June

June

The first day of June opened with a shock report that three directors of broker Stafford Knight had quit rather than be taken over by acquisition-hungry Towergate Underwriting.

David Taylor, David Bedford and Paul Goodman resigned after their own management buyout bid for the company collapsed and Towergate's bid was accepted.

None of the three were available for comment but a source said: “It made their position untenable once the deal went through.”

It is believed Stafford Knight was on the market for around £4m, with around 25 staff and an annual brokerage income of £4m.

This was another step in Towergate's aggressive acquisition policy, which lead it to appoint industry heavyweight Kenny Maciver, former Lombard managing director, in May to help spearhead the expansion.

Yet industry observers were sceptical of the move. HSBC analyst David Hudson said: “Some people are happy to use the weaknesses in these companies to acquire them but I have yet to find anyone who makes much money out of it.”

In the first week of June the GISC launched its rulebook, almost unchanged from its March outline proposals, straight into a hail of criticism.

The GISC was criticised by brokers Miller, who said the Lloyd's regime would be weakened by switching to the GISC, and by IIB director general Andrew Paddick for sending application packs to IBRC members. Finally, financial services ombudsman Walter Merricks cast doubt on the GISC's ability to handle consumer complaints.

However, the GISC said its standard of regulation was as rigorous as that of Lloyd's, that it was merely giving brokers the opportunity to join if they wished and that two members of the Financial Ombudsman Service would start work at the GISC at the end of the month.

Yet, just one week later, the GISC faced the possibility that it may have to rewrite its rulebook, after broker bosses claimed the solvency rules were unworkable.

The GISC agreed to amend its solvency requirement, which required intermediaries that took commission on an earned basis to have a 20% solvency margin, but did not take into account the company's assets at its meeting on June 15.

Association of Insurance Intermediaries and Brokers (AIIB) secretary general Chris Arter said quite a few companies would have struggled to make the limit. Both the AIIB and Biba had made representations on this issue to the GISC previously.

Later in June, it was announced that the Edgar Hamilton Group was to merge with fellow Lloyd's broker FE Wright. FE Wright was bought by Edgar Hamilton's parent company Sterling Insurance Group. A new broking group with 250 staff will be formed on January 1.

Scandal signalled the end of the month, when it was revealed a Staffordshire intermediary ripped off four working men's clubs by charging them massively overinflated administration fees for placing their premiums.

Lloyd Manley director John Bateman admitted that he first knew in June 1999 that West Sutton Labour Club in St Helens had unnecessarily paid nearly £700 in administration fees. Three other clubs were also overcharged.

The employee responsible was Joe Coy, who said he was unaware that it was wrong to not inform the club of the level of fees.

Bateman said the money had not been returned when the discrepancy first came to light because they were understaffed.