Quinn Insurance, the former operator of health and general insurance businesses, has set aside € 6.5 million to pay the lawyers it expects to use this year and next year when suing its former professional advisers.
The disastrous business, formerly owned by the now-bankrupt businessman Sean Quinn, has already received more than € 1 billion from the Insurance Compensation Fund to help it meet its losses, and expects to have to receive up to € 600 million more to meet future liabilities.
Accounts for the business for the year to December 2012 show that the company paid almost € 4 million in legal fees last year and in 2011. It initiated proceedings against its former auditors, PricewaterhouseCoopers, last year, and is considering extending those proceedings and possible taking proceedings against “additional defendants”, according to the report accompanying the latest accounts.
Historically, the company received actuarial services from the actuarial services provider, Milliman. Last year one of the joint administrators to Quinn Insurance, Michael McAteer, told an Oireachtas Committee that following the appointment of the administrators, new actuaries found that the company had inadequate reserves.
“The effect of this was to eliminate the profit reserves of the company and question whether the company had been historically profitable,” Mr McAteer told the committee.
Mr McAteer, who was appointed to Quinn Insurance (QIL) along with Paul McCann in 2010,told the committee they had come to the view that, prior to their appointment, there was a reluctance at QIL to provide adequate reserves for large cases.
The insurance company used assets held by it to guarantee loans issued by Anglo Irish Bank to members of the Quinn family and to family companies associated with foreign property investments. The Central Bank appointed joint administrators to the insurance business when it discovered this.
According to the joint administrators’ report accompanying the latest accounts, since initiating proceedings against PricewaterhouseCoopers in February 2012, “a significant amount of forensic investigation has been carried out into the circumstances surrounding the granting of guarantees by QIL subsidiaries and the implications of the treatment of the guarantees in the audited accounts of QIL.”
They said that more recently the company has commenced a detailed investigation into the way the audit of claim files and claim reserves was carried out. The company has engaged external experts to review a selection of the files audited and is currently considering the findings of the review.
“QIL is also considering the possibility if appropriate of adding additional defendants to the action.”
The company is due to update the courts on its case in August. A levy imposed on all insurance policies bar health policies, in order to repay the State’s investment, will probably have to run for 15 years.
