Longstanding worries that Quinn Insurance's solvency buffer could come under pressure have been rekindled after the revelation that the company breached insurance regulations by making intra-group loans of €288m. The loans were used to help cover loss-making positions in Anglo Irish Bank shares worth nearly €1bn.

A note appended to the 2007 accounts of Quinn Insurance (QI), released on Friday after the Financial Regulator announced sanctions against the company and chairman Sean Quinn, appears to substantiate the concerns. It says that as a consequence of impairments in the loans, its surplus over the minimum solvency margin – similar to bank capital – had been "materially reduced" as of May 2008.

According to a statement from Quinn Group, the majority of those loans have been restructured and repaid, but a spokesman declined to provide further details. Given that the group sustained an €829m writedown on sour equity investments –with a further possible €130m to come in 2008 – confidence about Quinn Insurance has taken a hit among industry professionals.

Brokers have long had concerns about Quinn's exceptionally low pricing on general insurance, reportedly undercutting market averages by as much as 50%. Many brokers have been perplexed at the direction in pricing, considering market consensus expects premiums to rise. The insurer has been very succesful in building market share through direct channels.

Transparency has been another key concern. This issue came to a head in July when Quinn pulled out of coverage by Moody's after the credit ratings agency revised its outlook on the insurer to stable from positive and withdrew its Baa2 rating, forcing large insurance brokers such as Marsh and AON to withdraw their business.

As early as March, Moody's pointed out that Quinn's large exposure to certain assets was a "significant risk" to the group, which would have trouble raising capital on the credit markets during times of stress due to its private ownership structure.

The Quinn statement from Friday asserts the insurance company is "in a very strong financial position with €2bn in assets". However the most recent breakdown of the asset mix at Quinn Insurance reveals the company to be in a trickier position than its peers. The company has nearly 40% of its assets tied up in either volatile or illiquid investments such as shares and property, leaving it exposed to the ongoing equity and property downturn.

Other large insurance companies in the Irish market tend to put roughly half their available assets into rock-solid government securities, but according to the most recent Financial Regulator figures Quinn has no assets in government bonds.

Even so the UK's Financial Services Authority has recently become worried about the financial strength of its own general insurers, several of which operate in the Irish market as well. These concerns, reflected in the volatile share prices of firms such as Aviva, RSA and Axa, have led to widespread speculation that general insurers across the board would have to raise capital to strengthen their balance sheets, just as the banks are doing.