Insurer turned industry on its head with meteoric rise
Published 31/03/2010 | 05:00
"We are doing it in a quiet, controlled way, letting it develop slowly."
That's how David Mackey, director of the Sean Quinn Group, described the plans for his master's foray into insurance back in 1995.
Fifteen years on, the statement is laughable. Quinn Direct's growth over the past decade hasn't been slow-- it has been explosive.
Staff numbers have soared from a starting 15 to more than 2,000. Annual premiums have grown from €15m to more than €1.1bn, an increase of more than 7,000pc.
From a standing start, Quinn became the country's second biggest general insurer.
The growth came as Quinn turned the insurance market on its head, a process that has been anything but quiet.
The Cavan insurer's starting pitch was to settle claims directly and quickly, slashing legal costs and red tape. The strategy allowed Quinn to undercut other players, provoking the wrath of displaced incumbents who blamed the insurer for the collapse in premiums throughout the boom.
Quinn Direct has had its fair share of clashes with Ireland's broking elite as well.
In 2006, the country's three biggest public brokerages refused to sell on Quinn's policies, citing the insurer's failure to secure a "security rating" that would confirm its ability to honour payouts. Quinn hit back by accusing the trio of operating a "cosy cartel".
As for the "controlled" development of Quinn Direct, experts have long pondered the strategy behind the company's growth, accusing the company of a "landgrab" rather than anything more calculated.
Over the past two years, Quinn has tried to reduce its exposure to motor insurance in particular, but until then the over-riding principle seemed to be 'the more the merrier'.
It might not have happened the way Mr Mackey set out, but Quinn Direct did succeed in creating a massive force in the insurance industry, a company so profitable that it could "gift" almost €600m to the Quinn Group over a six-year period.
Then, the cracks began to show. The notoriously cyclical insurance industry began to lurch downwards.
Investment returns, a crucial stream of income for insurers, collapsed in 2008 as the global financial markets imploded.
At the same time, claims spiked unpredictably, as massive weather events occurred with unprecedented frequency.
The international insurers were cushioned by their massive parent companies, who could be relied upon to bridge any shortfall.
Quinn had only its own reserves, and questions about its ability to withstand the storm began to be asked.
A year ago, the Irish Independent put some of those questions to Quinn Direct boss Colin Morgan.
"It would appear to me whoever is feeding you those questions are either struggling to compete with us or are trying to deflect attention from their own issues," Mr Morgan said.
The Financial Regulator has uncovered a €448m black hole in the insurer's reserves, a black hole that was there when Mr Morgan spoke to this newspaper, yet the insurance boss insisted his company was adequately reserved.
Asked about the ability of Quinn Direct to raise more capital, he remained bullish. "It (more money) would be available if required," he said.