Auditors are not obliged to report financial irregularities they uncover at insurance companies to the General Insurance Standards Council (GISC).
GISC spokeswoman Catherine Nicoll said members were free to be audited by whomever they chose. "They (the auditors) don't have any direct relationship with us. We can't impose on anyone, other than our members, duties to do things," she said.
The GISC's role in monitoring insurance companies has been criticised, particularly in the wake of Independent Insurance's collapse. Many industry members have asked why Independent was able to fail without warning, despite GISC membership.
But Nicoll said the GISC did not monitor companies' financial or solvency arrangements because the Financial Services Authority and the Department of Trade and Industry already had statutory status to do so.
The GISC has contracted Pricewaterhousecoopers and Ernst & Young to monitor its member companies, but Nicoll said they were unlikely to uncover financial irregularities. Independent joined the GISC in April, but had not been visited by the monitors. "Even if they had had a visit, it's unlikely we'd have discovered anything untoward."
Lloyd's regulation director David Gittings said auditors were made to sign an undertaking to inform its regulators of "anything material" to their work. "They don't come to us as often as we think they should," he said.
