QIL board not aware of €1.2bn loan guarantee
Inquiry into 2010 insurance crisis
Board meetings at subsidiaries of Quinn Insurance Ltd (QIL) to sign off on loan guarantees of €1.2bn for the wider Quinn Group appear not to have taken place, despite signed minutes indicating that they had, a public inquiry has heard.
Hearings for an inquiry set in train by the Central Bank of Ireland into the collapse of Quinn Insurance Ltd in 2010 kicked off yesterday.
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Senior counsel Eoin McCullough for the legal practitioner team assisting the inquiry told the first day of public hearings that neither the board nor the investment committee of Quinn Insurance had been made aware that the assets of eight subsidiaries had been pledged as collateral against €1.2bn of loans.
Referring to three separate board meetings of Quinn Insurance in 2005, 2006 and 2007 at which Liam McCaffrey, former CEO of Quinn Group and Kevin Lunney signed off on the pledges, he said that it appeared that board members had not been notified of the meetings. Both Mr McCaffrey and Mr Lunney deny the charges.
"It actually appears that the board meetings did not take place," Mr McCullough told the inquiry, adding that the failure to inform the Quinn Insurance board and its investment committee had breached company statutes and showed that internal controls were inadequate.
The assets of the subsidiaries of Quinn insurance were supposed to work as regulatory capital for the insurer.
The Central Bank of Ireland imposed a fine of €5m on Quinn Insurance for its failure to maintain those solvency margins and for the lack of management controls in 2013, but the fine was waived as the firm was in administration.
In order to fund compensation for the liabilities, which run at more than €1bn, arising from Quinn Insurance's financial collapse insurance customers in Ireland still pay a 2pc levy on non-life policies.
Mr McCullough's statement was the only one made in the hearing. "The persons concerned never told the other members of the QIL board or the investment committee of the proposal to enter into the guarantees - or the fact that the guarantees were entered into," he said.
The board of Quinn Insurance did not become aware that the assets of eight subsidiary companies, which were directly or indirectly owned by the insurance company or some of its entities had been pledged until 2010 when, in the words of Mr McCullough "matters became difficult".
The firm was put into administration in 2010 and later bought by Liberty Insurance of the US for one euro.
The inquiry is headed by Mr Justice Iarfhlaith O'Neill, a retired High Court judge, with barrister Ita Mangan and former Zurich Insurance lawyer John Cashin. It is scheduled to run for two weeks.