For staff at Quinn Insurance the withdrawal of Sean Quinn's opposition to the appointment of administrators is unlikely to lead to any more certainty over their jobs and the future independence of the company.
The insurance arm employs about 2,800 staff out of a total of 5,500 at Quinn Group. With hundreds of staff located in unemployment blackspots along the border, workers fear a prolonged period of administration or a fire sale to a rival will result in widespread job losses.
According to sources, the most likely outcome at this stage is a "short-ish" period of administration lasting maybe a year or so before Quinn Insurance is sold off. The ultimate outcome, however, depends on a number of factors including whether the administration damages the business by scaring off customers. As the Sunday Tribune reported last week, Quinn's rivals are looking to take advantage of the uncertainty and are seeing increased interest in switching away from the stricken insurer.
"Trust is hugely important for insurance companies. Customers need to know their policy will be honoured and claims paid out. Once you lose trust it is very hard to regain," said a senior bank executive who follows the Quinn Group closely.
The main issue to be resolved remains the solvency concerns raised by the Financial Regulator. According to an affidavit presented to the High Court in late March, the regulator had "grave concerns" about Quinn Insurance's ability to meet solvency requirements because guarantees given by the company to cover the debts of other parts of the Quinn Group wiped out its solvency cushion. The team of about two dozen Grant Thornton executives have been busy since their appointment as administrators in late March putting together a viability plan for the company to meet the necessary solvency levels.
The sale of the company to another insurer willing to pump in the necessary cash would be ideal. It is understood that about 20 expressions of interest have so far been submitted to the administrators, Michael McAteer and Paul McCann of Grant Thornton, looking to take over all or parts of Quinn Insurance. Most of Quinn's rivals made approaches to the administrators but no further discussions with any of those interested in the company will likely happen immediately, it is believed.
"There's a lot of people just kicking the tyres, seeing what is going to happen," a source familiar with the administration process said.
The Quinn Group says the insurance arm was highly profitable before the Financial Regulator's move. Quinn Insurance "has ample liquidity with almost €1bn in cash reserves as well as other assets, and was extremely profitable" (making about €18m in March), the Quinn Group said in a statement last week. To meet the Financial Regulator's solvency requirements the business needs between €100-€150m, the company claims.
But a sale to one of Quinn's existing rivals like Aviva, Allianz, Axa or Zurich who could easily make such a payment would likely be a disaster from the employees' perspective. All of the major insurance companies have extensive operations in Ireland and would be unlikely to be able to maintain the current employment levels at Quinn given the overlap in roles and functions.
According to some, the demise of Quinn Insurance as an independent entity would also be a blow for competition in the Irish market. His rivals may gloat at his downfall, but most insurers were furious about having to keep premiums low to match Quinn.
"I never did any business with Quinn [Insurance] but it was useful in negotiations with our insurers to keep the premiums down if they thought we would go to Quinn," the chief executive of a company employing more than 600 people across Ireland told the Sunday Tribune. "You need a bit of healthy competition."
Talks about the company's long-term future, though, are taking a backseat as the regulator and administrators hammer out a plan for the insurance company to find a way of resuming writing new business in the UK. A major factor in the decision by Financial Regulator Matthew Elderfield to step in and take control of Quinn Insurance was concerns about underwriting losses in the UK. According to the regulator's affidavit to the High Court - the figures were disputed by Quinn - the company posted an underwriting loss of €44m for 2009.
The UK's Financial Services Authority (FSA) agreed with its Irish counterpart and moved to stop the company taking on new business. The administrators and the FSA met in London the week before last. Staff at the company said reopening its UK business is vital if it is to remain intact. The FSA declined to comment but the Sunday Tribune understands that it is willing to let the Financial Regulator "take the lead" and would be prepared to allow Quinn to write new business if Elderfield agreed. The administrators submitted a plan to the regulator in recent days outlining its plan for the UK.
With the administrators now confirmed by the High Court, after Sean Quinn agreed not to oppose their appointment, the process of securing the company's future and the jobs of 2,800 workers is expected to speed up. In a statement last week the regulator said it will "continue to work with the joint administrators and the [Quinn] board to address issues to resolve the financial position of the firm in the interests of its policyholders."
The worst-case scenario for all involved, from the employees to the Financial Regulator, is a lengthy period of administration similar to that of PMPA, which collapsed in the mid-1980s and is still technically in administration nearly a quarter of a century later.