Letter to Insurance Cos and IPA re Gelling involvement

Letter to Insurance Cos and IPA re Gelling involvement

LETTER SENT TO:

ROYAL SKANDIA
AXA INTERNATIONAL
AEGON SCOTTISH EQUITABLE
FRIENDS PROVIDENT
PRUDENTIAL INTERNATIONAL
NORWICH UNION INTERNATIONAL
CLERICAL MEDICAL INSURANCE
DAVID VICK IPA
MANX PRESS & MEDIA
UK TRADE PRESS

Mr Donald Gelling CBE has held the position of Chairman of the Board of the Insurance and Pensions Authority since November 2002. Mr Gelling was also the Chairman and Director of Kaupthing Singer & Friedlander IoM (KSFIoM) during the period up to and during the time of its failure in October 2008. Holding this position, Mr Gelling would have been intimately involved with the discussions and decisions made in the spring of 2008 as to the best course of action required to safeguard the considerable assets of KSFIoM – including we believe almost £300m of Insurance Companies' deposits .

According to evidence given by Mr John Aspden Chief of the Financial Supervision Commission (FSC) at the TSC meeting on 3rd February 2009, the UK financial regulator (FSA) was consulted regarding exposure to Iceland amid growing concerns of the weaknesses that were becoming evident in that jurisdiction. It was stated that decisions were made to move KSFIoM funds from Reykjavik to Kaupthing UK, the sister bank of KSFIoM within the UK FSA's jurisdiction. It appears that the assets were then left there for a considerable length of time without regular review or consultation with the UK regulatory authorities in order to ensure their continued safe-keeping.

Given the senior positions that Mr Gelling has held during his time in Government – including two terms as Chief Minister as well as holding the key posts of Treasury Minister and Chairman of the FSC – it is incredulous that Mr Gelling either suggested or subscribed to the notion that allowing almost 50% of KSFIoM's assets to be moved into a) a single location, b) an Icelandic subsidiary bank located outside of the jurisdiction of the Isle of Man and c) with no security of ring-fencing or other means of protection to ensure priority creditor status was acceptable under any risk management policy employed by the bank at that time. As the non-executive Chairman his responsibility in this matter was surely to question all parties extensively and ensure that the appropriate risk management policies were employed and monitored to protect depositors' money. Having seen nothing to the contrary, it appears that his previous and existing relationships with the various parties who promoted this situation may have prevented the appropriate thorough procedures from being followed.

Although mention has been made that such 'upstreaming' is fairly commonplace without such measures in place, surely this would only be the case if the situation was not perilous – but it was indeed perilous and known to be so, hence the need for the transfer of assets in the first place. If such obvious concern existed over the security of this massive deposit, why was it placed in a subsidiary bank of the parent group of the State from which the threat was perceived? And why was the size of the deposit sanctioned to be so incredibly large? It was practically double the size of prescribed prudential limits. These factors alone indicate at worse gross incompetence or at best careless disregard by a Board of Directors that should have known better, even when encouraged to do so by the regulatory authorities.

All of the foregoing begs the question as to why the Insurance Pensions Authority , and the Insurance Companies it represents, continues to allow Mr Donald Gelling to sit on the Board when it is manifestly clear that his responsibilities in KSFIoM make him directly accountable for authorising or approving the transfer of assets, including huge sums of money belonging to the Insurance Companies and more importantly their clients? Mr Gelling is intricately involved with events leading to the failure of KSFIoM, but has made no public announcement of his participation and chooses to ignore the plight of thousands of savers who trusted the Board of KSFIOM with their money.

This deplorable attitude and his continued Chairmanship of the Insurance Pensions Authority should be the subject of immediate attention and we would welcome your comments on this matter. Many of our members have deposited their money via insurance company 'wrapper' products and we implore you to demonstrate your commitment to ensure 100% return of their money. This was not a high risk investment it was meant to be a safe secure deposit in an A1 rated bank.

Please demonstrate that you care about the fate of all depositors in this debacle and use your strength of voice and weight of opinion to do the right thing. We are under pressure from DAG members to demonstrate the actions we are taking to encourage the IOM authorities to take positive action and recompense depositors in full. DAG members are understandably frustrated by the lack of communication from IOMG and FSC since the last court hearing and the continued profound silence from the insurance companies is not making them feel reassured in any way.

To show this is not due to lack of effort on our part, we will be forced to publish our email exchange unless we hear from you within the next 36 hours.

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