In light of revelations that the losses at Quinn Insurance may be more than twice the original estimate, Fianna Fáil Finance Spokesperson Michael McGrath has called on the Government to clarify their plans for the insurance levy imposed on ordinary policyholders since 1 January 2012 and which now could remain in place for 25 years or more.
Deputy McGrath has also written to the Joint Oireachtas Finance committee requesting that the Central Bank and the administrators of Quinn Insurance be called before the Oireachtas Finance committee to answer questions on the dramatic escalation in the cost of covering losses at the former Quinn Insurance business.
Deputy McGrath stated, “Last September, the Minister for Finance Michael Noonan advised Dáil Éireann that the estimated call on the Insurance Compensation Fund arising from the losses at Quinn Insurance would amount of €738m – up from the original estimate of €600m. To fund this, the Government introduced the Insurance (Amendment) Act 2011 to impose a 2% levy on all insurance policies except for health and life insurance for an indefinite period. This 2% levy took effect on 1 January 2012 and was applied, for example, to home, motor and commercial insurance policies.
“During the Dáil debate, I pointed out to the Minister that the Government was giving an open-ended commitment and that, despite the Government referring to it as a levy on the insurance industry, ordinary insurance policyholders would have to pick up the bill. When the levy was introduced, the Minister said it would be likely to be in place for 11 or 12 years.
“We are now advised that the cost of covering the losses at the former Quinn Insurance could possibly exceed €1.65 billion, resulting in the levy, at the present collection rate, remaining in place for 25 years or more. The Minister now needs to clarify how he intends to deal with the escalating losses from Quinn Insurance.
“The Central Bank and the administrators should attend the Joint Oireachtas Finance committee and explain in detail how the original estimate of €600 million (given in April 2011) has now reached €1.65 billion and possibly more. It is also clear that the Central Bank has serious questions to answer concerning the regulation of Quinn Insurance in the past.
“When the legislation imposing this levy was rushed through the Oireachtas last September to facilitate the acquisition of Quinn Insurance by Liberty Mutual, I pointed out that the State was taking on an unknown amount of legacy liabilities left behind by Quinn Insurance. That legacy bill has now grown from over €700m last September to possibly in excess of €1.65 billion today and calls into question the basis on which the Government facilitated the sale of the business on the terms agreed at the time.”