Northern Ireland

Quinn Insurance mismanagement means levy to last years

People in the Irish Republic will pay extra on their insurance for many years due to mismanagement at Quinn Insurance, a Dublin court has heard.

The Irish government has imposed a 2% levy on all insurance premiums to meet the costs of plugging a financial hole at the company.

Expert witnesses were asked why the costs of covering the losses of Quinn Insurance could rise to 1.65bn euro.

The court was told it was down to lack of provision for potential losses.

Quinn Insurance was put into administration in April 2010.

It has since been sold to Liberty, the fifth largest insurance company in the world, under an agreement that historical shortfalls would be covered by the new levy.

The president of the High Court, Nicholas Kearns, asked the expert witnesses on Tuesday why the costs of covering the losses could rise to 1.65bn euro from a previous estimate of 738m euro.

He was told it was down to under-provisioning for potential losses in the company before it was sold.

The company had not put enough money aside to cover payouts - a fundamental problem for an insurance company.

One expert likened it to peeling back an onion, with ever more potential losses revealed.

He said the currency fluctuation between sterling and the euro was also a factor because most of the losses are related to the Quinn company's entry into the UK market.

The court also heard of correspondence between the Central Bank and the Irish finance minister, Michael Noonan, in which he, too, expressed his frustration about the escalating losses.

He said he was at a loss as to how such a large underestimation in the potential call on the government's Insurance Compensation Fund could not have been foreseen to a greater extent.

He also said in a later letter that he could not understand how the administrators, with the support of highly remunerated actuaries and auditors, could not have foreseen what was happening in terms of the rising losses.