Independent Insurance's Irish policyholders are protected by UK law and will be compensated by the Policyholders' Protection Board (PPB) for the insurer's collapse.

Deputy Prime Minister Mary Harney put pressure on the PPB, Independent's provisional liquidators PricewaterhouseCoopers (PWC) and the European Commission to resolve the issue of compensation for the Irish policyholders of the failed insurer.

The Irish Brokers' Association (IBA) had feared 700 policyholders who held employers' liability (EL) cover with Independent would not be protected because EL is not mandatory as it is in the UK.

However, Commerce Minister Noel Treacy had been confident the PPB would pay out because, under European single market rules, the UK was responsible for a UK company's operations in the European Economic Area.

The PPB said, after discussions with PWC and its legal advisers, that where the underwriting procedure took place would determine whether it was covered. It said: "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, 9,000 of which hold motor policies.

Independent also covered commercial policyholders in construction, entertainment and hotels.

The PPB estimated the compen-sation could amount to e40m (£31.5m) but IBA chief executive Paul Carty said this was a conservative figure. "We think the final total could reach e50m (£39.4m) to e60m (£47.3m)," he said.