THE FINANCIAL Regulator has launched an investigation into Quinn Insurance, the motor, health and general insurer within Seán Quinn’s group, after successfully applying to put the firm into provisional administration.
The High Court appointed joint provisional administrators to the insurer at a vacation sitting yesterday morning after the regulator expressed “very serious” concerns about the company’s ability to meet its liabilities to policyholders.
The administrators will now take control of the company, the largest Irish-owned insurer with about one million customers, from the management team. They will run the company as a going concern and conduct business with a view to putting it on a sound commercial footing.
Policy-holders will be unaffected, while Quinn’s life business is not affected.
At a press briefing yesterday, Matthew Elderfield, head of financial regulation at the Central Bank, said there was a “reasonable prospect that the administrator will look to put it [Quinn Insurance] up for sale”.
The regulator has instructed Quinn Insurance to stop writing new business in the UK. “It was a loss-making business and unprofitable, and we didn’t want to cause any further haemorrhage or losses into Quinn Insurance,” Mr Elderfield said.
Mr Quinn wrote to every member of the Cabinet and the leaders of Fine Gael and Labour, demanding that the action be “rescinded immediately”. He described the regulator’s action as “highly aggressive and unnecessary” and warned it would make repayment of the company’s outstanding debts “extremely difficult” and “endangers 5,500 jobs in Ireland unless immediately reversed”.
Mr Elderfield stressed the regulator had taken an “independent judgment on whether or not to put it into administration”. Earlier, counsel for the regulator told the court it had concerns about how the insurer conducted its business. It learned eight subsidiaries had guaranteed debts of €1.2 billion owed by the wider Quinn Group between 2005 and 2008 but these only came to light last week.
This had “wiped out” the company’s solvency cushion, the court was told, and “significantly breached” the solvency ratios laid down by the regulator to ensure the firm could meet its liabilities.
The guarantees had the net effect of reducing Quinn Insurance’s assets by €448 million, leaving the insurer more than €200 million in the red.
The guarantees were provided on debts totalling €1.2 billion due to banks and investors holding bonds, or outstanding IOUs, due by the Quinn Group. The group owes about €2.8 billion in additional borrowings to State-owned Anglo Irish Bank.