Deep divisions between directors of the stricken Independent Insurance have emerged as non-executives of the company have said that they were not informed about reinsurance contracts which appear to have been taken out earlier this year.
One non-executive director said yesterday that there was no formal board meeting to discuss the contracts and non-executives "definitely did not know about them". The company is now trying to find ways to unwind these reinsurance deals, saying that it wants to put something in place which is "better suited" to its needs.
These contracts came on top of separate publicly-announced ones, which cost the company a £110m premium for £278m of reinsurance cover, mainly aimed at capping the liability created by mounting "no-win, no-fee" claims.
It is believed the additional deals may have been arranged by Michael Bright, Independent's founder and former chief executive who resigned from the company last week.
No details of the alleged contracts have been made public, but it seems that the additional deals may have had the role of acting more as loans to shore up Independent's balance sheet than as conventional reinsurance used to cover specific underwriting risk.
The lack of communication between directors, plus an evident disagreement now about whether the contracts should have been taken out, will knock investors' confidence in the company still further. The company has instigated a full-scale investigation into its financial situation, which will include examining these reinsurance deals.
The non-executive director said that the inquiry would include the role of the company's auditor KPMG and its actuary, Watson Wyatt, "to try to establish how they came to the conclusions they did when they signed off the accounts." Both companies continue to be employed by Independent and are being kept closely informed about developments.
The director insisted that Independent would be able to offer details of its liabilities, plus information on its progress with selling its business, "within days rather than weeks".
Separately, Mr Bright is thought to be in talks with HSBC, also advisers to Independent, about the status of a £4m personal loan he secured against his shares in Independent. As Independent has now suspended its shares, the loan is effectively unsecured.
Mr Bright, who is famous for his flamboyant lifestyle, is believed to have taken out a number of loans to finance buying Independent shares, taking his holding to more than 6 per cent.
Mr Bright yesterday refused to discuss the loan but an associate said: "Michael was a great supporter of the company. He built up his holding as a sign of his confidence in it."Reuse content