The High Court has appointed two joint provisional administrators to Quinn Insurance, part of businessman Sean Quinn’s Quinn Group, on the back of an application by the Financial Regulator.
The appointments were made after the court heard the regulator had "very serious" concerns about the company's ability to meet its liabilities.
This morning Mr Justice John Cooke said he was satisfied to appoint Paul McCann and Michael McAteer of Dublin accountancy firm Grant Thornton as joint provisional administrators to Quinn Insurance following an ex parte application, meaning that only the regulator was represented.
John Hennessy SC, for the regulator, told the court his client was making an urgent application to have provisional administrators appointed because of concerns the regulator had about the manner in which the company was conducting its affairs.
The regulator, counsel said, had concerns about the company’s ability to meet its liabilities to policy holders.
Counsel said in recent months the company had "significantly breached" its solvency ratios. Mr Hennessy added the regulator was further concerned when it was discovered that subsidiaries of Quinn Insurance had made guarantees in relation to the group's assets which reduced the amount of cover for policyholders’ liabilities at the company.
This, counsel said, had had the effect of reducing the insurer's assets by €448 million and “wiped out” the company’s solvency cushion.
The company had gone from a position of having assets over liabilities of some €200 million to now having an excess of liabilities of more than €200 million, counsel said.
Counsel added these guarantees had been in place since 2005 but were only coming to light now. A number of Quinn Insurance's directors were not aware of the guarantees made by the subsidiaries, the court was told.
The regulator also had concerns over Quinn Insurance's internal financial control mechanisms and accounting, said counsel. This information had been given to the regulator by the company, the court was told.
The provisional administrators will run the company as a going concern and conduct business with a view to putting it on a sound commercial footing.
Mr Justice Cooke said he was satisfied the regulator’s application complied with Section 2 of the 1983 insurance No 2. Act. The judge made the matter returnable to April 12th next.
Only the non-life parts of the Quinn Insurance, including the motor, home, intermediary and public liability insurance businesses, will now be run by the administrators. Quinn’s life business is not affected by today’s court ruling.
The regulator said in a statement it had taken this action in the interest of the firm’s policyholders. “Irish policyholders of Quinn Insurance Limited can continue to renew policies, carry out new business and make claims in the normal way,” said the regulator.
“The appointment of joint provisional administrators will better protect policyholders. It will allow the firm to remain open for business, to continue to be run as a going concern under different management and to put the business on a sound commercial and financial footing.”
The regulator has launched an investigation into the matter with staff from the regulator’s office on site at Quinn Insurance’s offices in Cavan. The investigation was initiated after certain matters “very recently came to light”. The regulatory staff on site will “oversee its actions and to work with the new management,” the regulator said.
It’s understood the subsidiaries of Quinn Insurance gave guarantees to the value of €448 million in favour of bondholders of the Quinn Group who have provided large sums of money to the wider Quinn Group business. This in turn reduced the insurance company’s solvency cushion.
The matter came to light when the issue was raised by a third party acting on behalf of a creditor of the group which was reviewing its exposure to the wider Quinn business. The company then notified the regulator of the matter last week.
The bondholders were owed €1.3 billion at the end of 2008, according to group’s most recent accounts. The group also owes more than €2.5 billion to State-owned Anglo Irish Bank.
The regulator’s investigation is being overseen at the highest levels of the organisation, including the Central Bank governor Patrick Honohan and the head of financial regulation Matthew Elderfield.
In a separate development, the regulator has directed Quinn Insurance to cease taking on new business in the UK to prevent the company “suffering further financial losses from its currently unprofitable UK business”.
In a statement following the appointment of the administrators the Quinn Group said: 'This is deeply disappointing in the context of the continued profitability of the Group which is currently in excess of €20 million per month.”
“We feel that this issue could have been resolved to the benefit of all in a relatively short space of time and we will be working with the Regulator and the provisional administrators to resolve all outstanding matters”.
The statement added all other Quinn Group businesses were unaffected by the move.
The administrators said in a statement customers of Quinn Insurance would be unaffected by their appointment and that all valid claims would be met by the company.
In another statement, Quinn Life said the appointment of provisional administrators to Quinn Insurance did not impact Quinn Life Direct's business and policyholders.
"Quinn Life Direct is a separate regulated company to Quinn Insurance. The company is subject to separate regulatory supervision," Quinn Life said.
Siobhan Gannon, managing director of Quinn Life, added: “The savings and investments of the policyholders of Quinn Life are backed by the Quinn Life unit-linked funds, and in addition, Quinn Life holds the additional solvency margin required by the Financial Regulator. The Financial Regulator has not expressed any concern over the solvency of Quinn Life.”