Updated, 12.21
FINANCE MINISTER Michael Noonan has published a new insurance bill which proposes to place a 2 per cent levy on almost all insurance premiums – creating a pool of money to be used to cover the losses of Quinn Insurance.
The Insurance (Amendment) Bill 2011 will place a levy on all policies other than life assurance, all of which will go into the Insurance Compensation Fund – which will then be used to cover ‘solvency breaches’ in the fallen insurer.
The scheme is a similar proposal to the government-sanctioned levy on insurance policies to cover the collapse of PMPA insurance in 1983 – which led to a similar levy being put on most insurance policies for nearly a decade afterwards.
The move will come despite Quinn Insurance Ltd’s administrators selling some of the company’s assets to US-based multinational Liberty Mutual – in a move which secured €200m for the firm.
A government spokesman explained that the fund – which has been in existence since the mid-1960s, but is rarely used – would probably be needed because of Quinn Insurance’s major losses in 2009, now estimated at €906m, and a further estimated loss of €160m in 2010.
This would lead to major ‘solvency breaches’, according to the company’s administrators, who will then need to apply to the High Court for approval to seek money from the fund to cover the losses and to make sure that the company can still afford to meet claims as they come in.
The Central Bank is then required to pass on advice to the Minister for Finance, telling him whether he will need to put extra cash into the fund to cover any application from the courts.
The government insists that any money paid over from the Exchequer to the fund will be repaid – but that will be little consolation to struggling households, which will now pay more for insurance to cover Quinn’s losses.
The fund is expected to be called into action in the coming months, when Quinn’s administrators ask the fund for €320m to cover any claims that may be put in – but with the fund only holding €40m at present, the public will have to foot the bill for tying the company over.
Quinn Insurance went into receivership after Anglo Irish Bank moved to claim around €2.8bn owed to it by Seán Quinn and his companies.
Quinn had borrowed the money to place bets on the movement of Anglo’s share price – eventually running up debts in the region of €2.8bn.
Among the provisions of the new bill is a clause requiring any company seeking money from the fund to keep at least 70 per cent of their business within Ireland – in a move to ensure that the taxpayer is not footing the bill for saving a company which then moves abroad.
The Irish Insurance Federation welcomed the publication of the bill, but called on Noonan to remove the 3 per cent stamp duty already imposed on premiums to offset the cost to the public.
IIF chief executive Mike Kemp said the Bill brought “much needed clarity on which policies will be subject to it and what purposes administrators will be able to use Compensation Fund drawdowns”.
The High Court yesterday asked the European Court of Justice to decide on whether it had jurisdiction on whether Anglo could pursue the Quinn family’s assets held overseas – with the Quinns having moved some assets in Cyprus beyond Anglo’s reach.
Read: Quinn insurance lost €706 million in 2009 >
More: Quinn told politicians he “made mistakes” in racking up €2.9bn debt >
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