Gibraltar: Enterprise failure
The Financial Services Compensation Scheme (FSCS) has had to increase its provision for general insurance claims by around £45m for the next financial year, because of the failures of Enterprise Insurance and Gable Insurance AG, it has emerged, while it is still paying out for other insurers that used to back solicitors.
Enterprise, based in Gibraltar, provided professional indemnity cover for 43 law firms before its collapse in August last year. Gable Insurance, based in Liechtenstein, provided ATE insurance to law firms before it went into liquidation in November 2016.
In its plan and budget for the financial year 2017-18, published yesterday, the FSCS said its forecast for new claims and completions this year “turned out to be an underestimate” because of the twin failures.
“We expect that these firms will add around £45m to the cost of general insurance provision claims next year.”
The FSCS said it would still be paying out compensation next year on behalf of collapsed indemnity insurers Lemma Insurance Europe, Balva, ERIC (European Risks Insurance Company) and Berliner, which failed the year before last, although it was not expecting any more new claims.
The scheme said in its budget that “notwithstanding the insolvencies of Enterprise and Gable, in the absence of firm intelligence of imminent (and sizable) failures, we have not made allowances for any further such failures in 2017/18 at this time”.
Turning to the “older estates” of insurers Chester Street, Builders Accident Insurance and Independent Insurance Company, the FSCS said it expected compensation for employers’ liability mesothelioma claims to “continue at a rate similar to recent years” and “remain the most expensive category of claims for which we pay compensation”.
A spokesman for the FSCS said it expected its total levy on the insurance industry for next year to be £378m, down from £401m this year.
Chief executive Mark Neale said the plan and budget “highlights how FSCS will protect consumers in 2017/18” and said the scheme was for people with nowhere else to turn when firms fail.
“So the £378m indicative levy represents the costs of protecting people. That protection generates consumer confidence and contributes to financial stability.”
Crispin Passmore, SRA executive director of policy, said last summer that the regulator was working closely with law firms insured by Enterprise and taking a “constructive approach”.
Firms were advised to inform potential new clients about the situation and arrange new indemnity cover as soon as possible. A spokesman for the SRA said yesterday that the regulator nothing more to say on the issue for the time being.
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