ADMINISTRATION:THE ADMINISTRATION system in Ireland was established in the wake of the PMPA collapse in 1983. It applies only to non-life insurance companies and was used to deal with both PMPA and the subsequent collapse of the AIB insurance subsidiary ICI in 1985.
If a non-life insurance company fails, the Central Bank and Financial Services Authority of Ireland have two choices: they can either petition the High Court for the appointment of an administrator to take over the company on a going-concern basis, or let the company go into liquidation.
Appointing an administrator to an insurance company is similar to the appointment of an examiner to an ordinary company.
However, an administration is less onerous, as the administrator does not have to jump the same hurdles before the courts that apply under examinership rules.
An administrator has all of the powers of a liquidator – including the power to sell core assets – and his role is to run the company as a going concern with a view to returning it to a sound commercial and financial footing.
In theory, the company can revert to its original owners or managers if it is restored to full financial health and has paid off its debts. Another possibility is that the business could be sold to a new owner by hiving off the new portfolio from the pre-administration liabilities. This was the case with both PMPA and ICI.
The PMPA business was eventually bought by the Guardian Royal group and more recently by AXA Insurance, while ICI’s life and non-life assets were sold off by its administrator.
A third possible outcome is that the company might end up being liquidated. According to an insolvency expert, the Quinn Insurance Limited case could return to the courts in the next two to three weeks, at which point either a buyer will emerge or the company will be wound up. The only way the current owners will remain part of the business is if they can display that they have the financial means to do so, he said.
Quinn Insurance Limited – which owns Quinn Direct, Quinn Healthcare, but not the life insurance division – is one of 14 divisions of the Quinn Group. Whether the other divisions of the group are affected by the administration depends on whether Quinn Insurance Limited has any inter-company loans or securitisations with the other companies.
According to the latest accounts for Quinn Insurance Limited, at 31 December 2008 it owned the following entities: Quinn Financial Service Properties Limited, Quinn Direct Property Dublin Limited, Quinn Direct UK Properties Limited, Quinn Property Holdings Limited and Quinn Properties Limited, which is no longer trading.
In addition the company’s subsidiary, Quinn Property Holdings Ltd, is the 100 per cent owner of 19 further companies. These are mostly hotel management and property development companies based in Ireland, the UK, Switzerland, the Netherlands and Bulgaria.