Insurers put funds aside for Anglo legal costs
INSURERS have put aside reserves to cover legal costs expected to be incurred when senior former directors of Anglo Irish Bank are taken to court.
A file on Anglo is expected to be passed to the Director of Public Prosecutions by year end -- the last step before potential prosecutions are undertaken against former board members.
The former directors are covered by directors and officers' liability insurance (D&O) and if they are taken to court this insurance is either paid to them or the bank itself.
The providers of D&O policies have started monitoring developments at Anglo, with analysts asking these companies if they expect significant payouts to be triggered when cases begin.
Aspen Insurance, a major US D&O provider, is holding reserves for events like Anglo payouts, although it told analysts recently the situation on prosecutions was not clear.
"In places like Iceland and Ireland, I don't think it's even been decided there is going to be any prosecutions or actions against the boards of those companies,'' said the company's chief executive Christopher O'Kane.
Aspen is only one provider of D&O policies and other insurers are likely to have made similar provisions. It is not known how many of the policies were taken out by Anglo.
Anglo's last annual report simply said the bank had insurance in place to cover the directors and officers in respect of legal actions which "may be brought against them in the course of their duties".
The Irish Independent understands no payments have been made to former Anglo directors under these policies to date.
The bank is taking legal advice on whether the insurance policies will pay out to former directors or not.
A joint garda/Director of Corporate Enforcement investigation is looking at three crucial issues: the hiding of €87m loans by former chairman Sean FitzPatrick; the share transaction with 10 Anglo customers which may have propped up the bank's share price; and the €7bn Irish Life & Permanent deposits which boosted its deposits at a key reporting date in 2008.