The Central Bank of Ireland has announced it will halve the levy paid into the Insurance Compensation Fund (ICF) from January 1, 2026, marking the first reduction in 14 years. The rate, which currently stands at 2%, will fall to 1%.
The move is expected to benefit thousands of policyholders across the country, particularly those with home and motor insurance, provided their insurers are regulated by the Central Bank. Officials said the decision was made following an assessment of the fund’s financial position.
“The reduction in the levy will positively impact a large cohort of policyholders in Ireland,” said Mary-Elizabeth McMunn, deputy governor of the Central Bank. She added that the ICF remains an important safeguard for non-life insurance policyholders, stepping in to provide protection if an insurer goes into liquidation.
The Central Bank has instructed insurers to ensure that the lower levy is passed on to consumers without delay. “It is the responsibility of insurance firms to pay the correct levy, and it is important that they are ready to implement the change from January 1, 2026,” McMunn said. “We expect firms which charge this levy to act in the best interests of consumers by ensuring that any reductions on eligible policies are passed on immediately.”
The levy is charged to insurers, who generally incorporate the cost into premiums charged to customers. The ICF itself was established to provide a financial safety net to policyholders in cases where insurers collapse. In the past, the fund has played a crucial role in protecting consumers from financial losses when firms failed.
The Central Bank said it has been in talks with the Department of Finance, Insurance Ireland, the Revenue Commissioners, and relevant insurers to prepare for the adjustment. It also confirmed that it would continue to monitor the financial health of the fund closely and conduct another annual review next year.
While the cut is modest in monetary terms, consumer advocates say it represents a welcome reduction in costs for policyholders who have faced years of rising insurance premiums. Industry observers also note that the change signals greater stability within the fund, which had been kept at a higher contribution rate for over a decade to maintain resilience against shocks in the sector.
The adjustment comes amid ongoing scrutiny of insurance practices in Ireland, with regulators emphasising the need for transparency and fairness in how costs are applied to customers. By lowering the levy, the Central Bank has sought to balance the need to maintain a robust compensation fund with the desire to ease the burden on consumers.
