What happened in the High Court yesterday?
The Financial Regulator made, and was granted, an application to have joint provisional administrators appointed to Quinn Healthcare and Quinn Direct, which offers motor, home and business policies.
Is the move significant?
Very. Quinn Insurance is the second biggest insurer operating in the Irish market.
It has 19 per cent of the motor insurance market, 3 per cent of the property insurance market and 13 per cent of the public liability market.
Quinn Healthcare has about 400,000 customers and the companies employ almost 2,800 people in Ireland and Britain.
How has Quinn Insurance responded to the latest moves?
Angrily. It described the court action as “deeply disappointing in the context of the continued profitability of the group, which is currently in excess of €20 million per month”, and the company said it thought that the issues could have been resolved “to the benefit of all in a relatively short space of time”.
It stressed that its business outside of Quinn Healthcare and Quinn Direct, including its life assurance arm, were unaffected.
If Quinn Insurance is so profitable, why was the administration order sought?
Counsel for the regulator told the High Court that the company had “significantly breached” its solvency ratios.
It heard that subsidiaries of Quinn Insurance had made guarantees in relation to the group’s assets which reduced the amount of cover for policyholders’ liabilities and was told that its assets were reduced by €448 million. The court was also told that Quinn had gone from having assets-over-liabilities of some €200 million to an excess of liabilities of more than €200 million.
Should Quinn’s customers be worried?
No. People who have policies with the affected elements of this company continue to be covered. Both Quinn Healthcare and Quinn Direct remain open for business and the Financial Regulator has stressed that consumers will be able to renew policies, take out new business and expect payouts on all “valid claims” in the normal way.
What about potential customers?
There is nothing to stop people within the Republic taking out new policies with Quinn Insurance, which will now come under the remit of the provisional administrators and Central Bank staff.
However, the Financial Regulator has ordered the company to stop writing new business in the UK.
Can consumers, who have paid premiums in advance, get refunds if they leave the company before the policy term ends?
No, when an insurance company enters administration, its customers do not have a legitimate reason to break the terms of their contract.
The company continues to honour its side of the bargain by continuing to offer cover, so there is no legally valid reason to break the agreement.
Irish brokers were said to be inundated with inquiries from clients yesterday, with many expressing concerns about claim payments while others were asking whether or not to renew their policies with Quinn.
Consumers who are concerned can contact their broker but should be wary of making knee-jerk responses to the latest developments.
What happens next?
In the short term, probably very little. The administration process can be a long one. There are three scenarios which could come to pass:
the company could come out of administration as a profitable, independent concern and continue to trade just as it has done in the past;
it could come out of administration and be sold to a rival operator who would assume any of its losses;
it could remain in administration ahead of a long wind-up.
Have we been here before?
Yes, but not for a long time. In 1983, the motor insurance company PMPA, which was then the biggest motor insurer in the State, went into administration after it got into serious financial difficulties.
That administration process took six years. The PMPA workforce fell from 2,300 to about 800 and the company was restored to profitability before ultimately being bought by AXA Insurance.
Two years later, a similar fate befell the Insurance Corporation of Ireland (ICI), which was part of AIB. Its profitable life assurance arm was sold to Prudential which was later acquired by Irish Permanent Building Society.
