Quinn Insurance costs may lead to extended levy on policies
POLICYHOLDERS ARE likely to continue paying more for home, motor and commercial insurance for longer than expected as the bill resulting from problems at the former Quinn Insurance company tops €1 billion.
The Government’s levy on policies will remain in place for longer than the 12 years originally forecast to meet claims and other costs arising from the administration of the firm.
The Government’s mandatory 2 per cent levy on insurances policies offered by all insurers came into effect on January 1st. It does not apply to health insurance.
The cost of the Quinn administration was originally expected to be €775 million, but has mushroomed this year due to the euro weakening against sterling because of the EU sovereign debt crisis.
The increased estimates will emerge when the administrators of Quinn Insurance Ltd (QIL) at Grant Thornton update the High Court about the costs associated with its administration. Sources expect this to happen tomorrow.
The costs are associated largely with claims outstanding from QIL’s UK business during Seán Quinn’s time in charge of the business. Informed sources told The Irish Times yesterday the cost will be “north of €1 billion”.
The expected level is between €1.1 billion and €1.2 billion.
The administrators have tapped the Insurance Compensation Fund for money to meet outstanding claims and other items associated with the administration.
The fund was set up in 1964 to protect policyholders in the event of their insurer collapsing. It is an industry-financed fund, with the Central Bank deciding last year to impose a 2 per cent levy on non-life insurance policies to meet the costs associated with Quinn.
As the fund is not pre-financed by the industry, the State has been required to provide money up front to meet the costs of the insurer.
This is being recouped at the rate of €65 million a year from the levy.
It was anticipated that the levy would be imposed for 12 years but it now seems likely the timeframe will be 15 years or more.
The final cost will not be known until all claims have been met. Currency fluctuations could also affect the final figure recouped via the levy.
The Minister for Finance recently told the Dáil that the exchequer had so far advanced €729 million to the fund to meet the costs associated with QIL’s collapse.
QIL’s UK business is currently being managed for the administrators by Liberty Mutual, the US insurer that acquired QIL’s business in the Republic, in conjunction with Irish Bank Resolution Corporation.
Liberty Mutual has an option to acquire the UK business at a future date.
The levy is collected by the Revenue Commissioners, which forwards the money to the fund through the accountant of the High Court.
Separately, Irish commuters are facing a hike in bus and rail fares of about 6 per cent.
A CIÉ spokesman confirmed yesterday that it had held “initial discussions” with the National Transport Authority about fare increases for Iarnród Éireann, Dublin Bus and Bus Éireann for 2013.
However, he declined to comment on the level of increase being sought. “Both the level and the timing would be a matter for the NTA,” he said.
The Irish Times has learned that CIÉ is seeking a 6 per cent rise in its fares revenue, which could yield it an additional €4 million.
On Tuesday, the Cabinet approved emergency funding of €36 million for CIÉ to bolster its finances against a backdrop of declining passenger traffic and higher fuel prices.
CIÉ has also committed to selling assets to raise additional finance.
Minister for Transport Leo Varadkar said yesterday he could not rule out an increase in CIÉ fares but added that no rise had been agreed.