Michael Noonan (Limerick City, Fine Gael)

I would like to deal with the background to the Bill and elaborate on the main reasons for it. This has arisen as a result of the announcement of the sale of Quinn Insurance Limited to Liberty Mutual Direct Insurance Company Limited, LMDI, on 28 April. At the time the joint administrators indicated that Quinn Insurance Limited had suffered losses of €905 million in 2009 due largely to operating losses in the UK market and a write down in the value of assets, particularly in regard to the company's investment in Quinn Property Holdings. Further related losses in 2010 are expected to be €160 million. They also indicated that there was likely to be a call on the insurance compensation fund in the region of €600 million. In recent weeks the joint administrators have revised this figure upwards to €720 million. The main reason for this is an increase in the outstanding claims reserve which was required after the finalisation of the 2010 actuarial review by Quinn Insurance Limited's actuaries.

It should be noted that given the nature of claims reserves and the inherent uncertainty surrounding the ultimate claims costs, the joint administrators say it is not possible to state with certainty what the final call on the fund will be until all claims have been discharged which could take up to ten years. However, in the interests of prudence, they are obliged to make a conservative provision of what the future claims could be.

As Minister for Finance, I was becoming concerned about what seemed like an expanding call on the insurance compensation fund. In that light, I asked the State Claims Agency, which has specialist skills in the area of claims management and reserving, to undertake a review of the processes at Quinn Insurance Limited and, in particular, have a look at the claims management process. My concern was that because the company was in administration and, therefore, was eligible for funding from the insurance compensation fund that there might be an a more relaxed attitude about being sufficiently robust when dealing with the settlement and payment of claims and that this could be part of the reason for the increasing size of the call upon the fund. This was a very important point to establish as, ultimately, it is policyholders who will pay for any shortfall. I wanted to make sure that the appropriate systems and processes were sufficiently wholesome to ensure the call on the fund is kept to an absolute minimum.

The State Claims Agency has almost completed its review and in its interim report has reassured me that the claims management process is operating effectively. It indicated that reserving had improved considerably since the joint administrators took over the running of the business but there was potential for improvement in some other areas. In summary, it considered the increased call on the fund, as a result of various actuarial reserving reviews, was appropriate.