect that number to be 22,000. So that means 20,000 fewer units overall.
“We were already in a situation where there is a material shortage of housing supply and is the most important issue facing the housing sector. We are well short of producing enough housing for medium-term requirements, so this will exacerbate the situation.”
Mr Doherty also questioned Mr Makhlouf about a decision by banks to charge interest.
The governor said the regulator does not require banks to charge interest on mortgage payment breaks, and that interest does not need to be charged to prevent the loan being classed as being in default.