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Enterprise Insurance goes bust

Published: 12/10/2016

In July the Gibraltar Financial Services Commission announced that Enterprise Insurance Company PLC (EIC) had run into financial difficulties culminating in liquidators being appointed to take control of the company and its assets and establish the best way forward to help its policyholders.

The Financial Services Compensation Scheme (FSCS) has said that if it finds that “Enterprise cannot meet the cost of claims made against it, we will protect UK policyholders. In the case of motor insurance, this means the vehicle covered by the insurance policy must be registered in the UK. Policyholders must meet certain eligibility criteria.

“FSCS protects UK policyholders who are individuals or small businesses with a turnover of less than £1 million. FSCS protects all policyholders for compulsory insurance only, e.g. the third-party cover under a motor policy.”

About Enterprise

Enterprise Insurance Company are an unrated insurer, regulated by the Gibraltar FSC; the Gibraltar equivalent of the FCA in this country. They ‘passport’ into the UK insurance market through European freedom of trade agreements and are covered by the Financial Services Compensation Scheme.

EIC wrote a number of lines of business including Solicitors Professional Indemnity Insurance, but mainly UK motor insurance including Taxi and fleet Insurance. Their last accounts show gross written premiums in excess of £140m, and we are led to believe this failure will affect circa 75,000 policyholders, not mention employee’s and insurance brokers who placed business with them.

The failure of EIC has largely been reported as their inability to comply with Solvency II, although the full extent of the failure and recriminations will probably continue for a long time to come.

Solvency II

In January 2016, the insurance industry implemented the Solvency II regime. This set of financial rules has been compared to the similar standard applied to banks, dictating the amount of capital a business would need to retain (and acceptable forms of capital) in order to underwrite Insurance risks.

At this point the message to policyholders is confusing, we are told that policies remain in force, but the liquidator has recommended that policyholders replace cover as it is likely that the insurer will have insufficient money to pay claims.

As the compensation scheme does cover the ‘unexpired element of the premium’ paid to EIC (for eligible claimants), however, there seems to be no clarity from the liquidator on whether arranging alternative cover as has been advised, would affect an eligible claimant from receiving this compensation?

So what happens next….?

In the case of EIC, the industry is expecting, from comments made by the liquidator, that he will shortly (dates from early September to early October were mentioned), go to the supreme court to ask that all EIC policies be cancelled. At that stage it is expected that policyholders will be given 14 days to find alternative cover.

In respect of the insurance industry, many brokers and policyholders will be raising questions about their insurers and striving to ensure that there are no more Enterprises who cannot comply with Solvency II out there.

Ultimately, insurers set up outside of the UK to enjoy lower solvency and compliance regimes. This may then place a large focus on ‘unrated insurers’ and those who passport into the UK from other areas within the EU.

History shows us that neither the fact that an insurer is rated or regulated in the UK means that they could not become insolvent; the case of Independent Insurance is a stark reminder of that. Whilst UK insurers do not want to see any loss of confidence in their market; UK domicile insurers will no doubt be rather enjoying the fact that having lived in and paid the price of being in a tougher capital and compliance regime, they should be seen a safer bet right now.

At this difficult time, it is important that you always understand who your actual insurer is and seek the advice of an expert insurance broker. At Flint Insurance, our staff undergo professional training to guide you through these difficult decisions. Your Flint account handler is always available to discuss any issues regarding your policy, insurer etc. please do not hesitate to get in touch should you need to speak with someone.

The Gibraltar Financial Services Commission is currently saying:

“Warning from the Provisional Liquidator to United Kingdom Policyholders

It has been brought to my attention that fraudsters may be attempting to contact Enterprise policyholders in the United Kingdom, pretending to represent the Financial Services Compensation Scheme (“FSCS”) and requesting a payment of £300.00 to be made as an administration fee for processing their claim with the compensation scheme.

Please be advised that no fees or other costs are payable by a policyholder to enable them to apply for compensation from the FSCS. As part of the provisional liquidation process, I have put arrangements in place whereby eligible policyholders’ information is processed and passed to the FSCS by Claims Consulting Services Ltd in relation to United Kingdom policyholder motor claims and by Quest Consulting Ltd for all other United Kingdom policyholder claims.

If a policyholder has any queries regarding the FSCS application process please contact Paul Hafner of Quest Consulting on PHafner@quest-group.co.uk.”

The following information has been taken from the FSCS website:

Levels of Protection

Compulsory Insurance – Third-party cover under a motor policy.
FSCS protects compulsory insurance at 100%.

Non-Compulsory Insurance
FSCS protects the personal accident section of the policy at 100%.
FSCS protects all other types of non-compulsory insurance at 90%, e.g. accidental damage to own vehicle, except for small businesses with a turnover of £1million or more.

Limits of FSCS protection

FSCS compensation is subject to the limits that apply under the terms of the policy.

Other Types of Insurance Policies

After-the-Event Insurance
FSCS protects private individuals and small businesses with a turnover of less than £1million. Protection is at 90%.

Guaranteed Auto Protection - GAP - Policyholders
FSCS protects private individuals and small businesses with a turnover of less than £1million. Protection is at 90%.

Professional Indemnity Policyholders 
FSCS protects individuals and small businesses with a turnover of less than £1million. Protection is at 100%.

Financial Loss Warranty Contracts
FSCS protects individuals and small businesses with a turnover of less than £1million. Protection is at 90%.

They also have a useful Q&A page on their website here.

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