Decision by insurer to pay out on Anglo claims splits syndicate
Published 09/11/2010 | 05:00
A MAJOR split has emerged amongst Anglo Irish Bank's syndicate of insurers after one insurer paid out on claims made by the bank's former non-executive directors.
The Irish Independent understands that Chartis, the lead insurer for Anglo's director & officer (D&O) cover, has paid out on "modest" claims in recent months.
The claims all involve former non-executive directors and cover their costs for co-operating with the various enquiries into the bank's 2009 collapse. The other insurers involved in Anglo's D&O cover, who share any claims that go above a certain threshold, are believed to have vigorously opposed the Chartis payouts.
"The fear would be that if Chartis pay out, that validates the policy, so then any excess would eventually have to be paid by the other insurers," said one insurance source.
"Most people would have wanted to wait and see where things were when the dust settled."
Legally, D&O insurers are obliged to pay out on policies unless there has been "fraudulent misrepresentation" by directors or officers who are covered.
The policies are applied individually, so fraudulent representation by one director or officer doesn't invalidate the insurance policy covering the rest of the group.
The other insurers in the Anglo group -- believed to include Ace, Chubb, Lloyds and Quinn-bidder Liberty Mutual -- hope that the various probes will reveal "who knew what when" and who they should pay out for.
Insurance sources last night said it was "extremely unlikely" that non-executive directors would be found guilty of fraudulent misrepresentation, given their limited role in day-to-day business.
"You'd nearly have to have a letter from him (the non-executive director) to the risk manager asking for something to be purposefully concealed," said one source.
Insurance sources said Chartis would have faced significant reputational risk had it not paid out on the non-executive director policies, since Chartis holds about 70pc of the D&O market.
"People are innocent until proven guilty," one insurance source said. "Ireland is a very small place -- you'd ruin your reputation if you didn't pay out."
The level of claims so far has been "modest" so second-tier insurers have not yet been asked to pay anything. Sources last night said that even though some second-tier insurers had already provisioned for Anglo-related claims, they may end up not making any payments.
"It's hard to say how it'll work out, but if the obvious people can be proved to have been guilty of fraudulent misrepresentation and so aren't covered, the payouts might not actually be that high," one said.
Anglo Irish Bank declined to comment last night, with sources there stressing that the bank had no role in determining whether their insurers pay out or not.