The High Court confirmed the appointment of joint administrators to Quinn Insurance Limited on 15 April 2010, following the decision by the company to drop its objection to the application by the Financial Regulator.
The legislation which provides for the administration of insurance companies was first introduced in 1983 to rescue the PMPA, at that time the largest motor insurer in Ireland. The PMPA was put on a sound financial footing by funds advance from the insurance compensation fund, which in turn was financed by a levy on insurance premiums.
The administration mechanism was again used in 1985 to rescue the Insurance Corporation of Ireland (ICI), which was then owned by AIB, using loans from the Irish exchequer.
The High Court may appoint an administrator to an insurance company, on the application of the Financial Regulator, where it considers that the business of the insurer has been so conducted as to jeopardise or prejudice the rights of policyholders or where the insurer has failed to make adequate provision for its debts, including contingent or prospective liabilities.
Once appointed, an administrator is required to take over the management of the business of the insurer and carry on its business as a going concern with a view to placing it on a sound commercial footing. In exercising his functions, an administrator has all the powers (including the power to sell all property of the insurer) that a liquidator would have if appointed by the court.
For so long as the administrator is appointed, proceedings for the winding up of the insurer may not be commenced and no receiver may be appointed over any assets of the insurer. Furthermore, the ability of debtors to enforce judgements against the insurer without the leave of the High Court is considerably reduced.
It is important to note that the administration mechanism is only available to the Financial Regulator to address solvency or management concerns in respect of insurance companies and not in respect of other regulated companies within the financial sector (such as banks or brokers). An administrator of an Irish insurer should also be distinguished from an administrator appointed under English law, which is comparable to an examiner under Irish law.