It has been fined millions by the Irish regulator, withdrawn from credit rating and restructured its board. And then there were those market rumours about its future in the UK. Insurance Times asks, what’s really going on at Quinn?

It was six o’clock on a Friday afternoon last November, and the phones at Insurance Times were ringing off the hook. A rumour that the Irish insurer Quinn was about to stop writing UK business – or worse – was spreading rapidly through the market, and everyone was on tenterhooks, waiting for an announcement from the Irish regulator or Quinn itself. It never came.

Three months on, the chatter has died down but it has not quite gone away. Quinn broke its silence two weeks ago, acknowledging the rumours in an interview with Insurance Times and claiming its rivals were attempting to harden the market by suggesting the insurer was in trouble.

In the same week Sean Quinn, the company’s founder and the richest man in Ireland (see “Who is Sean Quinn?”, below), appeared on Irish television admitting that his family had been “too greedy” after it lost €1bn (£896m) on an investment in Anglo Irish Bank. The bank has been nationalised by the Irish government, rendering the investment effectively worthless.

Before then, Quinn had refused to talk, with a PR spokesman making it clear that any articles about the company would receive the full attention of its lawyers.

Now Quinn Insurance is making further overtures. Next month, Colin Morgan, the company’s chief executive, will visit a number of UK brokers to have a “frank and open” discussion about the company. Speaking to Insurance Times this week, he says he regularly visits the UK to meet with intermediary partners.

All the same, brokers will be looking for reassurances over the health of the business – at least one has prepared a list of questions. Morgan admits the gossip at the end of last year has been frustrating, but says the speculation has been proven “completely untrue” and Quinn remains focused on running the business.

“We didn’t start the rumours, so we don’t know where they came from,” he says now.

“I don’t want to give them credibility.”

Since Quinn opened its first UK office in Manchester in September 2003, it has attracted the attention of the market with its low prices.

It has also hit the spotlight for the wrong reasons: for example, an investigation by the Department for Work and Pensions in 2004 (see “Quinn in the headlines”, below). And at the end of last year, it made headlines after being handed a €3.25m fine by the Irish regulator. It was punished for making “unauthorised loans” of €229m to other Quinn family companies to buy the shares in Anglo Irish Bank. Sean Quinn was personally fined €200,000 and stepped down from his role as chairman and director of the insurance company.

This was followed in January by a reorganisation of the insurer’s board, which the company said was designed to make it “more independent of the wider Quinn Group” and “resemble [the corporate governance structures] of a publicly listed company”.

Given these moves, perhaps it is not surprising that the chatter about the insurer’s future in the UK and its financial stability has not died down.

Some brokers have even expressed reluctance to recommend Quinn to their clients, because of their concerns about its stability. “If we are forced to use Quinn as a last resort, we do it with a health warning,” says one, who asked not to be named.

The company insists it is very stable but, as a private company, it is difficult to find evidence either way. As one leading analyst says: “The shareholding structure in the insurance company is quite opaque. It’s very difficult to see your way through the business, and it’s very tied in with [Quinn’s] other businesses.”

Quinn also withdrew from Moody’s credit ratings last July, leaving it without an official rating – a move that discomfited Biba and other trade bodies. Peter Staddon, Biba’s head of technical services, says: “What we are saying is not that you cannot use them. We are saying if you do use them, then you may have to go a little bit further and explain to your clients a little bit more about the company.”

The Royal Institution of Chartered Surveyors took a tougher line, removing Quinn from its list of approved insurers because the organisation would not recommend an unrated insurer to its members. The final Moody’s rating for Quinn, issued last July, was Baa2, with a stable outlook – downgraded from a positive outlook.

Gareth Brady, chief executive of Irish broker Hughes Insurance, says of the rating: “We don’t trade at all with Quinn Insurance now. We always had concerns around the fact that Quinn originally didn’t have a rating and then applied for one and then withdrew.”

Quinn is adamant that leaving Moody’s has not affected its business, however. Chief executive Morgan says it has not lost any broker relationships as a result, adding: “We have a supportive basis of brokers that we do business with.”

The price – and the competition

Those brokers may well have been attracted to Quinn for its keen prices. And pricing goes some way to explain Quinn’s unpopularity among rival insurers – and, it would claim, their eagerness to see it fail. It operates largely in direct motor and liability products, and is known for substantially undercutting the competition.

Morgan describes the company as “competitive” but insists it does not sell on price alone. “Every insurer needs to be competitive, but we are by no means very cheap,” he says.

“We offer good customer service and a good approach to dealing with claims – we see it as part of a package.” However, in Newsquest Specialist Media Business Intelligence’s recent report, the insurer was ranked 29th out of 30 for its service to brokers.

Some brokers appreciate the role Quinn has played in opening up the market. Tony Blyfield, chief executive of Prime Professions, says: “Quinn is a market that we use for solicitors. They have provided a home for a lot of professionals that struggled to get insurance in the commercial market. If it was not for Quinn being a ready market, a lot of them would have potentially gone out of business.”

The possibility of Quinn itself going out of business was being talked about at the end of last year. It had stopped writing new business in Europe in October. And as the market was waiting to see who would be the next victim of the credit crunch, it was known that some insurers were approaching brokers that work with Quinn.

Morgan rebuffs any such suggestion about the insurer’s future, saying it remains committed to doing business in the UK. “It’s a difficult economic environment out there, and we’re very much focused on working with the brokers we have strong relationships with,” he says. “We are continuing to target specific parts of the market … We will continue to seek opportunities.”

Will the brokers be convinced? Morgan will hope to allay their concerns when he visits the UK next month but, in the mean time, those phones will keep on ringing.

Quinn in the headlines

Quinn was investigated by the Department for Work and Pensions (DWP) in 2004, over allegations that it was selling employers' liability policies that were in breach of the Employers' Liability (Compulsory Insurance) Act 1969.
Quinn hit back against the allegations, saying it was in compliance with all relevant regulation and legislation. But the insurer confirmed that it would change the wording of the standard employers' liability (EL) policy it sold in Northern Ireland, which contained several exclusions, to bring it in line with regulation.
One year on, Insurance Times revealed how the DWP had forced Quinn to change its EL policy. Documents obtained under the Freedom of Information Act detailed how the DWP's lawyers had advised that Quinn's policy was in breach of the law, leaving policyholders at risk of trading illegally.
In the midst of that battle, Quinn began selling direct motor insurance in England, to the dismay of its rivals, which said its aggressive pricing strategy would push down rates in an already soft market.
In 2007, Quinn was involved in a legal action when it was alleged that it had pressured a policyholder into accepting a low payment for a multimillion-pound claim. The dispute centred on a EURO 54m claim by timber company Murray Timber Products following a fire at its Galway plant in 2005. The case was settled out of court.