Consumers are set to be hit with a new levy of between 1% and 2% on their car and house insurance to cover a shortfall in the price being paid by the companies acquiring Quinn Insurance from the administrators.

The Irish Independent says a shortfall of €620m from the collapse of Quinn Insurance will need to made up.

Anglo Irish Bank, one of Quinn's biggest creditors, and US insurance giant Liberty Mutual have agreed to buy the beleaguered insurance company, but are not willing to take on all the losses on its books.

The Independent says the government will now make up this shortfall and will do so by imposing a levy - expected to be between 1% and 2% - on every single non-life insurance customer in the country. So it's not just Quinn insurance customers who will be affected. 

The revelation comes weeks after Anglo moved to seize the businesses of Sean Quinn, once Ireland's wealthiest man with a welath estimated by Forbes magazine at over €4bn. 

Anglo effectively confiscated his businesses to pay for more than €3bn he and his familed owed the bank after gambling on shares on the bank rising in value. 

Administrators to Quinn Insurance are finalising an application asking the Government to pay for this shortfall.

Sources told the Independent's deputy business editor, who can be heard hear talking about his story on RTE's News at One, said customers could be paying for the Quinn collapse for several years because the shortfall is so large.

The application from the administrators, Grant Thornton, will be made shortly to Finance Minister Michael Noonan. He is likely to grant it despite an expected public outcry.

The High Court and Central Bank will also be informed and asked for approval.

The problem has arisen because reserve capital at Quinn Insurance isn't sufficient to cover future losses from claims.

Under the law "solvent insurers have to bail out insolvent insurers and unfortunately Quinn is insolvent," Emmet Oliver, deputy business editor of the Irish Independent told Sean O'Rourke on News at One

"The main issue is the claims at Quinn - you have to remember in insurance you write the premium one day but the claim on that premium, if somebody gets knocked down or is in an accident, may not come back for two or three years - it's what the insurers call tail risk.

"So, in otherwords, these claims come in three, four, maybe five years after the event. So what it comes down to is - have you put aside enough money to absorb those?

"And it seems that Quinn Insurance, despite its boast to be the best insurance company in Ireland, didn't perform very well in those criteria." Oliver added.

Health insurance policy holders will not have to pay the levy, so the burden will be borne largely by those with car and household contents and buildings insurance.

"I think a lot of people listening we will say is 'we had nothing to do with Quinn', and here we are having to pay out," said Oliver.

Quinn lost the €3bn gambling on Anglo shares

The €3bn Sean Quinn acknowledged he lost on 'contracts for difference'  will go down in history as among the most significant suffered by a private individual in the recent banking and stockmarket crash, according to leading international historians.

Quinn Insurance has been in administration for over a year and it appears that its balance sheet is worse than originally thought.

Levy means all claims are paid irrespective of insurer

Money from the levy will go into what is known as the Insurance Compensation Fund. The fund is to make sure customers of all insurance companies get paid, even if their own particular insurer gets into financial difficulty.

This fund was used twice in the 1980s when AIB's insurance arm, ICI, got into trouble and two years earlier, in 1983, when the insurer PMPA collapsed.