Watson Wyatt's Independent role under scrutiny
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Your support makes all the difference.Watson Wyatt, one of the UK's largest firms of actuaries, is facing multimillion-pound negligence claims over its work for two collapsed insurance companies.
In two separate cases, administrators are claiming it should have spotted massive holes in the respective accounts.
Daniel Schwarzmann, of PricewaterhouseCoopers, the administrators of Independent Insurance, which went spectacularly bankrupt in 2001, is seeking tens of millions of pounds in damages. And KPMG, the provisional liquidator of Cotesworth Capital, a member of the Lloyd's of London insurance market, is demanding about £35m in damages for what it claims is Watson Wyatt's role in the lead up to Cotesworth's collapse in 2001.
Watson Wyatt denies the claims of negligence, and says it will vigorously defend both.
The revelations come less than a month after Watson Wyatt's UK partners agreed to sell out to the US-listed parent company, Watson Wyatt & Co, which owns 20 per cent of the UK business. The US group has excluded the potential liabilities from the lawsuits from its acquisition, and any claims will have to be met by the UK partners' liability insurance.
Independent Insurance, under the ebullient Michael Bright as chief executive, collapsed in 2001 after revealing a huge shortfall in the reserves it had for paying claims. PwC claims Watson Wyatt should have spotted the shortfall when it reviewed Independent's reserves in the years from 1997 to 2000. It plans to lodge financial details of the claim, which will run into tens of millions of pounds, later this month.
A spokesman for Watson Wyatt said: "We are confident that the work we undertook for Independent was of an appropriate standard, properly carried out on the basis of the information with which we were provided at the time, and that we conducted ourselves appropriately throughout."
He said the partnership would also fight KPMG's separate suit, which alleges that Watson Wyatt failed to issue warnings regarding reinsurance arrangements entered into by Coteworth syndicates.
Cotesworth, one of the oldest Lloyd's insurers, folded in 2001 after its Australian parent, HIH, went into liquidation. A Royal Commission in Australia found Cotesworth's deficit of A$1.07bn (£440m) was the biggest single contributor to HIH's collapse.
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