Consumers could see a small reduction in insurance-policy costs, after the Central Bank announced the Insurance Compensation Fund (ICF) Levy is to be reduced to 0% from the beginning of next year.
The fund ensures that policyholders’ claims can still be paid when an insurer goes into liquidation.
It was introduced in 2012 following the collapse of Quinn Insurance.
At the time, the State advanced more than €1 billion to the ICF after Quinn Insurance went into liquidation in 2011, with a 2% levy on policies introduced to repay the Exchequer.
That loan has now been fully repaid.
The change to the levy will affect customers with non-life insurance policies, such as home and motor insurance, however, the level of any reduction in costs for consumers will depend on their policy and premium.
The average motor premium for the first half of last year was roughly €655. Based on this, a 1% reduction would equate to a saving of around €6.50 for consumers.
Once the reduction takes effect in January, it will the first time the levy has been set at 0% since it came into effect.
It will also mark the second change in the levy in two years, following the reduction from 2% to 1% in January of this year.
Levy reduction ‘will positively impact’ policyholders – Central Bank
Central Bank Deputy Governor Mary-Elizabeth McMunn said the cut “will positively impact a large cohort of policyholders in Ireland”, adding that “the Central Bank will continue to conduct annual reviews of the fund and, should circumstances change, the levy may change in the future”.
The regulator added that it “expects firms to act in the best interests of consumers and must be ready to implement the changes from 1 January 2027.
“For firms which explicitly pass the levy on to policyholders as a separate charge listed within their documentation, the Central Bank’s expectation is that the reduction is reflected in the policy from 1 January 2027 onwards. This also applies to current policies which are paid in instalments into 2027 – where the levy charge is explicitly stated within the policy, the levy should be updated to reflect the removal from 1 January 2027,” the Central Bank said.
The Alliance for Insurance Reform has welcomed the change, with its CEO Brian Hanley saying that “for years insurers have told us that premiums reflect the costs of providing insurance. This decision removes another significant cost from the system, and policyholders should see the benefit.
“Motorists, businesses, sports, community and voluntary groups are still paying far too much for insurance, and this saving should be passed on in full through lower premiums.”
Tánaiste and Finance Minister Simon Harris also welcomed the change, saying: “At a time when households are experiencing cost of living pressures, the reduction will have a direct and positive impact on the cost of insurance for approximately 2.35 million private motor insurance policies and 1.3 million home insurance policies on renewal next year.”
While Minister of State for Insurance Robert Troy said the levy reduction is “further evidence of progress being made in the insurance market and it is now on insurers to act responsibly and pass on this reduction to their customers”.
The group representing insurers, Insurance Ireland, said the cut in the levy “is a positive development for consumers as it represents the removal of an additional cost applied to eligible non-life insurance policies, following the initial reduction from 2% to 1% in 2026.
“At a time when increasing costs are an important consideration for households and businesses, this is tangible proof of the ongoing stability of the Irish non-life insurance market.
“However, continued vigilance is required in the area of personal injury awards and legal costs and, of course, broader inflationary challenges. Together with the cost of labour, parts and materials and supply chain disruption, these are ongoing challenges for insurers. Our members will now work towards implementing this change from 1 January 2027,” it added.
