A finance manager at a failed provider of professional indemnity insurance to solicitors shielded its financial troubles through false and misleading accounts, a regulator’s investigation has found.
The Gibraltar Financial Services Commission (FSC) said that David Brown was ‘not fit and proper to be a manager of a Gibraltar insurance company’, after his part in the collapse of Lemma Europe, an unrated insurer.
Lemma Europe wrote more than £6.2m of cover to English and Welsh law firms in 2010 but was banned from entering new contracts in August 2012 and went into liquidation in January this year. The FSC report said that the collapse followed the failure of one of its reinsurers, Joint Stock Insurance Company Lemma, of Ukraine, to meet reinsurance claims.
The failure left a number of firms unsure of the insurer’s ability to settle claims on policies with years left to run.
The FSC has since conducted an investigation into the management of the company and whether it failed to meet key quality criteria in underwriting and claims-handling.
In a statement, the FSC said Brown, who acted as finance manager through a contract Lemma had with Asset Underwriting Ltd, an intermediary of which Brown was a director, failed to play his part in ensuring adequate systems and controls were in place. He also failed to make sure Lemma Europe conducted business in a ‘sound and prudent manner’.
The statement added that Brown helped to supply financial statements and annual returns that were ‘false and that contained incorrect information’ purporting to show the company was solvent. He also failed to ensure all liabilities were recorded promptly and accurately in the company’s financial statements, the statement said.
It revealed that the FSC and Brown have entered a ‘settlement agreement’ that prevents him assuming a position in any FSC-regulated entity. It added that Brown does not accept the conclusions and has made no admission of any liability.
The investigation into the role played by other individuals in the collapse of Lemma Europe continues.