BUSINESS OPINION:Seán Quinn is architect of his own downfall and the sooner he realises his insurance adventure is over the better, writes JOHN McMANUS

WATCHING SEÁN Quinn on the television news last Thursday, it seemed pretty obvious that someone needs to take him aside and explain a few things. The extent to which Quinn seems deluded is positively frightening. It is clear that he fundamentally does not understand the prudential bargain at the heart of the insurance business.

On the news and in several subsequent interviews, he has gone on at length about the profitability of Quinn Insurance, which he tells us makes profits of €20 million a month, and which in theory will allow him repay the Quinn Group’s €4 billion of debt.

The first point to make here is that Quinn Insurance does not meet the solvency requirements set by the regulator and has a history of not doing so. The Government allows companies sell insurance provided they obey certain rules, the most fundamental of which is the requirement to have enough assets to meet your liabilities. One of the ways you do this is set aside some of your profits.

Anyone in insurance will tell you that it’s much easier to make profits if you don’t meet your solvency targets. The trouble is that if you are not meeting your solvency targets you are not running an insurance company, you are running something else. And it’s something that might not have the wherewithal to meet its commitments.

That in turn is not something that the Government can let you do if it’s serious about protecting its citizens. In fact its something they should take off you before people get hurt, including the employees.

The only amazing thing about Quinn Insurance – and sadly it’s not that amazing in the Irish context – is that the company was not seized years ago. Mr Quinn’s decision to use the reserves of the insurance company to finance his disastrous foray into Anglo Irish Bank shares should have been sufficient grounds to seize the company in 2008, demonstrating as it did his blindness to the prudential fundamentals of insurance.

Over and above that, the whole – and as yet unexplained – thinking behind taking a secret 28 per cent stake in the country’s third-largest bank should, as a minimum, have shown an approach to investment at odds with running an insurance business. Never mind what it said about an attitude to corporate governance.

The anger expressed by Quinn Insurance staff is entirely misplaced. The person they should be asking questions of is the man whose massive investment gambles pushed the company into the arms of the administrator.

The second point on which Mr Quinn needs to be wised up on is that his folksy code of “if I make a mistake I will fix it” does not actually cut when you have helped wreck a bank that will end up costing €20 billion to put down, never mind save.

When the consequences of that include putting in jeopardy an insurance company that one million people count on and that 2,400 work for, “I made a mistake, I will fix it” just sounds like the recipe for mashing up what is left of the business.

The third thing that Seán Quinn needs to grasp is that the fact that he lost €3 billion on shares – most of which went on a disastrous investment in Anglo Irish Bank shares – makes him even less qualified to be let near an insurance company. But, by his tortured logic, the scale of his losses should engender some sort of empathy and lead to us giving him a further chance. It’s crackers.

Seán Quinn is the architect of his own downfall and the sooner he realises the game is up as far as his adventure in the insurance industry the better. The real issue is how to save Quinn Insurance, because if it goes down the unintended collateral damage will be huge. Not only are jobs at risk, there is the nightmarish scenario of what happens to the health insurance market if Quinn Insurance flounders. Private health insurance is one of the creaky pillars on which the health service is built. Withdraw cover from 400,000 people and the whole thing falls over.

The preferred solution is to find a buyer for Quinn Insurance as quickly as possible and before the whole thing unravels as its bankers and customers take flight. An international buyer would be preferable because it would shift the risk on to their balance sheet and away from the State.

The other alternative is for the State to take it on to its already rather stretched balance sheet via Anglo Irish Bank, which is owed €2.8 billion by the Quinn family and has a charge over the family’s assets. But Anglo is in deep enough trouble as things stand without also turning it into a lifeboat for Quinn Insurance

At this stage it’s unclear which way things will go, but one thing is obvious: there should be no role for Seán Quinn in what happens.