Insurers voice fears that they'll pay the price for Quinn sell-off
THE Irish Insurance Federation has asked the Finance Minister for "clarification" on the terms of the sale of Quinn Insurance. It has warned of the "moral hazard" that could arise "if there is any suggestion that full value" was not received in the sale.
The IIF has also called on the Government to ensure that any levy imposed as a result of the collapse of Quinn Insurance is entirely offset by the removal of a 3pc stamp duty on insurance policies.
The comments were made in a letter from IIF boss Mike Kemp to Finance Minister Michael Noonan and follow last week's news that Quinn Insurance's sale could leave a €700m black hole to be funded by an insurance levy.
Mr Kemp last night confirmed that he had written to the minister, seeking further details on the deal to sell the bulk of Quinn Insurance's operations to Anglo Irish Bank and US insurance giant Liberty Mutual.
"We want clarification on the terms of sale and plans for the future funding of the compensation fund, as consumers and insurers will be affected and have a material interest in the outcome," Mr Kemp said.
"We also emphasised the future moral-hazard implications if there is any suggestion that full value has not been extracted from the sale."
Some observers believe that the insurance company was "milked" in the wider deal, that saw Anglo and other lenders take control of the Quinn Group a fortnight ago.
Mr Kemp confirmed that the IIF was asking for the existing 3pc stamp duty to be removed as a 'quid pro quo' for the introduction of a new Insurance Compensation Fund levy.
The IIF is awaiting a response from Mr Noonan and plans to "follow up" its letter this week.
A spokesman for the Department of Finance declined to comment last night, beyond pointing out that the IIF letter would be "dealt with in the usual way".
However, sources stressed that agreements with the International Monetary Fund and European authorities meant that if the stamp-duty levy was taken off insurance policies, then the money would have to be found somewhere else.
The stamp duty on non-life insurance products raised €109m for the Exchequer last year.
"If you take it (stamp duty) away then you've got a hole to plug," said one source. "With the EU/IMF programme, all the numbers have to balance."
Under the Quinn/Liberty deal, about €200m from the insurance company's cash is believed to have been used to buy out guarantees that various lenders held against assets linked to Quinn Insurance.
The loss of that €200m means the call on the Insurance Compensation Fund is €200m bigger than it should have been, some argue.
However, others point out that if the guarantees had not been released and a deal to save Quinn Insurance had not been done, the call on the compensation fund could have topped €1bn.
Insurance companies are widely dissatisfied with the outcome, complaining that over the last year they were repeatedly assured that there would be no call on the compensation fund. They also feel that they are being made to "pay the price" for Quinn's demise.
But sources close to the deal argue that that it was not evident that the compensation fund would be triggered until late last year, when insurers across the UK began reassessing their future claims exposure.