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Fears over Quinn administration

20 April 2010

Both the Solicitors Regulation Authority and the Law Society have sought to calm the profession in the wake of the announcement that Irish insurer Quinn had officially fallen into administration in Ireland.

An earlier court order placing the insurer in provisional administration unleashed fear among the near 3,000 smaller English firms that took professional indemnity insurance with the company.

The SRA gave them temporary relief on Thursday (15 April) when it indicated in a statement the following day that it did not regard the decision as an “insolvency event” for the purposes of indemnity rules. Had it been the case, firms insured with Quinn would have had four weeks to secure alternative cover or apply to the assigned risks pool.

But the decision could store explosive problems as the October renewal date approaches. Solicitors Journal understands that Quinn’s forms were significantly shorter than those of other insurers, suggesting questions were possibly not as in depth. Come September, firms with difficult claims records could therefore find it particularly challenging to obtain cover elsewhere as they are forced to disclose their history in greater detail.

Only last week, Frank Maher, partner at LegalRisk LLP, told solicitorsjournal.com that Quinn’s collapse could precipitate applications by hundreds of firms to join the assigned risks pool. “The resulting expansion of the ARP could put its very existence in peril,” he said.

A large number of the firms currently insured with Quinn are already under significant financial pressure and may not be able to sustain further increases in premium, according to Maher. In some cases, the rises last year were up to three times what firms had been paying before.

Maher also said that Quinn’s insolvency could pose serious problems in respect of run-off cover. “Firms that have insurance with Quinn are likely to find it particularly hard to find alternative insurance to cover run off. It could be a real problem for lawyers about to retire and for those that are already retired.”

At an emergency hearing earlier in the week (see solicitorsjournal.com, 13 April 2010) the High Court in Dublin agreed to postpone its final decision and gave Quinn the opportunity to put forward arguments against the appointment of administrators.

A new hearing date was scheduled for Monday 19 but on Thursday 15 April the insurer dropped its objections to the Financial Regulator’s application that the company should be placed into administration. Grant Thornton, initially appointed provisional administrators on 30 March, are now permanent administrators.

The accountancy firm told Solicitors Journal it would be working with the Irish regulator to keep the whole or some parts of the business running as a going concern.

Press reports estimate that Grant Thornton has received between 20 and 30 expressions of interests from potential buyers. The firm said it was too early to say which approaches it regarded as realistic but confirmed there had been interest.

The interaction with potential buyers has been limited to acknowledging applications and that it had not engaged in discussions over the terms of a potential buy-out.

In the statement, the Financial Regulator said Quinn’s consent to the appointment of permanent administrators was “in the best interests of policyholders”.

The regulator also confirmed that Quinn remained “able to pay claims and renew policies in the normal way in the Republic of Ireland and continues to settle claims in the UK”.

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