THE Financial Regulator stepped in to take control of Seán Quinn's insurance business last week because it feared the company would run out of money to pay out on claims.
The claim is made in the regulator's affidavit to the High Court that approved the appointment of chartered accountants Grant Thornton as provisional administrators to take over running the insurance giant.
The "business of the insurer is being and has been so managed as to jeopardise and prejudice the rights and interests of persons arising under policies issued by the insurer, and if the insurer were to continue at present there might not be sufficient funds to the claims made under such policies," said the affidavit sworn by Domhnall Cullinan of the Financial Regulator.
According to the affidavit, the regulator was concerned in January that the entire Quinn Group would buckle under the weight of its vast debts and ordered the insurance company to draw up a survival plan in case its parent went under.
When that plan was presented, it was deemed "unacceptable" and "unrealistic" by the regulator. The final straw came after Quinn Insurance chairman Jim Quigley informed the regulator in March that there were guarantees for over €1.2bn of its assets to cover liabilities of other companies in the wider Quinn Group. The guarantees effectively eliminated the company's solvency levels.
For almost two years, the regulator was engaged in exhaustive discussions with the company to force it to bring its solvency levels up to the required standard. Quinn said it would do this by limiting the amount of insurance premiums it was taking on in 2009 to €972m and also target more profitable lines of business in the UK. The regulator agreed to the plan, but the company went on to write €1.05m of premiums and make a loss of more than €44m in the UK. Quinn also had to write down the value of its property assets by €75m.
In an interview with RTÉ last week, Quinn denied there was any risk to policyholders and said the decision to appoint administrators was the biggest mistake in Irish corporate history. He said the banks and bondholders who hold the guarantees were prepared to release them and he would inject money into the company. He said the move threatens not just the jobs at Quinn Insurance, which employs 2,700 people, but the wider Quinn Group, which is locked in talks with its lenders to refinance its debt.
In addition to the guarantees being released, the regulator demanded "significant board and management changes" at the insurance company.
Meanwhile, sources have confirmed to the Sunday Tribune that Anglo Irish Bank, which is owed €2.8bn by the Quinn family, is prepared to swap its loans in return for gaining control of the insurance company. That would allow Anglo to guarantee Quinn Insurance's solvency levels in a bid to persuade the High Court not to confirm the administrators – a move that the bank believes would lead to the ultimate collapse of Quinn Group. Anglo's loans to the Quinns are secured on their stake in the group and the bank would be among the last creditors to receive anything if it failed.
It is understood that Grant Thornton has no intention of selling the business immediately despite the initial interest of up to 20 bidders, including most of its rivals. Sources close to Grant Thornton pointed out that PMPA is still in the hands of administrators after nearly a quarter of a century.
Meanwhile it emerged yesterday that the Taoiseach spoke with Seán Quinn on Thursday night last at Quinn's request. A government spokesman told the Sunday Tribune: "He [Brian Cowen] pointed out to Mr Quinn that in relation to issues concerning Quinn Insurance, the Financial Regulator acts independently in such matters. Regarding issues concerning the wider Quinn Group, the Taoiseach has asked the Chairman and Chief Executive of Enterprise Ireland to meet with representatives of the Group to see if they can be of any assistance".