UK insurers could end up compensating European Community policyholders of Independent Insurance.

The Policyholders' Protection Board (PPB) is currently looking at its legal obligations to Irish policyholders and has said that, if the insurance contracts were written in the UK, it is likely it will have to pay out.

Independent wrote more than IR£30m of business in Ireland over the past three years and opened an office in Dublin last year.

It covered Carole Nash's 9,000 motorcycle and classic car policyholders, plus an as yet unknown number of commercial policyholders in the construction, hotels and entertainment sectors.

Irish Brokers Association chief executive Paul Carty said at least 26 brokers placed large amounts of business with Independent.

The issue was discussed in the Dail (Parliament) and Commerce Minister Noel Treacy said the Tanaiste (Deputy Prime Minister) Mary Harney was in The issue was discussed in the Irish Parliament and Commerce Minister Noel Treacy said Deputy Prime Minister Mary Harney was in contact with the PPB, provisional liquidators Pricewaterhousecoopers (PWC) and the EU Commission. He said the PPB could be forced to pay under European Single Market rules because the UK was responsible for a UK company's operations in the European Economic Area (EEA).

A PPB spokesman said there was a reasonable chance they would have to pay. “We have a long list of questions that our legal advisors have put together,” he said. “They're not ruled out solely on the grounds of being Irish.”

Independent also had offices in Spain and France and those policyholders could claim for compensation. UK insurers pay an annual levy of up to 1% of net written premiums to the PPB to cover such compensation.

The Association of British Insurers said it was aware the PPB was seeking clarification of its position.

Meanwhile, Irish Insurance Federation (IIF) chief executive Mike Kemp has called on regulators to place more emphasis on insurers' solvency.

The Enterprise, Trade and Employment Department, which regulates Ireland's insurance market, has already supplemented the existing supervisory Irish Financial Services Regulatory Authority (IFSRA) regulations. These include actuarial certification of reserves in motor and liability insurance.

“This measure should in our view be adopted as a requirement for all insurers in the EU,” Kemp said.