THE SPIRALLING cost of Quinn Insurance to the State’s Insurance Compensation Fund (ICF) has sparked a dispute between Minister for Finance Michael Noonan and the company’s joint administrators.
The Minister expressed his frustration, in letters submitted by the administrators to the High Court, that the cost to the fund had more than doubled to a possible €1.65 billion within several months.
The letters emerged as a Central Bank official said that the costs could rise further if more problems emerged at the insurer, which was previously part of Seán Quinn’s group of businesses.
The costs are being funded by a 2 per cent levy on motor and home insurance policies for an unknown period of time.
Mr Noonan told the administrators, Michael McAteer and Paul McCann of Grant Thornton, in a letter last June that it was “remarkable” that losses continue to climb substantially over short periods, “following examinations by teams of actuaries and accountants”.
“I am at a loss to see how such a large underestimation, and the corresponding scale of what is required from the ICF, could not have been foreseen to a greater extent before now,” he wrote.
High Court president Mr Justice Nicholas Kearns referred to the letter yesterday while hearing the reasons why the call on the fund had risen from €775 million last year to a possible €1.65 billion.
Mr McAteer told the court that he shared the Minister’s frustration at the increase in the cost.
The administrators were initially given figures after they were appointed in 2010 showing the insurer was solvent but a UK actuarial firm later uncovered a deficit of €400 million, he said.
Mr McAteer said more problems emerged as further analysis was carried out on the firm. He likened the analysis to peeling new layers of an onion; each new layer revealed deeper problems at the company.
A senior official at the Central Bank said it hoped the €1.65 billion figure was “as bad as it gets” but warned that it could increase with “further peels of the onion”.
Domhnall Cullinan, the Central Bank’s head of general insurance supervision, said he was satisfied the administrators had gone through “a very robust process” in reaching their current estimates.
Mr McAteer said the likely call on the fund was between €1.1 billion and €1.3 billion but this could rise to €1.65 billion if the euro crisis deteriorated or if cost of claims rose again.
Correspondence filed in court showed the dispute between the Minister and the administrators continued up until late last month.
A Department of Finance official told the administrators in a letter on July 25th that the Minister was “most unhappy” at the €1.65 billion worst-case estimate given their earlier lower estimates.
Mr Noonan was “particularly frustrated” that the estimate on losses had changed so significantly between April and July, he 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,” the official wrote.
He added that Mr Noonan was concerned by the manner in which the Government had been misled by incomplete information and underestimation.
The administrators replied the next day, rejecting any suggestion they had misled the Government, and saying there had been “no change in the underlying assumptions” in their figures since April.
The Minister asked the administrators in June to be kept updated on whether there was a legal basis to sue the insurer’s former auditors, PricewaterhouseCoopers, or “signing actuaries”, Milliman, for negligence.
Meanwhile, Fermanagh District Council will today post a letter of support to Mr Quinn, a native of Co Fermanagh, “acknowledging that this was a very difficult time for the family” after the council voted on the letter last Monday.
Mr Quinn’s son, Seán jnr, was last month jailed for three months for contempt of court orders preventing members of the family from putting assets beyond the reach of the former Anglo Irish Bank.
