THE HIGH Court has approved a total payment of up to €738 million out of the State’s Insurance Compensation Fund for Quinn Insurance. This is subject to deciding today whether the proposed sale of the troubled insurer to a joint venture of US insurer Liberty Mutual and Anglo Irish Bank can proceed.
If the president of the High Court approves the proposed sale following a hearing today, his order means €320 million will be paid out immediately from the fund with further payments to be made later following applications to the court.
While he was aware of the significant implications for taxpayers of the €738 million payment, the alternative scenario was a liquidation of the insurance group involving costs of up to €1,300 million, Mr Justice Kearns noted yesterday when making his orders.
He was satisfied a “comprehensive evaluation of all relevant factors” was undertaken on behalf of the group’s administrators prior to their application for the payment, the judge said.
The administrators and their experts previously estimated the total call on the fund would be €600 million but that figure was later increased to €738 million due to a number of factors, including outstanding claims.
Minister for Finance Michael Noonan, through his counsel Sarah Berkley, earlier yesterday said there would be sufficient funds available and the Minister was supporting the administrators application.
Mr Justice Kearns will today hear the administrators’ application for orders allowing the sale to proceed. The proposed sale is dependent on several factors, including High Court approval and Liberty securing the necessary licence from the Central Bank. Under the sale proposals, various conditions must be fulfilled by December 16th, the court heard.
Lawyers representing two groups called Concerned Irish Citizens (CIC) and Concerned Irish Business (CIB) told the court yesterday they were anxious that the position of Quinn’s 1,600 employees, policyholders and taxpayers should be protected and queried whether all necessary information was available to the court. Pauline Walley SC, for CIC, said the proposed sale involved the most significant decision in the history of the State where the insurance fund was concerned.
Denis McDonald SC, for the administrators, said some information was confidential and could adversely affect the proposed sale if released. Certain steps still had to be taken and, if certain material was put in the public domain, there was concern other parties might take steps which could jeopardise the whole process.
While €738 million was a significant imposition on the taxpayer, the alternative would be “significantly worse” as all employees would have to be made redundant and the business would have to be run down, he said. A wind-up scenario could involve a deficit of up to €1,300 million and would be “disastrous” for policyholders.
It was important to remember the insurer was placed in administration because it did not have enough reserves to meet its ongoing liabilities, he added. It had a deficit of €851 million last August as a going concern which would increase by up to €600 million more if it ceased trading. The proposed transfer to Liberty involved the fund not being called on for the total debts and this meant some savings for the taxpayer.
Counsel said a lot of the objections raised by the two groups raised issues of policy and were not for the court to determine.
John Gordon SC, for CIN, said every insurance policyholder in the State will be subject to a 2 per cent levy under the proposals. He was anxious all information was available to the court before making its decisions, including details of an “assets purchase agreement”.
Ms Walley said her clients were not trying to destroy the sale but had genuine concerns about the transparency of the sale process.
Not all liabilities were being transferred under the sale proposals and her side wanted to see the assets purchase agreement, counsel said. An issue arose as to whether the court could direct the transfer of assets from an insurer to a company which had as yet no licence to practise insurance here. Employees were also concerned whether all jobs would be saved.
Mr Justice Kearns urged counsel to try to narrow down the issues between them before he deals with the transfer application today. The court could not act as a tribunal of inquiry into all aspects of the sale but could only address key concerns, he said.
Yesterday’s hearing comes after legislation was passed by the Dáil last month to inject €240 million into the insurance fund to meet the Quinn Insurance losses. The Insurance (Amendment) Bill also provides for all motorists and home-owners to pay an annual 2 per cent levy on their insurance premiums to raise further money for the troubled group.
CENTRAL BANK DIRECTIVE: €30M INVESTMENT
The Central Bank has insisted that a further €30 million be invested in the new company that will take over Quinn Insurance if the proposed sale is approved by the High Court.
The administrators in charge of Quinn Insurance will apply today for approval to sell most of the business to Liberty Direct, which is owned by US insurer Liberty Mutual and State-owned Anglo Irish Bank. Liberty is investing €102 million into the new company, while €98 million is coming through Anglo. Under an asset purchase agreement relating to the proposed sale – a confidential document which has not been disclosed in court – Liberty Direct was originally to have assumed liabilities over assets of €81 million from Quinn Insurance.
However, the Central Bank's requirement that a further €30 million be injected into Liberty Direct means the company will assume liabilities over assets of €51 million.
