The Law Society has urged former clients of the collapsed Lemma Europe insurance company to seek advice from their broker as soon as possible.
Last week, the Supreme Court of Gibraltar appointed a provisional liquidator to establish the financial position of Lemma after the company had been wound up.
The firm was not a qualified insurer for the 2012/13 solicitors professional indemnity market, which closed today, but had written more than £6.2m of cover to law firms in 2010. Solicitors will be concerned at the insurer’s ability to settle claims which are not yet settled or claims against firms that are in run-off – potentially with four years left to run in some cases.
The Solicitors Regulation Authority said one firm had insurance with Lemma from 2011/12 and it had been given extra time to find a new insurer.
Elliott Vigar, head of regulation at the Law Society, said: ‘The position is not yet clear as to Lemma’s ability to meet current or future claims going forward.
‘Firms should seek advice from the broker that they used to secure coverage as to their current position in regard of unmet claims and as required contact the Financial Services Compensation Scheme to determine whether or not the scheme can assist them.’
In a statement, Gibraltar’s Financial Services Commission said it had been forced to act to protect policyholders by seeking the company’s liquidation after shareholders refused to contribute extra capital.
One of its major reinsurers and sister company, Joint Stock Insurance Company Lemma, had also stopped all reinsurance claims payments. The statement added: ‘This has placed Lemma Europe’s finances on an unviable footing.
‘The provisional liquidator has been granted very wide powers by the court, and this will enable him to do whatever he considers necessary to protect the interests of policyholders.’
No one at Lemma was available to answer the Gazette’s enquiries.