QUINN INSURANCE lost €866 million between 2009 and 2010, in the period before and just after administrators were appointed to the business.
The losses emerged yesterday along with details of a deal to sell the insurance business to Liberty Mutual and Anglo Irish Bank.
The circumstances surrounding the sale will lead to a call of €600 million on the Insurance Compensation Fund (ICF), which will mean a levy of up to 2 per cent will be applied on motor and household insurance policies across the industry.
While this levy is being collected, a shortfall in the ICF will be covered by the exchequer, which will be repaid as soon as levy funds are received. The compensation fund contains just €30 million at the moment.
The levy will be applied to insurance firms on a quarterly basis, with the insurers then certain to pass on this cost to policyholders.
The Central Bank will carry out a review of the ICF over coming weeks and will then advise Minister for Finance Michael Noonan on the size of the initial State injection required.
Quinn Insurance said it would need to draw on €180 million from the compensation fund before the end of this year, but that calls on the fund would be limited by the new-look Quinn Insurance, Liberty Mutual Direct Insurance Company, dedicating a quarter of its profits to this purpose.
The Central Bank said the need to access the compensation fund was “not unexpected in light of the serious and persistent solvency problems” at Quinn Insurance.
“The Central Bank worked closely with the administrators to ensure that the funds required from the ICF were limited as much as possible. The Central Bank’s main concern is to ensure that policyholders’ claims are paid as they fall due.”
The Quinn Insurance administrators, Michael McAteer and Paul McCann, said the company lost €706 million in 2009, with this comprising an operating loss of €559 million from the UK market and an “investment loss” of €147 million. A further €160 million loss has provisionally been pencilled in for 2010, they said.
The 2009 investment loss referred to a writedown in the value of assets, mostly in relation to Quinn Property Holdings, which is a Quinn Insurance subsidiary. These assets included the Slieve Rushen wind farm in Co Fermanagh, hotels in Cambridge, England and Krakow, Poland and a further hotel in Sofia, Bulgaria.
Quinn Property Holdings’ assets, which were the subject of controversial guarantees held by Quinn Group’s banks and bondholders, are now valued at €464 million, some €200 million of which will now be paid to the creditors to allow for a release of the guarantees. The remaining €264 million will be used to minimise the call on the fund.
Much of the €559 million operating loss recorded in 2009 related to Quinn’s UK business, where strong competition had led the company to apply low prices. These prices have been raised since administrators took control of the business and Mr McCann siad yesterday that he was confident the operation could be profitable. It will remain in administration in the near term, with Liberty Mutual holding an option to purchase it before the end of 2012.
The UK losses in 2009 led to a deficit in shareholders’ funds at Quinn Insurance of €336 million, with this rising to €496 million after 2010’s likely losses are included. Earlier this week, Quinn Insurance founder Seán Quinn said that if Quinn Insurance had not been placed in administration, there would never have been a call on the ICF. The administrators rejected this.
“Since our appointment as joint administrators in March 2010, the losses suffered by the business have been stemmed and we are confident that policies commenced since our appointment are profitable,” said Mr McAteer.
The 2010 loss mostly reflected UK business written immediately before the administrators’ appointment, he added.
