Administrator says legal action pursued as broker suffers consequences of alleged fraud.
ESR Insurance, the Lloyd’s broker at the centre of an international fraud investigation, could be liable for up to £200m in outstanding claims, its administrators said this week.
Legal proceedings were underway in the UK, US and the Bahamas in an attempt to catch those behind an alleged fraud in ESR’s financial risks division, said Andrew Hosking, joint administrator from accountant Grant Thornton.
Hosking also announced that 20 ESR staff had been made redundant following a sale of ESR’s remaining healthy books of business to Apex Insurance. Nineteen former ESR staff and former ESR directors Paul Goodman and David Taylor are now employed by Apex, a subsidiary of Lloyd’s broker Crispin Speers.
It also emerged that ESR had turned to parent company Primary Group in an attempt to secure emergency funding, but talks collapsed. A final attempt to sell ESR to a third party also failed.
ESR was put into administration in February this year, following an internal investigation that uncovered irregularities in the operation of the company’s financial risks division. Director David Bedford, head of the division, was suspended amid allegations of the invalid issuing of bonds and insurance.
Hosking said a number of clients that dealt with ESR’s financial risks division could claim for the return of premiums paid, as well as damages with respect to policies improperly or invalidly placed. He added: “Total claims against the company could, in a worst case scenario, total around £200m.”
Such a scenario would arise if claims were made against ESR in situations where all policies of insurance or bonds fail to respond to claims by insureds or bondholders, Hosking continued.
“Statistically, this scenario is unlikely and the actual quantum of claims against the company is likely to be significantly less,” he added.
ESR’s directors’ and officers’ and errors and omissions insurers have been notified.
