The Quinn Group is still standing despite having lost nearly everything Sean Quinn has put into Anglo

The unvoiced subtext to the recapitalisation of Anglo Irish Bank last weekend is the story of its 15% shareholder, Sean Quinn, chairman of industrial holdings company Quinn Group.

Although Quinn isn't believed to have been party to any discussions between government and the Anglo board over the last month, the position of the bank's single largest investor always loomed large behind the scenes. With the banks finally settling down somewhat, this could be the principal drama of 2009.

Quinn may have sunk more than €1bn into Anglo by converting a huge stake built up through contracts for difference (CFDs) in 2007, but he has lost up to €1.5bn on the gamble according to the most recent estimates, leaving him just about €40m of his original investment. If this were just one extraordinarily wealthy man blowing his fortune in a stockmarket crash, the story would be mere trivia; but these massive losses may ultimately damage the Quinn Group itself.

Incredibly, Quinn dragged Ireland's second-largest insurer, his own Quinn Insurance, into the fiasco last spring when he borrowed €288m from the company (via an associated Quinn Group company) to cover margin calls on the CFDs as the Anglo share price plummeted. Ultimately the Financial Regulator fined Quinn €3.4m for this breach of insurance rules.

More systemically significant, it emerged that Quinn Group had to take a write-off of nearly €1bn relating to stock market investment, resulting in a €425m loss for the company in 2007. And now Quinn (and the family members to whom he has distributed shares) is holding 15% of virtually nothing.

Crucially, however, this stake remains undiluted. Even though the government will have 75% of voting rights in Anglo as a result of its investment in preference shares, the recapitalisation leaves existing shareholders intact to recoup losses in any recovery.

The cynical view abroad in the market sees the government lending a helping hand to Quinn through the Anglo rescue. Yet Quinn Group is still standing despite having lost nearly everything its chairman has put into Anglo. Quinn may have borrowed perhaps hundreds of millions from Anglo in an undisclosed transaction to buy the shares in the first place. If Anglo was rolling up interest payments on that debt, then Brian Lenihan did indeed just alleviate the Quinn empire's pain. Neither company will comment on questions about their relationship.

An objective test of Quinn Insurance's own solvency comes in just a few days when it has to book final numbers on its assets for submission to the Financial Regulator. In its last submission, Quinn appeared dangerously exposed to the stockmarket and property downturn as the company had nearly 40% of its assets tied up in either shares and property – unlike its competitors which tend to take more conservative investment options.

The company has surely lost money on those assets through depreciation or through selling at distressed prices. This will have forced the company to acquire other assets to hold against its insurance claims liabilities in order to remain solvent – a costly process sure to put profitability under pressure. The question is whether the insurance arm of Quinn Group can sustain itself through the downturn.

Insurance brokers are not so sure. For months, rumours about Quinn Insurance's demise – greatly exaggerated, it must be acknowledged – have circulated throughout the business community. What underlies these rumours is a fear that the company undercharges for risk and eventually won't be able to meet claims against the policies it writes. The company says there is a lot of jealousy in the market aroused by its quick success and competitive pricing.

Large international broker networks such as Aon and Marsh refuse to do business with Quinn because the insurer withdrew from having its debt rated – a key assurance of solvency. Privately, executives at large competitors are worried that a Quinn collapse – at the Group level or just of the insurer – would devastate the insurance industry in Ireland as other firms would be forced to pick up business originally written on terms they could not match. Such a situation would drive up average insurance costs for businesses and probably put a good few firms underwater – exactly the opposite of what the government wants at the moment.

As a privately held company, Quinn doesn't have to make statements to the market, so much of this will remain obscure until the Financial Regulator publishes the 2008 insurance assets in August. The Oireachtas Committee on Economic and Regulatory Affairs has taken up the cudgels and will be investigating the circumstances of the €288m Quinn Insurance loan as well as the circumstances surrounding Quinn's Anglo stake – and whatever quid pro quos that might have entailed.

Unless some fresh market 'event' sheds new light on the subject, we'll have to wait for the big wheels of government to grind out the information.