Central Bank probe opens into former Quinn Insurance management

The Central Bank is to investigate suspected contraventions of insurance regulation by management of the former Quinn Insurance, which entered administration in 2010.

The bank has opened an inquiry after uncovering “reasonable grounds” in the course of its investigation to suspect management were in contravention of rules governing the industry.

In these situations, the Central Bank conducts an initial investigation before launching a formal inquiry.

The bank said it had grounds to suspect that “certain persons who were concerned in the management of Quinn Insurance Limited participated in the commission of a suspected prescribed contravention” of EU regulations governing the sale of non-life insurance.

Specifically, the investigators are concerned with determining whether regulation 10(3) of the European Communities (Non-Life Insurance) Framework Regulations 1994 was breached by management.

The Central Bank has opened an investigation into the former management of Quinn Insurance Limited. https://t.co/eWQ20R8SQ6

— RTÉ Business (@RTEbusiness) November 11, 2015

The regulation provides that insurance companies must have sound and adequate administrative, accounting and internal control mechanisms.

A prescribed contravention could be a breach of legislation or of an obligation imposed by the Central Bank under that legislation.

The Central Bank has not specified the particular potential contravention it is investigating or given any indication of management they suspect to have been involved.

The bank said the inquiry is not a court of law but does have the power to administer sanctions should they deem it necessary to do so.

“An inquiry into suspected prescribed contraventions is a serious matter and the procedure of the inquiry must reflect this,” the Central Bank said in a statement.

Quinn Insurance, which was established by billionaire businessman Sean Quinn and is now called Liberty Insurance, was placed into administration in 2010 after serious misgivings were raised how as to the insurer was managing its affairs.

The initial cost to the taxpayer of the administration was estimated to be in excess of €700m but this has since grown to over €1bn as under-provisioning of claims has been uncovered.

Following its collapse in 2010, a 2% levy was introduced on all motor, home, and commercial insurance policies, meaning customers are footing the bill for its financial failings.

The money goes to the State-backed Insurance Compensation Fund.

Boston-based insurer Liberty Mutual paid €102m in November 2011 to acquire a 51% stake in Quinn Insurance, with the IBRC providing €99m for 49% of the business.

Liberty subsequently bought out IBRC in late 2013 to take full control of its Irish business.

At the beginning of 2015, the Irish subsidiary of Bermuda-based Catalina Holdings acquired Quinn Insurance’s remaining portfolio of UK and European legacy liabilities which the Quinn Group administrators heralded as a major step towards the completion of the group’s administration.

The administrators, Michael McAteer and Paul McCann of Grant Thornton, also indicated the sale was likely to reduce the cost of the administration to below €1.3bn.

The portfolio acquired by Catalina Ireland had net insurance liabilities of more than €460m.