Quinn Insurance was ‘precarious’ before 2010, ex-chairman says
Jim Quigley shocked to learn in March 2010 that some Quinn subsidiaries had entered agreements that ‘eliminated the value’ of much of its reserves
QIL was placed into administration at the end of March 2010 on foot of the Central Bank securing a High Court order. The business was subsequently taken over a year later by Boston-based insurer Liberty Mutual Group
Quinn Insurance Limited’s (QIL) financial standing was “precarious” even before its board was shocked to learn in March 2010 that some of its subsidiaries had entered agreements that “eliminated the value” of much of its reserves, a former chairman of the insurer told an inquiry on Thursday.
Insurers are required to hold a reserve of assets by law to make sure that policyholders’ claims are met in the event that a company suffers an unexpected loss.
The inquiry, which began public hearings on Tuesday, is centred around allegations that QIL’s board and investment committee were not properly informed that eight of its subsidiaries had entered into guarantees between October 2005 and April 2007 against €1.2 billion of loans taken out by the wider Quinn Group, a cement-to-property conglomerate owned by businessman Sean Quinn.
The assets in these subsidiaries formed part of QIL’s technical reserves, to comply with regulations.
The inquiry is seeking to establish whether Liam McCaffrey, former chief executive of Quinn Group and one-time director of QIL, and Kevin Lunney, who was also a director of both companies at the time, played a part in the alleged regulatory breaches.
Jim Quigley, who joined QIL’s board in 1997 and took over as chairman in 2008, was among three former non-executive directors who told the inquiry on Thursday that they had not been informed of board meetings that were purportedly held to give rise to the guarantees.
Mr Quigley said he first became aware on March 22nd 2010 of the guarantees, when QIL’s then general manager, Colin Morgan, phoned him to say he had learned of their existence.
“I was startled, quite frankly. I couldn’t believe it,” said Mr Quigley. “I was dumbfounded. I knew they’d dilute the value of the assets of the insurance company – and at the time QIL was in a precarious solvency position as it was. I believed this revelation could be detrimental to the future of QIL.”
Mr Quigley said he contacted financial regulators the following morning to inform them of the matter.
QIL was placed into administration at the end of March 2010 on foot of the Central Bank securing a High Court order. The business was subsequently taken over a year later by Boston-based insurer Liberty Mutual Group.
While the notes of the accounts of the QIL subsidiaries had recorded the existence of the guarantees from 2005, these reports were not brought to the insurer’s board for review, Mr Quigley said.
“The manner and dubious circumstances in which [the guarantees] were granted, I’m not sure how any board could have identified those,” said Mr Quigley, adding that there was no proper notification of board members of meetings. “I’m not sure what one could do to prevent something like that happening.”