FCA fines insurance firms £15.5m

The FCA found that Shay Reches performed controlled functions and conducted regulated activities at Coverall Worldwide Limited, despite not being approved by the FCA to do so.

In doing so, the FCA said he 'recklessly' directed payments of insurance premiums to parties other than the insurers and reinsurers responsible for paying claims, increasing the risk that policyholders’ claims would not be paid.

This misconduct contributed to the failure of several insurance schemes as well as to three insurers going into administration. As a result, the FSCS had to pay claims totalling £12.7m as at the end of 2015.

The FCA has fined Mr Reches £1,050,000. Mr Reches has also agreed to pay a sum of £13,130,000 to the three insurers, which will make a substantial contribution towards the liabilities to the FSCS and UK policyholders. If he fails to pay this amount or any part of it, the fine will be increased by the amount unpaid. Mr Reches has also been prohibited by the FCA from performing any function in relation to any regulated activity.

Action was also taken against Colin McIntosh, CEO of Millburn Insurance Company, Coverall, Robert Bygrave, Andrea Sadler, Wayne Redgrave and Bar Professions Limited.              

Mark Steward, director of enforcement and market oversight, said:

“This was a hugely complex case with the FCA liaising with over 20 regulators and agencies around the world.

“Mr Reches’ misconduct led to many solicitors and others being left without adequate insurance. He treated policyholders’ funds and their interests with reckless indifference and his misconduct was facilitated by an absence of proper controls by key persons at important stages of the insurance process. The FCA has also taken action against those responsible for poor controls and oversight.

“This case not only demonstrates the consequences of poor controls but also what can happen when the distribution chain becomes overly complex, participants fail to ask obvious questions or take rudimentary precautions, including those insurance intermediaries and brokers checking whether Mr Reches was approved to carry out the functions he was performing.”