Focus on Senior Executives: End of the CBI Inquiry into persons concerned with the management of Quinn Insurance Limited (Under Administration), (“QIL”)October 2020
The story of Quinn Insurance Limited is a long one with many twists and turns. The notice of a Settlement Agreement issued on 3rd September 2020 marks the end of the Central Bank of Ireland, (CBI) inquiry.
In October 2008, the CBI entered into a Settlement Agreement with Quinn Insurance Limited for breaches of its obligations under the Insurance Acts and regulations, including a failure by the firm to notify the CBI prior to providing loans to related companies. The penalty imposed was €3.25 million.
In March 2010 Quinn Insurance Limited went into administration on foot of an application to the High Court by the Central Bank.
In February 2013, the CBI entered into another Settlement Agreement with Quinn Insurance Limited (Under Administration) for further breaches of the Insurance regulations. They included:
· No adequate procedures or controls to manage assets representing its technical reserves. The board of the firm was unaware that its subsidiaries had guaranteed Quinn group debt up to €1.2billion
· The firm had failed to maintain an adequate solvency margin. As at 31.12.2009 the margin was minus 250% a shortfall of €830 million in its assets.
The penalty of €5 million was waived as the company is in administration.
In 2015 the Central Bank started an inquiry into “persons concerned in the management of Quinn Insurance Limited (Under Administration), (“QIL”)”. The investigation concerned a suspected breach of Regulation 10(3) of the European Communities (Non-Life Insurance) Framework Regulations 1994 (S.I. 359/1994), which related to the soundness and adequacy of the administrative and accounting procedures and internal control mechanisms of QIL.
The individuals were named as Mr Liam McCaffrey and Mr Kevin Lunney. They brought a High Court challenge to the investigation and inquiry and this was decided in favour of the Central Bank in 2017.
Once the decision was handed down, the inquiry looked at the guarantees provided by the QIL subsidiaries against loans of the wider Quinn Group without the knowledge of the insurer’s board or investment committee.
As noted in the Irish Times (in an article from 3rd September 2020), “The guarantees undermined the ability of QIL to rely on the subsidiary assets to form part of a reserve of money set aside to meet insurance claims, if necessary…..”
The enquiry has now ended, and settlement agreements have been entered in to by the Central Bank with both Liam McCaffrey (in December 2019) and with Kevin Lunney (in September 2020). No details regarding the terms of the settlement have been published.
From the Settlement Agreements and inquiries, it is very clear that the CBI expects regulated financial service providers to have robust corporate governance procedures in place and that all directors must take their duties and responsibilities very seriously.
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See the settlement agreement notices links below: Central Bank of Ireland and Liam McCaffreyCentral Bank of Ireland and Kevin Lunney
By Eilish Larkin