News Analysis: Quinn enters administration

Quinn Insurance can no longer take on any business in the UK after Ireland's watchdog, the Financial Regulator, called in the administrators following allegations about the firm. The insurer will still be allowed to operate in Ireland and its life arm has not been affected. The firm had been trying to shore up its capital solvency throughout 2009 but suitable plans never materialised.

The insurer fell into trouble after the regulator found out, following a phone call from Quinn's chairman Jim Quigley on 24 March, that it had been underwriting guarantees to shareholders for the wider Quinn Group of €448m, undermining significantly the insurer's balance sheet and meaning that liabilities exceeded assets.

Additionally, the regulator said that the insurer had not come up with a plan to restore health to the business. The Quinn Group owes €2.8bn to Anglo Irish Bank and the news came at a poor time for the Irish economy, with AIB and Bank of Ireland seeking to raise €10bn between them. Sean Quinn had built up a 15% stake in Anglo Irish Bank using money from Quinn Insurance but this was almost wiped out when it was taken over by the government.

Loans and fines

Sean Quinn resigned from the board of Quinn Insurance in October 2008 after being fined €3.25m for failing to meet regulatory requirements regarding substantial loans from the insurer to related companies in order to buy shares in Anglo Irish Bank. Then, he described the insurer as "very profitable" and this time he has defended himself by writing to every member of the cabinet, complaining that the action was unnecessary and that 5,500 jobs had been endangered.

Quinn Insurance has described the regulator's actions this time as "completely wrong" and said that its financiers had been working "around the clock" to meet its demands. The company also "entirely disagreed" with the regulator that its UK business is "currently unprofitable". Quinn cited that the group had given the Irish treasury over €1bn in tax since starting in 1973.

Paul McCann and Michael McAteer of Grant Thornton have been appointed joint provisional administrators. The insurer has 365,000 customers - including many in construction - and over £200m gross written premium in the UK, alongside 920,000 policyholders in Ireland.

Solicitors

Quinn has a large segment of the UK solicitors' professional indemnity market, insuring many smaller solicitors, including more than 2,000 clients and over £25m GWP. Solicitors Regulation Authority spokesman Geoffrey Negus told PB: "If it is good enough for the Financial Services Authority then it is good enough for us: we don't vet providers.

"Our firms do not need to take immediate action because they will be covered until renewal. We have had a continued dialogue with the FSA and the Irish Financial Regulator." He added that the regulator, part of the Law Society, had no preferred broker or insurer and did not have the capability to go into partnership with one.

Neil Nimmo, executive chairman at Lockton Risk Solutions, questioned if Quinn would have the capacity to pay claims that might take years to materialise when they weren't taking money for new premiums. He also said that the market would harden as a result of Quinn pulling out.

Frequent updates

Prime Professions has 1,600 single-practitioner solicitors with Quinn. Director Richard Brown said that clients were informed of Quinn's status at all times and will wait for the regulators for further advice. He said, like other brokers, that a security committee had met regularly to discuss Quinn's status.

Following Quinn's decision to withdraw from a Moody's UK rating in July 2008, the Royal Institute of Chartered Surveyors dropped its approval of the insurer.

As PB went to press, brokers and clients alike were still waiting for more guidance from the respective Irish and UK regulators as the investigation into Quinn's finances continued. The regulators will look into the non-disclosure of loan guarantees, incorrect calculation of solvency and reserves and the lack of systems and controls that may have allowed these events to take place.