The Financial Regulator used a recently amended and rarely used law to petition the High Court last week to place Quinn Insurance into administration for breaching insurance solvency rules in the last two years.

The law, which allows the regulator to petition the High Court for the administration of insurance companies, was part of the Financial Measures (Miscellaneous Provisions) Act 2009, signed last June. It updated the 1983 and 1989 Insurance Acts.

The provision was used only once before, when the regulator placed ESG Reinsurance Ireland and its subsidiary, Accent Europe, into administration last December over concerns about the financial position of the companies and their abilities to meet claims. ESG's most recent accounts showed it had an $18m asset deficit, meaning it was technically insolvent.

According to the regulator's affidavit, filed in the High Court last Tuesday, Quinn Insurance has a €448m hole in its balance sheet due to guarantees given to other entities within the Quinn Group.

Regulatory sources said last week the change in the law relating to putting insurance companies into administration was probably prompted by the regulator's engagement with Quinn Insurance over ongoing concerns, dating back to May 2008 according to court papers, about the company's solvency provisioning.

The regulator fined Quinn Insurance and its then chairman Seán Quinn, a combined €3.45m for unauthorised transfers of €288m from Quinn Insurance to a company in the Quinn Group to help cover near-billions in loss-making trades in Anglo Irish Bank shares. Seán Quinn later stepped down as chairman as part of the settlement agreement with the regulator.

New head of financial regulation Matthew Elderfield is understood to be seeking stronger enforcement powers to crack down on lax regulatory compliance. He is believed to be focusing closely on so-called "fitness and probity" standards for directors and top executives to ensure senior people at big financial firms have the skills and character to lead systemically important institutions. Regulatory sources have said a key new power will include the ability to ask the High Court to remove specific people from their jobs.

In an address to the Leinster Society of Chartered Accountants last month, Elderfield said he would implement risk-based regulation with tougher scrutiny of bigger and riskier companies.