Independent investigated for fraud

The UK's Serious Fraud Office has decided to launch a full investigation into the collapse of bankrupt insurer Independent Insurance.

The company went into liquidation on Monday after it was hit by soaring claims for personal injury compensation.

At the same time the SFO was called in by City watchdog, the Financial Services Authority, to examine the collapse and decide whether to launch a full-scale investigation.

A spokesman for the SFO said that it was too early to say how long the investigation would take, although a criminal investigation could take up to three years.

He also would not give any details of the probe, but it is thought that it will examine the role of the former chief executive Michael Bright in the company's demise.

'Unquantifiable losses'

The company is carrying out its own "thorough investigation" after discovering previously unknown reinsurance contracts.

According to the Financial Times newspaper, Independent Insurance failed to record at least £62m of insurance claims in its accounting system.

The SFO has confirmed that it will open a full-scale investigation

The decision to liquidate came after the directors of the company were forced to abandon a £200m rights issue.

When news of the debacle emerged, the extent of the losses were merely described as "unquantifiable".

Independent's demise is the biggest collapse among general insurers - as opposed to life insurers - for many years.

At one point last year the company was worth £1bn on the stock market, but is now worth close to zero.

The SFO spent the early part of this week studying documentation on Independent and assessing evidence for a full investigation.

Close to a deal

PricewaterhouseCoopers has been appointed provisional liquidator to sell the assets and use what remains to pay creditors.

Late on Thursday, PwC was said to be on the brink of a deal with insurance giant Royal & Sun Alliance to rescue business from Independent.

The two sides are locked in talks that could result in Royal & Sun taking on Independent's 450,000 council tenant insurance policyholders.

Job losses?

A spokesman for the liquidator said job losses were "inevitable" but added it was too early to say how many would go.

The company employs 2,000 people at offices in Greater Manchester, Kent and London.

Mr Bright, who founded the company in 1986, left the company last week without a pay-off.

Private individuals 'safe'

Independent's 500,000 private customers have been told not to panic as they will be covered by the Policyholders' Protection Act 1975, which is designed keep potential losses to a minimum.

As an added precaution, the Association of British Insurers is advising Independent policyholders - and in particular those not covered by the Act - to take out new policies with other insurers.

The liquidator has set up a hotline - 0161 741 1010 - for concerned policyholders.

Corporate clients

The outlook is less promising for Independent's 40,000 corporate policyholders, which include the London Fire Brigade, Pizza Express and Oval cricket ground.

Companies are not protected by the 1975 Act which could leave them out of pocket if they need to make a claim.

An FSA spokesman said: "They are basically becoming creditors of the company and they will have to join the queue of creditors, which could be a long one."

A spokesman for PwC said if Independent goes into full liquidation as expected - it is currently in "provisional liquidation" - a scheme would be put in place to ensure part-payment of claims by corporate policyholders.

But he said it was too early to say how much companies would receive - or how soon the scheme would be set up.

Mark Batten, one of two provisional liquidators appointed on Monday, said: "We will be conducting a forensic investigation into the financial position of the company as a matter of urgency, including the reasons for the company's failure."