Explainer - What compensation schemes protect consumers of authorised firms?

Compensation schemes

A central part of the Central Bank of Ireland’s mandate is to protect consumers. One of the ways we do this is by overseeing a number of important compensation schemes which protect consumers of authorised financial firms. These schemes are designed to pay some, or all, of the money you would otherwise have lost as a result of a financial firm going out of business.

Deposit Guarantee Scheme

The Deposit Guarantee Scheme (DGS) protects you if you have money in a bank, building society or credit union that is unable to pay back your savings. This includes any money you have in your current account. The maximum you can claim under the DGS is €100,000 per person, per institution.

The DGS only protects savers who have deposits in financial firms authorised by the Central Bank of Ireland. Deposits held in institutions authorised by another EU Member State are covered by that country’s deposit guarantee scheme.

Investor Compensation Scheme

The Investor Compensation Scheme (ICS) protects clients of an investment firm that goes out of business. The scheme pays compensation when an investment firm authorised by the Central Bank is unable to return money or investment instruments it owes to consumers who invested with it. Such firms can include stockbrokers, investment managers, insurance brokers and agents. The maximum amount of compensation you can claim under the ICS is 90% of your net loss, up to a maximum of €20,000.

The ICS only pays you compensation when:

  • A firm is put into liquidation by the High Court
    or
  • The Central Bank determines that the firm is unable to meet the claims of clients

The ICS doesn’t pay compensation if:

  • You incur losses due to receiving bad investment advice
  • Your investment is poorly managed
    or
  • Your investment performs poorly due to market conditions or other economic forces.

In the case of an investment that is eligible under both the ICS and the DGS, the Central Bank decides which scheme pays you compensation.

Insurance Compensation Fund

Finally, the Insurance Compensation Fund (ICF) protects consumers of authorised non-life insurance companies that go into liquidation and are unable to pay insurance claims. These could be claims made by the policyholders or third parties. A non-life insurance policy is typically a general household insurance policy like car or home insurance, and excludes life insurance or health insurance. The maximum compensation amount paid by the ICF is 65% of the cost of the insurance claim or €825,000 – whichever is lower.

The ICF doesn’t refund the cost of insurance premiums that may have already been paid by the policyholder. It also only covers payments in respect of sums due under policies issued by non-life insurers authorised in Ireland or in other EU Member States.

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