An application by administrators of two insolvent insurance broking companies for directions to approve their proposal for a scheme of distribution has been granted by the High Court (the Court).
Allanfield Property Insurance Services Ltd (APIS) and Industrial & Commercial Property Insurance Consultants Limited (ICP) were insurance brokers who went into administration in December 2012 and January 2013 respectively. At the time of the companies’ administration, significant funds were held in client accounts; £760,000 in the case of APIS and £515,000 in the case of ICP. These funds represented insurance premiums received from clients yet to be sent on to insurers or other intermediaries. Both companies failed to maintain adequate records which would help the administrators to determine with certainty who might be entitled to the funds held in the accounts.
The administrators proposed creating a distribution scheme under which the client accounts were to be treated as consisting of trust funds subject to a pooling event as they believed the client accounts were subject to the statutory trust regime in Chapter 5 of the Client Assets Sourcebook (CASS 5) in the Financial Conduct Authority (FCA) Handbook. The Court agreed with this analysis. CASS 5 was inserted into the FCA Handbook to give effect to the Insurance Mediation Directive 2002/92/EC, which among other things, was aimed at ensuring the protection of client interests throughout the EU.
In granting the application, the Court considered a number of technical issues such as whether there was certainty that the accounts were held for no other purpose than to hold insurance premiums and the manner in which the funds should be distributed given there were no precise records to assist with reconciling the accounts.