The State's Insurance Compensation Fund could be forced to pay the outstanding claims of the Irish holders of policies from the collapsed Danish insurer, Qudos Insurance.
It has emerged that a change in the law in Denmark last May could mean the Danish Insurance Guarantee Scheme will not be liable to meet Irish claims if Qudos is declared bankrupt after 1 January next.
Qudos had been providing home, as well as private and commercial motor cover, to 50,000 Irish customers through brokers and agents.
On 27 November, it went into solvent liquidation in Denmark where it is based and regulated, and subsequently said it would cease paying out on any outstanding claims.
The Central Bank, which is not responsible for regulating Qudos, strongly recommended that because of the uncertainty around the payment of claims, affected customers should contact their insurance brokers to arrange alternative insurance cover.
Patrona Underwriting, Qudos' managing agent in Ireland, provided brokers with options to replace all insurance covers with other providers at no extra cost to consumers.
But according to Patrona, there are currently 1,570 Irish based pre-existing claims awaiting settlement.
It and the Irish authorities are still awaiting confirmation from the Danish liquidators about whether or not Qudos has enough funds to pay out on those claims.
It had been thought that if it does not, the Danish Insurance Guarantee Scheme would meet the liability of all claims across Europe.
But in an answer to a parliamentary question submitted by Fianna Fáil's Michael McGrath, the Minister for Finance indicated there is now a doubt about that.
Paschal Donohoe said his officials had been in contact with the Danish Finance Ministry, which indicated that if Qudos is ultimately placed into bankruptcy, and this happens after 1 January 2019, the Danish scheme will not be liable.
This is as a result of a Danish legislative change in May of this year, which limits the fund's liability to domestic policy holders.
If this happens, it will then fall on the Irish Insurance Compensation Fund to pay out on the Irish claims instead.
It is not yet clear what the final bill could be to the fund, but industry sources said it would run into tens of millions of euro.
"Apart from the serious uncertainty the collapse of Qudos has caused to policyholders and claimants, there is now the distinct possibility that we will be left with a hefty bill to the tune of tens of millions of euro because of a failure of regulation in Denmark," said Mr McGrath.
"The Government here needs to follow up on this directly with the Danish authorities as it should not be the case that Irish insurance policyholders have to foot the bill yet again."
The estimated cost of around 1,750 claims arising from the collapse of Setanta Insurance in 2014 is thought to be around €95m.