Big Five - Maxwell payout threatens premiums
Insurers are expected to seek higher professional indemnity insurance premiums following last week’s record £68m payment by Coopers & Lybrand to administrators of Robert Maxwell’s media empire.
As the former auditor of the Maxwell Communication Corporation, Coopers paid £5m last week to settle finally the long-running professional negligence claim. It will pay an additional £35m next month and £27.6m in July 2000.
According to PricewaterhouseCoopers, the settlement was fully provided for and covered by partners’ earnings and insurance cover from previous years. The firm uses a ‘captive’ insurance firm but the size of the settlement means it would have had to rely on additional external insurance.
Experts expect the Coopers settlement to trigger insurer demands for higher professional indemnity premiums even though fierce competition for accountants’ business has kept premiums relatively soft.
‘Insurers undoubtedly will try to use that sort of settlement to harden the market,’ said Paul Redfern, professional indemnity litigation partner with Beachcroft Wansboroughs.
But he added: ‘On the whole, claims are fairly low so I doubt whether attempts to jack up rates would be successful.’
In addition, Coopers has dropped its £300,000 claim for unpaid fees and creditors are now likely to receive 55% to 58% of claims.