THE decision by the Gibraltar Financial Services Commission a week ago to direct Enterprise Insurance Company to cease writing new business after the company admitted to being insolvent has now led to the directors agreeing with the Supreme Court for the company to be placed into liquidation, and a provisional liquidator has been appointed.
The insurer, being unable to obtain additional funds from shareholders is said to have had more than 250,000 customers, with 14,000 motor policies sold in Ireland, and many indemnity policies sold to solicitors and other legal firms around the world.
The appointment of a provisional liquidator has been made in an effort to speed up investigations as to whether any funds would be available in order to satisfy claims and shareholders but, whilst authorities suggest that all policies remain in force, there is currently no guarantee that any claims will be settled.
Indeed the Central Bank of Ireland in a public announcement encouraged motorists who have insured through Enterprise to consider taking out new policies to ensure that they are covered in the event of an accident and they are advised to contact their brokers regardless.
According to the governor of the Irish Central Bank, Philip Lane, Europe needs to be more co-ordinated with regard to protection schemes for insurance companies and their customers in the event of a firm failing.
“The coordination of national protection schemes for policy holders remains unsatisfactory,” he said. “Should an insurance firm fail, citizens are covered in full, in part or not at all, depending on where they are.”
This inconsistency is because under EU ‘passporting’ rules, insurers are allowed to be regulated in one country but sell insurance in another so that, under this system, when an insurer fails, the cost of paying claims sometimes falls on the country where the insurance was sold, rather than the country in which the insurer is domiciled.
This is not the first time that an insurance company of this type has failed, the most recent occurrence being when Malta based insurer Setanta Insurance failed and, eventually, the bulk of the costs had to be met from Irish and other local protection schemes.
As the liquidator starts investigating Enterprise, so more information about assets and liabilities should emerge, although it is not unusual for professional costs to take up a great deal of any assets left in any company in similar distress.