Enterprise Insurance liquidator uncovers regulatory breaches

A liquidator appointed to Gibraltar-based Enterprise Insurance, which was active in the Irish motor market in recent years, has found the company had committed a number of regulatory breaches before it collapsed.

In a report submitted to Gibraltar's supreme court last week and published on Friday, the liquidator, Freddie White of Grant Thornton (Gibraltar), found that Enterprise failed to set aside enough technical reserves to cover the risks it was insuring.

It also failed to maintain a sufficient capital cushion for unexpected losses, or margins of solvency, as required by law, and underwrote 10,000 roadside assistance policies in the UK that it was not authorised to underwrite.

Mr White said these breaches, while not exhaustive, provided a basis for an investigation into Enterprise Insurance by the Gibraltar Financial Services Commission, which was launched last week. The company, which imploded in July, has an estimated £151.5 million (€170.3 million) of liabilities to policyholders, net of reinsurance, and an asset shortfall of £94.4 million, according to the report.

At the time of the collapse, Enterprise had 18,610 motor policies in Ireland, according to the report, higher than an original estimate of 14,000.

The company had earned £11.3 million in premiums in Ireland in recent years, making this the smallest of five European markets in which it operated. Total net premiums earned in the past six years amounted to £527.6 million, mainly in the UK.

“The company wrote a complex multi-line mixed portfolio of insurance without adequate underwriting expertise,” the report said. “It appears that the motor and solicitor’s professional indemnity insurance business in particular have accumulated large underwriting losses.”

The report estimates the cost of Irish motor loss claims at almost £8 million, out of a total of £143.8 million for the group – including £83.9 million in the UK.

Almost all of Enterprise’s Irish customers had changed provider by the time the liquidator was formally appointed last week.

Next steps

Mr White took out an ad in The Irish Times on Friday saying he had decided to dispense with a first meeting of creditors and that a requirement to send claims forms to each creditor had been dispensed with until further court directions.

The liquidation report says there is little or no prospect of unsecured creditors, other than insured creditors, getting any money back given the level of the group’s insolvency.

Meanwhile, the Irish Supreme Court last week reserved judgment on a case that will likely decide what body carries the cost of claims against failed insurers.

The court heard an appeal this week by the Motor Insurers Bureau of Ireland against a Court of Appeal decision earlier this year, which said the bureau must foot the bill for Malta-registered Setanta Insurance in 2014, which could run to about €90 million.