Insurers fined £19 million by UK regulators

‘Significant’ failures leading to numerous insurers going into administration have resulted in fines totalling approximately £19 million being issued in the UK to two firms and five individuals.

The UK Financial Conduct Authority (FCA) fined Millburn Insurance Company Ltd. and Coverall Worldwide Ltd. £1.2 million. They also fined £1.1 million to Shay Reches, a former Coverall director who agreed to pay an additional £13.1 million in compensation to the insurers. Millburn were later hit with another fine of £2.9 million, this time issued by the Prudential Regulation Authority (PRA).

Concerns were raised in 2013 about the validity of the lawyers’ professional indemnity plans (insurance protecting attorneys in the event that they are sued), which led to an investigation by the regulators. These plans had been set up for more than 1300 law firms in England and Wales. The FCA and PRA discovered that due to convoluted structures and management oversight and reinsurance arrangements failing, customers were at risk of being left uninsured.

FCA Director of Enforcement Mark Steward stated that Reches “treated policyholders’ funds and their interests with reckless indifference and his misconduct was facilitated by an absence of proper controls” and “this case not only demonstrates the consequences of poor controls but also what can happen when the distribution chain becomes overly complex.”