Caught Between a Rock and a Hard Place?
Elite Insurance (“Elite”) entered the UK insurance market in 2005 with a promise to address risk like no other insurer. It said that it would focus on individual insurance needs, rather than adopting a “one size fits all,” when writing property and construction professional indemnity and legal expenses risks. Rapid expansion followed with Elite offices opening in Spain and Italy and re-domiciling to Gibraltar in 2011. It is thought that Elite now has around 1.5 million policyholders across Europe.
It was then with some surprise that on 4 July 2017, Elite announced that it was closed to new business and would run off existing policies. No reasons were given at the time for the decision.
But the lid has just been lifted to reveal a series of regulatory concerns, interventions and disputes in Gibraltar over Elite’s business that date back to 2016.
On 28 July 2017, it emerged that there had been a series of Gibraltar Court proceedings, which had involved Elite in challenges to regulatory interventions by its “home” regulator, the Gibraltar Financial Services Commission (“GFSC”), which has powers to supervise Gibraltar-based insurance companies so as to ensure that they comply with local law. The Gibraltar Supreme Court initially imposed confidentiality restrictions over the proceedings at Elite’s request, but Elite subsequently asked for the restrictions to be lifted.
It has now become clear that during the course of its supervisory oversight, the GFSC had identified risks arising from Elite’s governance, delegated underwriting and reserving processes. Since the middle of 2016, the GFSC worked to try to ensure that Elite resolved those issues and the implications for Elite’s capital adequacy and solvency. The GFSC was supported by PwC who were engaged in formal ‘skilled persons’ and ‘inspector’ capacities.
The GFSC then took regulatory actions to protect Elite’s policyholders. That included issuing directions to Elite to inject capital and to cease writing new business, which Elite then challenged in the Gibraltar courts.
However, on 4 July 2017, it seemed that Elite called it a day on its challenges to the GFSC and agreed to cease writing new business and entered into runoff. The GFSC has said that Elite’s directors have provided the GFSC with declarations of solvency and with a run-off plan for approval by the GFSC. The GFSC is reviewing Elite’s run-off plan and solvency declarations. In the meantime, the GFSC, the European Insurance and Occupational Pensions Authority (EIOPA) and European regulators are working together to ensure that existing policyholders experience minimal disruption and inconvenience as a result of Elite’s closure to new business.