News release

Overseas insurer positions clarified soon

The solvency positions of two overseas insurers should be clarified in the coming weeks, the SRA believes.

The SRA has been made aware of new problems involving two companies, European Risk Insurance Company hf (“ERIC”) and Balva Insurance Company AAS (“Balva”). One of the panel solicitors dealing with claims made against firms previously insured by ERIC and BALVA has written to insured firms advising them that the insurer has failed to pay defence costs for a period of many months.

The panel firm therefore served a 30-day notice on each insurer requiring remedy of the breach of their agreement failing which the retainer with the insurer would be terminated. If ERIC or Balva are unable to meet defence costs, then under the terms of the joint retainer the panel firm will be looking to each insured firm to pay the outstanding costs.

The panel firm has also written to claimants advising them that it is uncertain as to whether either ERIC or Balva will be able to pay any liability that may be established in respect of the claimant's case. The SRA has been keeping in contact with the two insurers and the Financial Conduct Authority (FCA).

It believes that all issues will be clarified in a little over a month's time, when it should know if the insurers are able to meet their liabilities. If they do not, then the Financial Services Compensation Scheme (FSCS) can become involved.

The FSCS will not handle any claims until it is satisfied that an insurer is in default which means that it either has insufficient assets to meet its liabilities or else it is insolvent. www.fscs.org.uk

The SRA understands the current position to be:

ERIC

ERIC was a qualifying insurer in the 2011/12 indemnity period and wrote solicitors professional indemnity business under a fronting arrangement with Balva. The difficulties experienced by Balva have had a knock on effect on ERIC.

The Icelandic Financial Supervisory Authority gave notice that it had withdrawn ERIC's operating licence with effect from 12 February 2014 and it had appointed a three person Resolution Board to review the business with a view to managing the portfolio towards a sale (http://en.fme.is/published-material/news--announcements/news/nr/2021).

It the absence of a sale the company is likely to be put into liquidation. Indications are that this is likely to be a relatively short process. At this point in time ERIC is still accepting claim notifications but is not in a position to pay defence costs or settle claims.

The new claim contact details are as follows:

Ms Emma Grimsdottir/Ms Kristin Helgadottir
European Risk Insurance Company hf
Síðumúli 28 108
Reykjavík
Iceland

Phone number: 00354 518 5300

Email: claims@erichf.com

BALVA

The liquidator appointed to wind up Balva is in the process of gathering all the claims by creditors after which a report will be made to the Latvian Financial and Capital Market Commission and decisions will be taken as to the solvency or otherwise of the company. (http://www.fktk.lv/en/publications/press_releases/4026-2013-08-12-ijsc-balva-liquidator-registered.html)

 
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