THE FINANCIAL Regulator may refer breaches of insurance regulations and company law unearthed in its investigation into Quinn Insurance to the Office of the Director of Corporate Enforcement and the Garda Síochána.
Investigators from the regulator have been at work at Quinn Insurance in Cavan since last week, when the High Court appointed joint provisional administrators to take control of the insurer. Regulatory staff have collected information detailing the failure of Quinn Insurance to meet the threshold for the amount of money an insurer must hold in reserve to cover potential claims.
The regulator is examining breaches of these solvency rules and the conduct of individuals in failing to disclose them, as well as systems failures at the company.
Lawyers at the regulator will be consulted early next week to determine whether fresh evidence is needed to proceed with a formal complaint or to refer matters to other State bodies for further investigation or potential action. Investigators may require additional information from the firm or seek to question Quinn executives to fill any gaps that remain as part of the investigation.
The regulator expressed “grave concerns” in court over how the insurance company was being run and its inability to put enough in reserve to meet possible liabilities.
The regulator said it only discovered last month that guarantees were provided by Quinn Insurance subsidiaries as far back as 2005 on Quinn Group’s debts of €1.2 billion, including €600 million owing to about 20 US bondholders. The guarantees, which pushed the insurer’s solvency below the regulatory threshold, were not disclosed in quarterly solvency reports to the regulator, but the group has claimed they were detailed in the subsidiaries’ accounts.
It emerged last night that Anglo Irish Bank, which is owed €2.8 billion by the Quinn family, has proposed to the regulator that it indemnify Quinn Insurance. It would also take on some of the Quinn Group’s debts in an effort to avert the administration of the insurance subsidiary and keep the group intact, as it fears the rump would be unable to service the debt.
Anglo would buy the group’s €600 million debt to its US bondholders at a discount, issuing them with about €550 million in new, Government-backed bonds. Mr Quinn confirmed last night that talks with the bond holders were under way.
The bank would also inject €150 million into the group to allow Quinn Insurance improve its solvency.
This would bring the cost of Anglo’s proposed bailout to about €700 million and increase its exposure to Quinn to about €3.5 billion.
Anglo will present its revised plan to the regulator today. The regulator has demanded that Anglo outline the full effect on the bank of the additional risks that it would take on through its proposed rescue of Quinn.
It also emerged last night that the regulator is considering whether to allow Quinn Insurance to reopen to new business in Britain and Northern Ireland, after receiving a draft proposal from the provisional administrators. In the proposal, the administrators at Quinn Insurance suggested reopening parts of the motor and corporate insurance businesses in the UK operation.
Some 1,430 employees out of a 2,800-strong workforce at Quinn Insurance are working in the Northern Irish and British insurance business at Quinn’s offices in Dublin, Cavan, Enniskillen and Manchester.
Last week the regulator ordered the closure of the business, putting these jobs at immediate risk.
“We met today with the provisional administrators to discuss a draft proposal in respect of the UK business,” the regulator said in a statement last night. “They are currently carrying out further work on this proposal and we expect to receive details of this shortly.”
Taoiseach Brian Cowen acknowledged the crisis had led to a very complex situation for the Government in its efforts to save 5,500 jobs at the group while not compromising the independence of the regulator.
