Noonan vents fury at administrators as Quinn 'black hole' doubles to €1.6bn
An extraordinary dispute between Finance Minister Michael Noonan and the administrators running Quinn Insurance was revealed in court yesterday.
Details of the row emerged after the High Court demanded further information on how the cost of rescuing the company could have spiralled to more than €1.65bn.
In correspondence read out in court, Mr Noonan demanded to know how highly-paid administrators, actuaries and auditors could have so badly underestimated the size of the "black hole" at Quinn Insurance.
He also said he was concerned that the Government had been "misled by incomplete information and under-estimation".
When the insurer went into administration two years ago, the court was told that Quinn was able to pay its way without needing to raise money from insurance policyholders through the Insurance Compensation Fund (ICF).
By last October, the administrators said more than €738m could be needed -- and last month that estimate rose to €1.65bn, an escalation described as "truly shocking" by High Court judge Nicholas Kearns.
Yesterday, an official from the Central Bank admitted the final cost of the insurer's collapse -- which will be paid for by a 2pc levy on general insurance policies for about 20 years -- could be higher than the "worst case" bill of €1.65bn.
Documents laid before the court yesterday revealed Mr Noonan's frustration with the latest Quinn Insurance developments.
A letter from the Department of Finance to the insurer's administrators on July 25 said Mr Noonan was "at a loss to see" how the black hole at Quinn could have been underestimated so greatly and how the potential €1.65bn burden on policyholders "could not have been foreseen before now".
"In this context the minister has asked me to advise you that he is most unhappy (at the €1.65bn to be outlined to the courts)," the Department of Finance's Aidan Carrigan said.
"The minister can not understand how you, as highly remunerated professional administrators with the support of highly remunerated actuaries and auditors, could not have had greater insight into the total increased cost at an earlier stage, and is concerned by the manner in which the Government has been mislead by incomplete information and under-estimation," the letter continued.
The insurer's administrators replied the following day, detailing how the revised number had been reached and stressing that they "totally refute any suggestion that we misled the Government".
In their letter, the administrators cite correspondence to Mr Noonan on April 13, detailing a cost of up to €1.4bn for the insurer's rescue. The increase to €1.65bn was "largely" because the administrators had to include a new provision for foreign exchange losses because the Government couldn't enable them to hedge the risk, the administrators said.
Quinn Insurance gets all of its income in euro, from the Insurance Compensation Fund levy. It pays all of its costs in sterling, since it's dealing with claims from Quinn Insurance's UK and Northern Ireland business.
One of the joint administrators, Michael McAteer of accountancy firm Grant Thornton, told the court the administrators expected the likely call on the compensation fund to be in the range of €1.1bn to €1.3bn and the €1.65bn was based on considerable contingencies.
In a statement last night, the administrators said they were "deeply frustrated" by the soaring cost of the insurer's collapse.
Yesterday Central Bank official Domhnall Cullinan said the process for arriving at the €1.65bn was "robust" -- but the figure could be overshot depending on future events.
The administrators have already said they believe €1.1bn to €1.3bn is the likely final cost.