Actuary quizzed on role at failed insurer

By Heather Tomlinson

A law firm representing creditors of Independent Insurance has written to actuarial firm Watson Wyatt to query its relationship with its former client.

The Independent on Sunday can reveal that Watson Wyatt, although promoted as an independent actuary of the collapsed firm, had a professional indemnity policy with the insurer – but changed it some time before the collapse.

The actuary uniquely issued a report every year verifying the risks at Independent Insurance.

Solicitors' firm Class Law represents former Independent Insurance policyholders who either were not covered for claims, due to the collapse, or had to pay substantial premiums to get new cover. It is investigating legal action against KPMG, the auditor of Independent Insurance, and the Financial Services Authority.

Independent Insurance collapsed in June 2001 as it did not have enough reserves for its liabilities. It had issued its final results for 2000 in March, which Watson Wyatt certified. But in May the actuary notified Independent's board that it could no longer be sure of the size of the liabilities. The company later collapsed and it appeared that claims had been kept off the books. It is now the subject of a probe by the Serious Fraud Office.

In a letter sent by hand on Friday, Watson Wyatt was informed by Class Law that there was a possible claim for insurance against the company "so that you may notify your insurers accordingly". The letter also asked the firm to confirm it had a professional indemnity policy with Independent Insurance, and asked when and why the policy was changed.

The responses could be crucial if Watson Wyatt is further questioned over its awareness of the precarious status of the company.

A Watson Wyatt spokes- man confirmed the existence of a policy but could not say when it had changed.

He said it had been in place "a few years" before. "There was no insurance in place at the time of collapse or immediately before."

The Institute of Actuaries declined to comment on whether there had been an investigation into Watson Wyatt's role at Independent Insurance.