What was the Insurance Corporation of Ireland?
Published 15/12/2012 | 05:00
THE Insurance Corporation of Ireland (ICI) was a wholly owned subsidiary of Allied Irish Banks until it collapsed in 1985 with losses of over £200m.
The London-based unit which underwrote everything from travel agents to the Catholic Church ran into problems when it became obvious that it had not been setting aside enough money to cover risky underwriting.
It was first revealed in November 1984 that the seemingly profitable ICI was breaking law by operating below the statutory reserve ratio.
AIB decided that it was not in a position to pay for the unit's mistakes without endangering the bank and turned to the Fine Gael and Labour coalition of the day for help.
The government took advice (which under-estimated the cost of the bailout) and then agreed to take over ICI.
The decision to buy ICI and bail out AIB was announced in the Dail by former Finance Minister John Bruton at a time when the economy was already in deep trouble.
AIB was allowed to write off its investment in ICI, while the taxpayer was left to pick up the bill through a levy.
In a move that angered many, AIB paid a dividend to shareholders the following year.