Independent's Irish employers' liability policyholders will not be protected by UK law, the Policyholders' Protection Board (PPB) has said.

Doubts had been raised by the Irish Brokers' Association (IBA) that the 700 policyholders who held employers' liability would not be protected. Employers' liability is not a mandatory class of insurance in Ireland, unlike in the UK.

The PPB made the decision not to offer protection to the EL policyholders after talking to liquidator Pricewaterhousecoopers (PWC) that “where the policy is operational”, namely where the underwriting procedure took place, would determine whether it was covered.

In a statement, the board said: “On balance, the PPB decided it was correct, based upon facts, to regard Irish policies as covered by the 1975 Act.”

Overall, there are 9,700 policyholders seeking compensation, of which the majority 9,000 are motor policies. These will be offered compensation, said the PPB.

The PPB said it would try to transfer eligible policies to another insurer, but if it failed to pass on the policy then the case would be reviewed.

IBA spokesman Paul Carty said: “We welcome the decision to pay compensation to the personal lines policyholders. I will be writing to the PPB to clarify the position on employers' liability. But this has restored our faith in the London Market.”

He also said the IBA may join one of the action groups as the Independent debacle had been “shocking”.

The PPB estimated that around e40m (£24.7m) was outstanding, but the IBA said this was a conservative estimate. “We think the final total could reach e50m to e60m (£31.5m to £37.9m),” said Carty.

As of this week, the PPB has received 141 claims from Independent's policyholders and the total amount paid out in compensation from these claims is £1.2m.