Ernst & Young, Watson Wyatt and Cotesworth directors named in law suit
A Names action group is preparing to join the £200m legal action brought by the provisional liquidator of Cotesworth Capital against former syndicate directors and professional advisers.
Auditor Ernst & Young and actuary Watson Wyatt have been named in the claim brought by provisional liquidator KPMG, along with the syndicate directors.
Insurance Times has learned that members agents have obtained legal opinion and are rallying Names to start their own claim against the advisers and directors.
The claim relates to reinsurance arrangements between the syndicates and Luxemburg Reinsurance (Lureco) in the 1999, 2000 and 2001 years of account.
KPMG and the Names claim that the full details of the Lureco arrangements were not disclosed.
A source said: "There would be a gap in the reinsurance programme if the syndicates went into run-off. If the capital providers had known this they would not have participated."
KPMG and the Names are looking to recover the losses made by the syndicates.
Between 1999 and 2001 the Cotesworth syndicates lost nearly £200m.
At the end of 2001 the syndicates collapsed due to heavy exposure to reinsurance contracts taken out with Independent Insurance.
Cotesworth Capital failed as a result of its inability to secure funding for underwriting in 2002 following the demise of the HIH Insurance Group.
KPMG confirmed that a legal action had been brought, but declined to comment further. Ernst & Young said the claim was "without merit" and would be defended.
Watson Wyatt said it would "vigorously" contest the claim.