SRA issues advice on Quinn administration

The Solicitors Regulation Authority today advised 2,911 law firms to sit tight and take no action after Irish insurer Quinn Insurance, which provides their solicitors’ professional indemnity insurance (PII), was forced into administration yesterday.

The SRA said in a statement: ‘The SRA understands that existing policy holders of Quinn in the UK will continue to be covered, and that customers of the firm can continue to make claims in the normal way. We are seeking confirmation of this. In the meantime, we are advising firms to take no action at present. We will contact all policy holders direct if the situation changes, and we will put information on our website.’

Quinn today attacked the Irish Financial Regulator (IFR) for calling in administrators, labelling the IFR’s actions as ‘pre-emptive, aggressive and unnecessary’. In a statement, the insurer said that it ‘entirely disagrees’ with the IFR’s decision to bar it from writing new business in the UK, in a move the IFR deemed necessary to ‘prevent [Quinn Insurance] suffering further financial losses from its currently unprofitable UK business’.

The IFR also said yesterday that it had ‘commenced an investigation into certain matters within Quinn Insurance Limited that have very recently come to light’. Quinn said today that a planned refinancing would have addressed the regulator’s concerns around a number of ‘entirely lawful’ guarantees provided by Quinn’s subsidiaries, and that it had sufficient financial guarantees in place to avoid administration.

Quinn said in its statement today: ‘The Financial Regulator has justified his actions on the grounds of “certain matters within [Quinn Insurance] that have very recently come to light”. We understand that he is referring to guarantees provided by certain subsidiaries of [Quinn Insurance]… these guarantees are entirely lawful, do not breach any insurance regulations, and were fully disclosed in the statutory accounts of the relevant companies.

‘We reviewed these guarantees in the context of our current refinancing, and sought the opinion of the Financial Regulator last week. He took the view that the guarantees were inappropriate. Since then we, our financiers and our respective advisers have been working around the clock to respond to the regulator’s questions and to address his concerns. The guarantees have not been called upon, there was no reason to believe that they would be called upon, and the regulator was provided with comfort on this by our financiers, most recently in a meeting on Monday 29 March.

‘Quinn Group is in the process of negotiating a refinancing which would have addressed the concerns of the regulator, and we and our financiers remain confident that this will be achieved. Therefore, the regulator’s analysis that these guarantees give rise to a €448m (£399m) liability is totally incorrect. The regulator’s demand that the guarantees be released was therefore unnecessary, and not practical in the time which he allowed.

‘In the light of all these facts, of which the regulator was well aware, we believe the regulator made the wrong decision. Even if the regulator’s concerns in relation to [Quinn Insurance] were well founded (which we dispute), it is extraordinary that the regulator was unwilling to give the necessary time to work through those concerns.’

Law Society chief executive Desmond Hudson said: ‘The Law Society has delegated its regulatory obligations and powers to the SRA that sets the professional indemnity insurance rules that insurers and solicitors must follow. As part of this role, the SRA maintains a list of qualifying insurers for each indemnity year. To become a qualifying insurer, an insurer must be authorised to conduct insurance business in the UK and sign the Qualifying Insurer’s Agreement. The SRA does not approve, vet or regulate qualifying insurers. The Irish Financial Regulator regulates Quinn.’