The High Court has sanctioned the draw-down of €738 million from the State's insurance compensation fund by the administrators of Quinn Insurance.
The ruling is subject to the court approving the sale of the business to US insurer Liberty Mutual tomorrow.
The President of the High Court, Mr Justice Nicholas Kearns, gave the administrators permission to draw down €320 million from the fund immediately, once the sale is approved, and to make additional calls of up to €418 million through further applications to the court.
The judge will hear an application from the administrators of Quinn Insurance to transfer the business to Liberty Mutual which will take over ownership of the company with State-owned Anglo Irish Bank following a deal that was agreed earlier this year.
Mr Justice Kearns said that while the €738 million was a significant sum for the taxpayer it had to be balanced against the risk of a potential cost of €1.3 billion to the State if the business went into liquidation.
Denis McDonald SC, for the administrators, said the €738 million from the fund would protect policyholders being transferred to Liberty, the remaining policyholders at Quinn Insurance and the employees of the company.
There was a deficit of €851.5 million at Quinn Insurance at the end of August, he said, and if the company was run down, the cost would be significantly higher than this amount, between €500 million and €600 million more.
Lawyers for the Minister for Finance consented to the draw-down from the fund. The judge said that comprehensive evaluations of the costs involved had been made and that he was "extremely conscious" of the position of the taxpayers and all of the parties concerned.
Lawyers for two lobby groups, Concerned Irish Citizens, which represents employees and policyholders of Quinn Insurance, and Concerned Irish Business raised concerns about the transfer of the insurance business to Liberty Mutual.
Pauline Walley SC, for Concerned Irish Citizens, told the court that the transfer of the business was the most significant decision in the history of the State relating to insurance.
The groups are seeking a copy of a private document showing the agreement reached to transfer the assets of Quinn Insurance to Liberty Mutual. Mr McDonald said that the document was commercially sensitive and, if leaked, it could be used to destabilise the business.
Discussions will take place today between lawyers for the lobby groups and the administrators ahead of a hearing tomorrow to approve the sale of the business to Liberty.
Mr Justice Kearns acknowledged the concerns of the parties and said that he would hear arguments tomorrow but asked for all sides to narrow the grounds of objection to the transfer.
The Government introduced legislation last month to impose a 2 per cent levy on all non-life and health insurance policies to fund the shortfall at Quinn by replenishing the compensation fund, which contains €30 million. The levy will raise €65 million a year.
The deficit at Quinn Insurance arose primarily from writing insurance business in the UK at loss-making prices.
