Experts fear insurance claims won't be covered
Published 07/04/2010 | 05:00
INSURANCE brokers have warned the hundreds of companies insured with Quinn that they stand to get nothing if the Cavan insurer goes bust.
The situation is set out in a memo sent by the Insurance Brokers Association (IBA) to its 700 members in recent days and comes a week after Quinn Insurance was put into administration.
The memo explains that if Quinn Insurance collapses, an insurance compensation fund will honour 65pc of any claims made by individuals -- but won't honour any claims made by the companies that hold Quinn policies.
"Brokers have been notifying all Quinn customers of the issues and making them aware of the outcome should Quinn (Insurance) go into liquidation," confirmed IBA director of general services Brian McNelis.
Mr McNelis added that his members were "obliged" to inform commercial customers of the situation since they would face "particular issues" in a liquidation scenario as they were not covered by the fund.
Quinn has built up a significant commercial book in recent years, mainly focusing on small and medium-sized businesses.
The Cavan firm is also understood to insure a handful of major Irish companies.
The head of one of the country's largest commercial insurers said his office had taken a "huge amount" of calls from Quinn's commercial policyholders over the last week.
"They know nothing in a company name would be covered if Quinn goes down," he said. "We've had some of Quinn's biggest customers talking to us over the last few days, assessing their options, because of the uncertainty out there."
Companies who have already paid out their annual premiums and want to switch "mid term" will only get some of the money back if Quinn agrees, while companies whose policies are up for renewal are free to move as they choose.
Quinn has had a difficult relationship with brokers in the past and Ireland's three largest brokerages stopped selling the Cavan insurer's policies a number of years ago.
The IBA document explains that companies are only exposed if Quinn collapses and goes into liquidation, and not if Quinn remains under the administration process and continues to trade as a going concern.
The situation arises because the 1989 Insurance Act says compensation can only be paid to "natural persons" holding policies in the event of an insurance company liquidation.
"The only way to extend coverage to companies would be to change the law," an international insurance boss said last night.
"Any attempt to do that would be strongly opposed by other players in the market."
Quinn's two health insurance competitors also confirmed they have seen an increase in enquiries since the Cavan insurer went into administration last week.
Aviva is understood to have added more than 5,000 policyholders to its book, bringing total numbers near the 260,000 mark.
A spokeswoman for VHI confirmed an "increase" in enquiries from Quinn customers over the last week but said she couldn't confirm how significant that increase had been for "competitive reasons".
Sources close to Quinn Insurance, however, said the company's policyholder book had been holding up "pretty well" despite the administration process.