Price of Sean Quinn’s reckless gambles: We pay €400m
Businessman Sean Quinn, who earlier this week accused Anglo Irish Bank of pursuing a vendetta against him and destroying his lifetime’s work, has left families and businesses paying a high price for his reckless gambles on the bank’s share price.
Irish policyholders will have to fork out as much as €400m extra for the 2pc Quinn Insurance levy.
The news comes almost six months after the administrators of Quinn Insurance announced the Cavan insurer's resolution would trigger a call of about €600m on the Insurance Compensation Fund.
The relevant laws appeared to give the Finance Minister the ability to raise the levy either through a charge on all non-life insurance policies sold in Ireland, or through a charge on all policies sold by Irish-regulated insurers – insurers doing international business from Ireland escape the new 2pc charge.
The move has been criticised by the Consumers’ Association of Ireland and the small firm’s association ISME said it could be disastrous for many companies.
Insurance customers already cover a compensation fund for potential losses by insurance companies but it only amounts to €40m. Quinn Insurance has lost €700m.
Earlier this week Mr Quinn complained that Anglo Irish Bank was pursuing a ‘vendetta’ against him and his family by trying to recoup some of the €2.8bn they owe the bank. Anglo denies the claims.
"The 38 years of hard work to build the Quinn Group with the unending support of staff and the wider community has all but been destroyed by Anglo in less than five months," Mr Quinn said on Monday.
"It is absolutely apparent that Anglo's priority is to pursue a vendetta against me and my children -- while totally ignoring its obligations to the Irish taxpayer, the group and its employees."
"The reality now is that thousands of jobs are at risk."
Since about two-thirds of the business written by Irish-regulated companies is actually sold internationally, non-Irish policyholders could have ended up bearing most of the charge.
Finance Minister Michael Noonan had indicated he was considering this approach, but yesterday the Department of Finance announced the levy would only be raised from Irish policies.
A department spokesman said the decision had been taken on foot of advice from the Attorney General.
"Article 46 of the Third Non-Life Directive precludes indirect taxes and parafiscal charges being applied to risks outside the State," the spokesman added.
"The Attorney General has advised that the levy is a parafiscal charge, thus explaining the change in approach."
Mr Noonan had referenced the potential legal difficulties in imposing the charge on international business in response to a parliamentary question in July.
At the time, he said that while he was "very conscious" of not imposing an extra burden on Irish policyholders, the levy must be applied so it was "sustainable over time and stands up to legal scrutiny".
The department had "extensive consultations" with international insurers and the European Commission on the issue of how the levy should be raised, Mr Noonan added, and also engaged with the Central Bank and domestic insurers.
The new levy is expected to raise about €60m a year, based on Irish non-life insurance premiums of about €3bn. It will be raised by a 2pc charge on all non-life business, excluding health insurance.
The bill enabling the charge is expected to complete its passage through the Dail "no later than September 29", clearing the way for the levy to be applied later in the year.
As much as €320m is expected to be demanded from the fund at the end of 2011. There is already €40m in the fund and the remaining €280m will be pre-funded from state cash.
The levy is expected to run for about a decade, giving it a longer life than the PMPA levy, which was charged at a 2pc rate from January 1, 1984, to December 31, 1991, and then at 1pc for 1992.