Recent news from the UK Financial Conduct Authority (FCA), that Gibraltar-domiciled motorcycle policy underwriter MCE Insurance Company had fallen into administration, only told half of a story concealing what could amount to bad faith by the local regulator. And it highlights the dangers of doing business in offshore jurisdictions where the rule of law is often a moveable feast.
According to the FCA, the company went into administration on 19 November, after its equivalent in this British overseas territory — the Gibraltar Financial Services Commission (GFSC) — applied to the Supreme Court of Gibraltar. Andrew Stoneman and Geoff Bouchier of insolvency practitioner Kroll were subsequently appointed as administrators.
However, the FCA also acknowledged that the company had ceased writing new policies for its MCE UK parent’s distributive arm, the specialist motorcycle broker MCE Insurance, on 5 November. And the FCA noted existing policies “remain in force and are valid” (although the UK’s Financial Services Compensation Scheme seems to think otherwise). What it didn’t say was MCE had previously decided to transfer its portfolio to a UK underwriter and restructure the offshore operation, and the Gibraltarian regulator had been made aware of this intention.
The background was MCE’s long-running dispute with the GFSC over compliance relating to EC Directive Solvency II. Billed as “a fundamental review of capital adequacy and risk management regimes for the European insurance industry”, Solvency II encouraged the GFSC to apply capital add-on requirements. In response, MCE claims to have made proposals that would have injected £20.5m into its Gibraltarian business. But the GFSC reportedly declined these measures, for reasons MCE couldn’t fathom.
“Over the past 14 months, we have seen what appears to be corruption, coercion, cover-ups and just plain lies,” said a forthright MCE statement. “The GFSC changes its position and approach subjectively as and when it suits, without accountability under the veil of immunity from proceedings.”
Meanwhile, prior to the administration move, big-league British motor underwriter Sabre Insurance Group had signed up on 10 November, to become the exclusive policy provider to MCE Insurance in the UK market, with immediate effect. Gross written premiums from the relationship are anticipated to exceed £20m annually.
“This agreement provides a unique opportunity to enter a new market at scale,” said the Sabre’s chief executive Geoff Carter. “Motorcycle insurance is entirely consistent with our focus on engines and wheels, providing an exciting additional opportunity alongside our UK private motor business.”