Ex-Independent Insurance man fined over fresh breach

Keith Rutter, a former executive at the collapsed Independent Insurance group, was dragged into another financial services scandal yesterday, as the City watchdog fined him £20,000 for regulatory breaches during his time at the helm of The Underwriter, the failed insurer he launched in 1999.

Keith Rutter, a former executive at the collapsed Independent Insurance group, was dragged into another financial services scandal yesterday, as the City watchdog fined him £20,000 for regulatory breaches during his time at the helm of The Underwriter, the failed insurer he launched in 1999.

Mr Rutter, who was director of the broker division at Independent before quitting after a boardroom dispute in 1998, was fined for failing to operate with integrity during his time as chief executive of The Underwriter, and failing to be open and co-operative with the Financial Services Authority.

The FSA also issued a public censure against The Underwriter, which was wound up last year after disappointing results in 2001 and 2002.

The disciplinary action relates to breaches of an FSA rule which restricted the amount of business the company could write in its first few years in business. Mr Rutter and his team circumvented the restrictions by writing business for which payment was deferred until later years.

The FSA said that while it believed the group thought it was acting within the regulator's guidelines, its actions in fact constituted a breach of regulations.

Andrew Procter, the FSA's director of enforcement, said: "The management of regulated firms should be in no doubt as to the importance of dealing openly with the FSA. Our regulatory framework places great emphasis on the role of senior management. If a firm takes steps to deliberately circumvent a regulatory requirement, the FSA will take disciplinary action against both the firm and its senior management. It is important that this message is clearly understood in the insurance industry."

Mr Procter added that despite regular contact with the FSA, The Underwriter's management failed to disclose or discuss its premium deferrals.

"This meant that The Underwriter's reported premium income did not accurately reflect the underwriting risks to which it was committed," he said. "This is unacceptable and in breach of our principles."

Mr Rutter launched The Underwriter after 11 years at Independent Insurance, which went into liquidation almost three-and-a-half years ago after it emerged that its liabilities exceeded its reserves by £220m.

Supporters of Michael Bright, the chief executive of Independent, tried to pin some of the blame for the insurer's collapse on Mr Rutter three years ago. However, the road towards Independent's collapse is more widely believed to have been paved in the wake of the departure of Mr Rutter, who was renowned as one of the only board members willing to stand up to the headstrong Mr Bright.