FSA 'derelict' in its duty over insurer

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Insurance – don't bet your life on it

Protection goes up in flames

The Financial Services Authority has been accused of being "derelict" in its duty following the collapse of Independent Insurance. The company was last week declared insolvent by provisional liquidators, Pricewaterhouse Coopers, in a crisis which could be as serious as the Maxwell pensions scandal.

The accusation came from an insurance law specialist following the announcement that the Serious Fraud Office has launched a criminal investigation into the company, which reportedly has a £62m "black hole" in its finances.

The FSA last night defended its position. "Companies are obliged to provide us with accurate data and we have to work on the basis that the information is correct," said a spokeswoman for the regulator.

John Quarrell , a partner at lawyers Nabarro Nathanson, is not surprised at the extent of Independent's problems. "Most audits are conducted by unimaginative staff who don't know what to look for," he said.

The company's external actuaries, Wyatt Watson, have faced criticism. They refused to comment, but apparently warned Independent last March about its low reserves. The warning is said to have been repeated last month. The fact nothing was done has led to criticism that Wyatt Watson's warnings were not explicit enough.