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FCA issues £15.5m in fines for mismanaging PI insurer

by: Mortgage Solutions
  • 01/02/2016
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FCA issues £15.5m in fines for mismanaging PI insurer
The Financial Conduct Authority (FCA) has hit five individuals and two firms with fines totaling £15.5m for the mismanagement of payment protection insurance (PI) premiums.

Four of the five people to receive fines were banned on the grounds of ‘integrity and competence failings’.

Despite lack of authorisation from the FCA, Shay Reches performed the CF1 (director (AR)) controlled function at Coverall Worldwide, with responsibility for a managing general agent, Aderia UK. He was found to have conducted regulated activities central to setting up and operating these insurance schemes.

Reches ‘recklessly’ directed payments of insurance premiums to parties other than the insurers and reinsurers responsible for paying claims, increasing the risk that policyholders’ claims would not be paid.

The FCA has individually fined Reches £1.05m. Reches has also agreed to pay a sum of £13.1m to the three insurers, which will make a substantial contribution towards the Financial Services Compensation Scheme (FSCS) and UK policyholders.

The actions caused the failure of several insurance schemes and three insurers were forced into administration, driving £12.7m of claims made against the FSCS by the end of 2015.

The regulator said if he fails to pay this amount or any part of it, the fine will be increased by the amount unpaid.
It said: “These payments to insurers will deprive Reches of the indirect benefit that the FCA considers he has gained from his misconduct. Mr Reches has also been prohibited by the FCA from performing any function in relation to any regulated activity.”

Action was also taken against Colin McIntosh, Millburn Insurance Company Limited, Coverall, Robert Bygrave, Andrea Sadler, Wayne Redgrave and Bar Professions.

These actions were taken as a result of a joint investigation by the FCA and the Prudential Regulation Authority (PRA). The PRA will also be publishing Final Notices against Colin McIntosh and Millburn today.

Mark Steward, director of enforcement and market oversight, said the case was ‘hugely complex’ and saw the FCA liaise with over 20 regulators and agencies around the world.

“Mr Reches’ misconduct led to many solicitors and others being left without adequate insurance,” said Steward. “He treated policyholders’ funds and their interests with reckless indifference and his misconduct was facilitated by an absence of proper controls by key persons at important stages of the insurance process. The FCA has also taken action against those responsible for poor controls and oversight.”

Steward said the case highlighted the risks of developing ‘overly complex’ distributions chains populated by people failing to ask obvious questions.

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