Friday, 2 April 2010

Quinn Insurance Ltd placed into provisional administration

The Financial Regulator in Ireland has announced that Quinn Insurance Limited has been placed into provisional administration.

Following an application to the High Court in Dublin, joint provisional administrators have been appointed to the firm, which has offices in Cavan and Enniskillen.

Quinn’s UK operations, Quinn Insurance Limited (UK) or Quinn Direct, specialises in motor and professional indemnity insurance and has now closed to new business.

According to the UK’s Financial Services Authority (FSA), the Irish regulator has confirmed that existing policyholders in the UK will continue to be covered.

Customers of the firm can continue to make claims and should continue to pay direct debits and premiums in the normal way.

The FSA says it is working closely with the Irish authorities in the matter.

The BBC has reported that the Irish Financial Regulator expressed serious concerns about the finances of the company following the discovery that back in 2005, subsidiaries of the group had made guarantees that reduced the value of the company’s assets by €448 million.

A message on the "Quinn direct" website says "QUINN-Insurance Notice
Quinn Insurance Limited has ceased writing business in the UK. Existing UK policyholders will not be affected by this decision as existing policies will remain valid. Customers can make claims in the normal way. Please see attached statement from the joint provisional administrators appointed to Quinn Insurance Limited."

The Irish Times - Wednesday, March 31, 2010 had a headline "Quinn Insurance under financial investigation"

It went on to say"The Financial Regulator has launched an investigation into Quinn Insurance, the motor, health and general insurer within Se├ín 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."

On the Quin Group website this morning (3rd April) there is a Press Release "QUINN-group Limited wishes to comment on the actions of the Financial Regulator yesterday to appoint provisional administrators to QUINN-Insurance Limited (QIL), which we consider to be pre-emptive, aggressive and unnecessary.

As a preliminary matter, we wish to confirm that the QUINN-group and QIL are fully able to meet all of their payment obligations, and (except as disrupted by the Regulator’s Actions) our business continues as normal. Policyholders of QUINN-direct, QUINN-life and QUINN-healthcare, and staff, customers and suppliers of the entire QUINN-group, should continue to deal with us as usual.

The Financial Regulator has justified his actions on the grounds of "certain matters within QIL that have very recently come to light". We understand that he is referring to guarantees provided by certain subsidiaries of QIL, some dating back to 2005, supporting the general indebtedness of the QUINN-group. These guarantees are entirely lawful, do not breach any insurance regulations, and were fully disclosed in the statutory accounts of the relevant companies.

We reviewed these guarantees in the context of our current refinancing, and sought the opinion of the Financial Regulator last week. He took the view that the guarantees were inappropriate. Since then we, our financiers and our respective advisers have been working around the clock to respond to the Regulator’s questions and to address his concerns.

The guarantees have not been called upon, there was no reason to believe that they would be called upon, and the Regulator was provided with comfort on this by our financiers, most recently in a meeting on Monday 29 March. QUINN-group is in the process of negotiating a refinancing which would have addressed the concerns of the Regulator, and we and our financiers remain confident that this will be achieved. Therefore, the Regulator’s analysis that these guarantees give rise to a €448m liability is totally incorrect. The Regulator's demand that the guarantees be released was therefore unnecessary, and not practical in the time which he allowed.

In the light of all these facts, of which the Regulator was well aware, we believe the Regulator made the wrong decision. We do not believe that his decision was in the interests of any of the relevant stakeholders - QUINN-group, its staff, its customers or indeed the Irish Exchequer, which has received well in excess of €1bn in tax from QUINN-group since it was established in 1973. Indeed, we note that yesterday was marked by significant announcements in relation to the Irish economy and the banking sector, and it is highly ironic that, on that same day, the Regulator's action was taken in respect of one of the most successful Irish companies, providing crucial jobs in the export sector.

Even if the Regulator’s concerns in relation to QIL were well-founded (which we dispute), it is extraordinary that the Regulator was unwilling to give the necessary time to work through those concerns, rather than taking precipitate action which damages the interests of all stakeholders, including the State.

Separately the Financial Regulator has directed QIL to cease writing new business in the UK, and has commented that the UK business is currently unprofitable. We entirely disagree with this statement and unless reversed, this direction will be immensely damaging to the future prospects of QIL.

While we work through the issues which have been caused by the Financial Regulator’s actions, QIL remains focussed on the future and will continue to provide a high level of service to all of its customers. We thank our staff, throughout the QUINN-group and especially in QIL, for their continued commitment to the business. We remain totally committed to working with them, and our customers, to get through this difficult period.

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