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Attempts to save an insurance firm - that discovered millions shown in its accounts did not exist - have failed.
The Guernsey Financial Services Commission is now investigating what went wrong, while policyholders face serious uncertainty and being left out of pocket.
GBG Insurance Limited has been placed into administration, with impacts that will ripple around the world.
In March the directors approached the GFSC to tell them that “despite the audited accounts showing the firm to be in good health, they had discovered that assets shown in the accounts representing many millions of pounds did not actually exist”.
“Since that point the Commission has engaged intensively with the directors as they tried to recapitalise the business and/or secure a sale of the firm, in the interests of the policyholders,” a GFSC statement said.
“At several points over the last few months there was a very strong prospect that transactions may have been executed that would have protected all policyholders.
“Sadly, the final proposed buyer, which had given us and the directors of GBG the strongest signals that it would buy the business as a going concern, decided to withdraw from the deal in mid-December rather than inject the large amounts of fresh capital required.
“This last minute withdrawal from the transaction after some months of due diligence and integration planning forced the directors of GBG to seek administration, other reasonable avenues having been exhausted.”
GBG Insurance Limited is the parent company of GBG, described on its LinkedIn page as “a leading global insurance service company”.
It serviced health, life, disability, and travel insurance, “with a client base that spans multinational corporations, expatriates, international students, high net-worth individuals, international schools, and non-profit organisations”.
“The Commission will be conducting an investigation focused on how the large hole in the firm’s balance sheet developed and on why it was not identified more quickly by various parties whom the Commission would expect to have validated the accounting records and other relevant information,” the GFSC said.
“This is likely to be a complex and lengthy investigation and we cannot, as we commence the investigation, predict its outcome.
“We will examine the evidence and endeavour to understand what went wrong. Whilst we must clearly investigate thoroughly, we would not wish the fact of our investigation to lead anyone to draw any adverse conclusions about the current directors of GBG. At present, we have no evidence to suggest they are not competent people with integrity.”
How policyholders are affected depends on whether they were directly insured by GBG.
Those who were have been warned by the joint administrators “that it is not expected that GBG Insurance Limited will be able to honour the full amount of any claims currently received or any made during the Administration”.
Customers with critical, life-threatening healthcare needs have been told to apply for emergency financial assistance if they cannot cover their medical expenses.
GBG policy holders have also been warned they are unlikely to be protected by an insurance compensation scheme/US State Guarantee Fund.
GBG has nine offices across four continents.
Under its TieCare International brand, it supplied employee benefits to American and international schools around the world.
The GFSC has advised TieCare policy holders that replacement coverage through an arrangement with an insurance carrier rated A (Excellent) by AM Best is currently being finalised.
AM Best is a global credit rating agency.
It withdrew GBG Insurances' credit rating on 28 April.
At the time both its financial strength and long-term issuer credit rating were classed as Good, but AM Best said there was a lack of information available to continue the interactive rating process of the company.
“AM Best’s procedure is for a final rating opinion to be produced in conjunction with a rating withdrawal,” it said.
“However, a final rating opinion could not be produced for GIL due to the absence of sufficient and reliable information.”
Alex Adam, Andrew Wood and Michael Tagg, all Insolvency Practitioners of Teneo, have been appointed Joint Administrators of GBG Insurance Limited.
Pictured top: Before going into administration, GBG Insurance Limited was registered at Albert House.
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