THE PRESIDENT of the High Court has described as “truly shocking” the revelation that €1.65 billion may be required from the Insurance Compensation Fund to meet claims and costs arising from the administration of Quinn Insurance.
The Irish Times reports that Mr Justice Nicholas Kearns has sought the “clearest of explanations” for this information and has directed he be given it 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 is that the Government levy imposed on motor and home policyholders 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.
The Government introduced a mandatory 2 per cent levy on policies this year, except health insurance, offered by all insurers to meet claims and costs arising from the Quinn Insurance administration. It was anticipated the levy would be imposed for 12 years.
The judge made his comments yesterday after receiving the latest report of the joint administrators appointed to Quinn Insurance by the Financial Regulator in 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 reduced value of Quinn Insurance investments in assets, including property assets.More Prudent Approach
Bernard Dunleavy, for the administrators, said the figure was “an absolute ceiling” and based on a worst case situation. The actual level of drawdown was expected to be somewhere between €1.1 billion and €1.3 billion, he added.
Counsel agreed with the judge that the levy on policies would last longer than planned. Before the administrators took over the business, there had been a culture in Quinn Insurance, particularly in the UK, of under-provisioning the reserves needed for claims and the administrators were adopting a more prudent approach, he said.
Counsel said all matters in the report had been put before Minister for Finance Michael Noonan, who would continue to provide funding through the fund so Quinn can meet its costs. Counsel said Mr McAteer was willing to give evidence to answer any questions the court had.
The judge said he was adjourning to next Tuesday so all matter can be explained.
Previously, the court was told the fund payment is part of the deal under which Quinn Insurance was transferred to US company Liberty Mutual and Irish Bank Resolution Corporation, formerly Anglo Irish Bank.