- Two firms and five individuals fined by U.K. FCA and PRA
- Failures relate to professional insurance for lawyers
Two firms and five individuals must pay about 19 million pounds ($27 million) in the U.K. over "significant" failures in the establishment of insurance plans for lawyers that led to a number of insurers going into administration.
The U.K. Financial Conduct Authority fined Millburn Insurance Company Ltd. and Coverall Worldwide Ltd. 1.2 million pounds, while the Prudential Regulation Authority fined Millburn an additional 2.9 million pounds on Monday. Shay Reches, a former Coverall director, was fined 1.1 million pounds by the FCA and agreed to pay another 13.1 million pounds in compensation to the insurers.
The regulators started investigating the companies in 2013 after concerns were raised about the validity of their lawyers’ professional indemnity plans -- insurance to protect attorneys if they’re sued, set up for more than 1,300 law firms across England and Wales. The FCA and PRA discovered that the schemes were tied up in convoluted structures, and failings in management oversight and reinsurance arrangements meant that customers risked being left uninsured. The schemes were all linked to Reches, the FCA said.
Reches "treated policyholders’ funds and their interests with reckless indifference and his misconduct was facilitated by an absence of proper controls," said FCA Director of Enforcement Mark Steward. "This case not only demonstrates the consequences of poor controls but also what can happen when the distribution chain becomes overly complex."
In addition to Reches, former Millburn Chief Executive Officer Colin McIntosh was fined 77,000 pounds by the FCA and PRA and banned from working in the industry in a regulated function. Robert Bygrave and Andrea Sadler, both directors at Coverall, were fined 37,400 pounds and 18,700 pounds by the FCA and banned. The FCA publicly censured insurance broker Bar Professions Ltd. and fined Wayne Redgrave, a Bar employee, 38,600 pounds.