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Wednesday, August 08, 2012
Insurance customers could be paying levies to cover Quinn’s losses for 25 years as the size of the firm’s financial black hole doubled and the Government expressed anger at being "misled" on the scale of the crisis.
The news emerged after the president of the High Court was told a call on the insurance compensation fund due to losses at Quinn in the UK could go above €1.65bn.
Domhnall Cullinan, the head of the Central Bank’s general insurance supervision, told Mr Justice Nicholas Kearns the Central Bank hoped the €1.65bn figure was "as bad as it gets" but "further peels of the onion" meant the call on the fund "could get worse".
Letters from Finance Minister Michael Noonan expressed Government outrage that the call on the compensation fund had gone from €600m to €738m in October to a possible €1.65bn, if not more, now.
In a letter to the administrators, dated Jul 25, a senior Department of Finance official said: "[The minister] cannot understand how you, as highly remunerated professional administrators with the support of highly remunerated actuaries and auditors, could not have had greater insight into the total increased cost at an earlier stage, and is concerned by the manner in which the Government has been mislead [sic] by incomplete information and under estimation."
Michael McGrath, Fianna Fáil’s finance spokesman, said customers could be paying the levy for a further 25 years as the Government had allowed an "open-ended" situation to arise.
Mr Justice Kearns was hearing evidence from Mr Cullinan and one of the joint administrators, Michael McAteer of Grant Thornton, regarding how the claim on the compensation fund — financed by a 2% levy on all non-life insurance policies — had increased from zero in 2010 to €1.65bn or above now.
Mr McAteer said the call the administrators expected on the compensation fund was likely to be in the range of €1.1bn to €1.3bn, and the €1.65bn figure was based on contingencies.
In a letter to the joint administrators in June, Mr Noonan said: "It is over two years now since your appointment as joint administrators to QIL [Quinn Insurance Limited] and notwithstanding the information contained in your letter and email referred to above, I am at a loss to see how such a large estimation, and the corresponding scale of what is required from the [fund], could not have been foreseen to a greater extent before now."
The joint administrators denied they misled the Government: "[We] continue to be deeply frustrated by the scale of the costs to Irish policyholders of the collapse of Quinn Insurance Ltd caused by years of mismanagement, and insufficient internal controls by QIL."
The fall in the value of the euro against sterling added over €200m to the costs.
Mr McGrath called on the finance minister to urgently clarify his position: "The minister said [the levy] would be likely to be in place for 11 or 12 years... We are now advised... the levy, at the present collection rate, could remain in place for 25 years or more."
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