Guernsey-based Global Insurance Group (GIG) and five of its directors have been collectively fined £155,750 ($200,214, €170,703).
The Guernsey Financial Services Commission (GFSC) said the firm breached the Bailiwick’s insurance law and the five individuals failed to fulfil the minimum requirements needed for their licence.
GIG is a general insurer that specialises in international medical and travel cover for expats and for companies that employ expats around the world.
The failings relate to an agreement the provider had with an unnamed intermediary based in the UK, which had some common ownership with the firm.
The intermediary issued policies and retained a portion of the premiums from policyholders to pay claims on behalf of GIG, the regulator said.
Lack of control
Policy reports should have been prepared monthly by the intermediary and a net premium settlement should have been made quarterly to GIG.
But, following an inspection in July 2017, the GFSC expressed concerns about the insurer’s oversight of the functions outsourced to the UK intermediary, especially the management of the claims fund.
Additionally, the watchdog discovered GIG had not conducted any audits of the activities carried out by the intermediary and, as a result, failed to monitor its solvency due to the reporting frequency.
The problem, the GFSC said, was that while the insurer could outsource functions, it could not outsource responsibility, and it had the duty to check that the operations and reporting from the intermediary were accurate.
Two of the directors confirmed to the regulator that, before the GFSC’s visit in July 2017, no visits to the UK were made to check the reports were correct.
The regulator added: “In the period prior to the July 2017 visit, apart from the first quarterly payment to GIG by the intermediary, the only payments made were the exact amounts required to pay GIG’s reinsurers.
“GIG’s management accounts showed that the amounts outstanding from the intermediary grew whilst GIG’s cash remained low. The amounts due from the intermediary were GIG’s major asset.
“GIG began to request that the payments be regularised from November 2015 onwards. However, regular payments from the intermediary were not forthcoming. The outstanding amounts were only paid to GIG after intervention by the Commission and after investment into the intermediary by a third party.
“This called into question the liquidity of GIG’s major asset.”
The GFSC said that, given the situation, the insurance provider failed to maintain adequate liquidity, or make adequate provisions for depreciation or diminution in the value of its assets, resulting in the firm failing to meet its licensing requirements.
Fines left and right
This prompted the watchdog to impose fines on the firm and the five directors responsible.
The penalties are:
- £48,659, to Shane Younger, non-executive director from December 2011 to February 2019, for failing to implement control systems and reporting;
- £42,000 to GIG for lack of oversight;
- £30,100 to Christopher Percival, non-executive director from December 2011 to July 2017, for failing to implement control systems and reporting;
- £17,500 to Christopher Schofield, director, for control system and reporting failings;
- £10,500 to Andrew Robert, former director, for reporting and control system failings; and,
- £7,000 to Stephen Dewsnip, non-executive director, for failing to implement control and reporting systems.