Bailouts are not confined to the banking sector
Published 17/03/2011 | 05:00
Michael Noonan is certainly getting a crash course in bailout economics in his first week of office.
Effectively he is learning that much of his job over the next few years will be solely about finding ways for Ireland (and its banks) to repay bank creditors and/or the ECB.
But bailout economics won't just emerge out of the banking industry. The legacy of Quinn Insurance will mean Noonan is introduced to the concept in that sector too.
Proposals to take over Quinn Insurance, forwarded to Noonan in recent days by the administrators for that company, involve utilising the Insurance Compensation Fund, effectively meaning all insurance customers will pick up the bill for Quinn Insurance's failure.
The objection to that reasoning, of course, is that the insurance fund is there for precisely that reason -- to assist policy holders with troubled insurance firms.
But it is not clear that Quinn Insurance, which is not in liquidation remember, fits the strict definition needed to allow this fund to come to the rescue.
It is usually only reserved for insolvent insurers who are being run by a liquidator and who no longer have an authorisation from the government to operate. That status may come in time.
Few will begrudge insured parties receiving their due entitlements, but any use of the fund is likely to throw fresh focus back on how the company was run when it was owned by Sean Quinn and family.
Many will be asking why aren't the assets and reserves of Quinn Insurance currently sufficient to meet all claims?