Drake Insurance’s crash into insolvency could eventually cost the insurance industry £50m, according to the Policyholders’ Protection Board.
The PPB, which takes over the payment of claims for insolvent insurers, said it has paid more than £4m to Drake motor policyholders since the company’s collapse last May.
But PPB claims manager Roger Clements said the final bill could be even higher: “The board estimates the demise of Drake could cost up to £50m and take between five and ten years before the last claim is settled.”
The PPB provided £25.2m of financial assistance to policyholders of 16 general insurance companies that went into liquidation in the year to March 31, 2000. Last year the sum was £18.8m for 18 failed insurers.
The £4m paid to Drake policyholders is not reflected in last year’s figures since the company plunged into liquidation after this year’s accounts were published.
The largest amounts were paid to policyholders of BAI, formerly the Builders’ Accident Insurance company (£8m), and to the insured of five insolvent companies of the London United Investments Group (£7.3m).
An additional £405,000 was paid to policyholders of two small life insurers, but this was on top of £201,000 paid to them in 1999.
The PPB is financed by a regular levy on UK insurance companies and last year it received £15.9m in payments to its scheme compared to £10.3m in 1999.
The board has decided not to raise a levy for 2000, but Clements said this could change if another insurer the size of Drake went bust.