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In a welcome development for the insurance industry, the Central Bank of Ireland (the Central Bank) will reduce the Insurance Compensation Fund (ICF) levy from 2% to 1% with effect from 1 January 2026.
This adjustment, the first in over a decade, reflects the ICF's strong financial position and is expected to offer relief to a large cohort of non-life insurance policyholders. The announcement also aligns with the Irish Government's broader insurance reform agenda, with Minister of State responsible for Insurance Robert Troy urging insurers to ensure the reduced levy's benefit is passed on to consumers.
The ICF, established under the Insurance Act 1964, provides protection to eligible non-life policyholders in the event their insurer enters liquidation (or administration in certain circumstances). The levy, collected by the Revenue Commissioners, is funded by non-life insurers based on gross premiums received for risks falling within the scope of the ICF, including home and motor insurance (as applicable).
Following its annual review in September 2025, the Central Bank determined that the ICF is projected to have a surplus by the end of 2026. This assessment was based on current reserves, estimated income and outgoings, and an assumption of flat premium levels compared to 2024. As a result, the Central Bank concluded that a 1% levy is sufficient to repay the outstanding Exchequer loan and meet anticipated claims.
However, the Central Bank cautioned that insurers entering liquidation or administration before the end of 2026 could still cause unanticipated calls on the ICF. It will continue to monitor the ICF and conduct another review next year.
Insurers that pass the levy on to policyholders are expected to reflect the reduced rate in all relevant policies from 1 January 2026. This includes policies paid in instalments into the new year, where the levy is explicitly stated in documentation.
Next Steps for Insurers
Insurers should first review the notice issued by the Central Bank under Section 6 of the Insurance Act 1964, which formally sets out the change to the Insurance Compensation Fund levy. They should also begin preparing their systems and processes to apply the reduced levy rate and update policy documentation as required ahead of the effective date of 1 January 2026.
Contributed by Martha Ní Dhochartaigh
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