Regulator’s handling of Quinn signals change
With more than 5,500 jobs riding on the group’s future, those with deep concerns about the jobs lost sight of the fact that under the law of this land the Financial Regulator has powers to appoint administrators where he has solid grounds for so doing.
For the record Quinn Insurance was fined a total of €3.25 million for breaches of regulations in 2008.
Those breaches dealt with solvency matters and in reality have the same implications as the under-funding that confronted the banks when the property bubble struck. And the bank debacle may cost the Irish taxpayer well over €50 billion to resolve.
Financial Regulator Matthew Elderfield put it straight to Quinn during the week when asked about the solvency issues when he appeared before the Dáil committee on finance.
Asked if putting the business into administration was avoidable, his devastating riposte was: “Show me the money.”
Perhaps his words were a bit too colloquial for a man in his position but they made it very clear he was not about to be intimidated either by Quinn or the state-owned Anglo into delaying the appointment of full-time administrators unless the group came up with enough cash to resolve the solvency issues.
Mr Elderfield’s job was on the line. If he bowed to the considerable pressure he had been placed under by Anglo and Quinn as they tried desperately to reach a compromise solution to their mutual financial difficulties — the bank is owed €2.8bn by the Quinn family — his authority would have gone up in smoke.
We have past examples of solvency undoing the general insurance sector in Ireland in the past. There are two stand-out cases: PMPA and more recently Insurance Corporation of Ireland (ICI), which collapsed after it had been bought by AIB.
PMPA took years to sleepwalk into the hands of an administrator having undercut its competitors in the motor insurance end of the market for years.
Boss Joe Moore, a former school teacher, looked to have the Midas touch until the amount of claims built up by the group finally overwhelmed the assets set aside to deal with claims.
Effectively, PMPA was insolvent when taken out of the hands of the company.
In the case of ICI, it was bought by AIB on the back of growth that unfortunately turned out to be on the back of dodgy underwriting in the British market.
In the end, AIB sold the business back to the state in March 1985 for a nominal sum.
Parts of PMPA is still under administration decades on while the core business of general insurance eventually ended up with Axa.
Those talking about a quick sale of Quinn Insurance should bear that in mind.
If Quinn has been writing business at very competitive prices then the black hole in the business might be so big that outside firms would not want to get involved.
In effect this process of appointing administrators was a test case for the regulator and the Central Bank.
It is fair to say the regulator’s authority as the chief steward of the Irish financial services sector has been enhanced by events of the past few days and a clear message has been sent to international investors that full compliance will be demanded of all our financial institutions in future.
That may be of little comfort to the thousands worried about their futures within Quinn. It is easy to forget how people regarded Sean Quinn as a visionary when it came to building up the border counties and injected life into the area.
The tragedy was his vision and the commercial cost of delivering it could not be reconciled in the end.
