Mr. Aidan Cassells:

I only joined the company in December, so most of the action had taken place. In terms of the accuracy of the reserves and the level of certainty one can build around reserving, as Mr. Cullinan stated it is not a precise science. The core foundation is the file estimates. When a file comes, say, for an injury, one has a snapshot of what is involved. If one has the right balance of experience and knowledge in the organisation, one can give a reasonable estimate of what the claim is likely to cost.

One of the issues in Quinn Insurance is what is described as a culture of optimistic or aggressive reserving. If a more conventional view was a figure of X, Quinn Insurance would tend to target a much lower number on the estimate. If the estimate were low, then the actuarial reserving on top of that would miss it. This would lead to a compounding of the error and the error in the file estimate. There was a culture of aggressive reserving while processes and controls were not strong. This was backed up by the State Claims Agency when it went into the company. There were some examples of deliberately under-reserving which led to sanctions against some individuals in the claims department. There was a foundation around the file estimation of the company which was not up to the standards one would expect.

In fairness to the administration, much of that was done in the first 18 months. How long did it take to find this? It took three exercises at different stages with different degrees of pressure to get the file estimates up to the level that was regarded as satisfactory.

When one is trying to project into the future the cost of any claim, one is dealing with the potential deterioration in the injury that the individual has suffered, external environmental issues, changes in legislation and the decisions of the courts. It is a complex area and is not amenable to a precise figure. Hence, when we give the committee a figure that we consider is robust and prudent, we are 80% certain about it but there is 20% risk depending on what happens in the external environment.

There was a culture in the company of aggressive reserving and there was probably not the right skills set within the company for managing, particularly the more complex claims. These two issues together created a scenario in which there was much under-provisioning of the files which the actuarial provisioning then accentuated the problem as it did not adequately pick up on that. I do not want to go into it too much further because there are issues there where we feel some of these matters should have been picked up. We will be examining that in the context of legal action. Another difficulty is that some of the claims go back to 2000 and it takes a long time for the more complex claims to settle.

Broadly speaking, there was a culture of aggressive provisioning and lack of adequate experience, knowledge and controls. These have now been addressed and we have adequate reassurance from our investigations that the situation today is satisfactory from our perspective.