A 2013 investigation by the FCA found the schemes raised concerns about the validity of insurance arrangements for more than 1,300 law firms across England and Wales. The regulator said that the schemes were all linked to Shay Reches, a director with insurance intermediary Coverall Worldwide with responsibility for a managing general agent, Aderia UK.

Mr Reches used binding authorities issued by London-based Aderia to various cover-holders, including to a specialist PII broker named Bar that targeted solicitors. Security was needed from a number of insurers and reinsurers based in the UK, the rest of Europe and offshore. The main risk carrier, Sinclair Insurance Company, was registered in the Comoros and controlled by Mr Reches.

The FCA concluded that failure in the management oversight throughout these distribution chains, as well as the failure of the reinsurance arrangements, contributed to three insurers – Millburn, European Risk Insurance Company and Latvian insurer Balva – going into administration. The result was that each was unable to honour the insurance they had offered to hundreds of law firms.

Mr Reches was fined £1.05m and has agreed to pay £13.13m to the three insurers that went into administration. It is the first time the regulator has fined a person for undertaking regulated activities without approval. Coverall was fined £36,800 by the regulator and had its authorisation cancelled, while Coverall directors Robert Bygrave and Andrea Sadler have been fined £37,400 and £18,700 respectively.

Wayne Redgrave, a broker, director and the controller at Bar, was fined £38,600 by the regulator, while Colin McIntosh - the chief executive at Millburn and a director at Coverall, has been fined £51,600. Milburn itself has been fined £1,137,500 for failing to deal with the FCA in an open and cooperative way. Sources: The Law Society Gazette; InsuranceAge