The President of the High Court has described as “truly shocking” the revelation today that €1.65 billion may be required from the Insurance Compensation Fund to meet claims and costs arising from the administration of Quinn Insurance.
Mr Justice Nicholas Kearns has sought the “clearest of explanations” for this information and has directed he be given that full explanation next week.
It would be helpful if somebody from the Central Bank, which is responsible for regulating the insurance industry, also attended court then, he added.
He noted the court was originally told no funds would be required from the Fund, then was told last October monies would be required from the fund and the cost of the administration would be approximately €738 million, a figure later increased to €775 million.
Now, in the space of a few months, the amount being sought from the fund “had more than doubled”, the judge said.
The net effect of the information concerning the increased demands on the fund is that the Government levy imposed on motor and home insurance policy holders will last “in perpetuity” and not for a limited number of years as originally envisaged by the Government, he noted.
As this involved public monies, the increased demand on the fund was something that required “the clearest of explanations” in “an open and transparent manner”, he said.
Earlier this year, the Government introduced a mandatory 2 per cent levy on insurances policies, except health insurance, offered by all insurers to meet claims and other costs arising from the administration of Quinn Insurance. It was anticipated the levy would be imposed for 12 years.
The judge made his comments today after receiving the latest report of the joint administrators appointed to QIL by the Financial Regulator in April 2010.
Lawyers for the administrators, Michael McAteer and Paul McCann, said a number of factors had led to the increase in the amount being sought from the Insurance Compensation Fund, including an increased and more pessimistic provision for claims, the euro weakening against sterling and the decreased value of QUL investments in assets, including property assets.
Bernard Dunleavy, for the administrators, said the €1.65 billion figure was “an absolute ceiling” and based on “a worst case scenario.” The actual level of drawdown was expected to be somewhere between €1.1 billion and €1.3 billion, he said.
Counsel agreed with the judge the levy on insurance policies would last longer than originally planned.
Before the administrators took over the business, there had been a culture in Quinn Insurance, particularly in the UK, of underestimating and under-provisioning the reserves needed for claims and the administrators were adopting a more prudent approach, he said.
Counsel said all matters contained in the report had been put before the Minister for Finance, who would continue to provide funding through the Fund so QIL can meet its costs. Counsel said Mr McAteer, who was in court yesterday, was also willing to give evidence to answer any questions the court had.
Mr Justice Kearns said he was adjourning the matter to next Tuesday so all matter can be explained.
Previously, the court was told the Fund payment is part of the deal under which QIL was transferred to US company Liberty Mutual and Irish Bank Resolution Corporation, formerly Anglo Irish Bank.
All of Quinn Insurance businesses in the Republic, except healthcare, transferred to Liberty Mutual.
The US insurer is now wholly responsible for the business while IBRC is acting in a loan recovery capacity. The Fund payments are necessary for protection of policy holders transferring to Liberty, remaining policy holders and employees, the court was told.