Financial services regulators will investigate a professional indemnity insurer over fears they were misled about its financial position.

The Gibraltar Financial Services Commission (GFSC) today published the report of its probe into the affairs of Enterprise Insurance, which provided cover for 43 firms in England and Wales.

The commission intervened into the firm in July and was declared insolvent, giving its clients 28 days to arrange alternative cover.

In a statement released today, the commission said the extent of Enterprise’s financial collapse had been ‘unprecedented’ and regulators now want to examine the apparent failure of the board to adequately govern the company and to report its true financial position.

The GFSC’s director of legal enforcement and policy Peter Taylor said: ‘The GFSC is shocked by the extent of the collapse of Enterprise. We have reason to think we may have been seriously misled.

‘Given the magnitude of the debt reported by the provisional liquidator and his view as to the serious contraventions by the company, we have major questions of the Enterprise board.’

The commission said insurance companies must be run in a ‘sound and prudent manner’ and the nature and extend of the insolvency demonstrates that had not happened in this case, resulting in ‘extensive losses with serious harm’ to consumers and a wide range of creditors.

Directors who hold regulated positions in other companies have been invited to voluntarily stand down from those positions while the investigation takes place.

Taylor stressed the GFSC has not made any findings or reached any conclusions, but formal action will result if there has been found to be misconduct.

‘We consider it is critical for the reputation of Gibraltar to determine the extent to which any of the directors need to be held to account for what has occurred. We must get to the bottom of what has happened here and we will,’ he added.