An insurance broker specialising in the solicitors indemnity market went bust after aligning with an insurer that failed, a report has revealed.
According to a statement of administrators’ proposals, filed with Companies House last week, Bar Professions Ltd made a profit of £1.5m in the year ending September 2013, on a turnover of over £5m.
But within 13 months the company was in administration after a series of difficulties at its partner insurance firms.
The broker had secured a contract in 2011 to provide business for a specialist PI insurer which left the market after becoming insolvent.
A replacement insurer was found, but within nine months questions had also been raised about this new entrant, and it was agreed to transfer policies to a German insurer.
When that option failed to materialise, Bar Professions lost its entire book of solicitors’ indemnity insurance business, resulting in most staff being made redundant in December last year.
The statement added: ‘The director began making enquiries into selling the elements of the business that remained, however it became apparent that the reputational damage caused by the above events deterred any potentially interested parties from making an offer.’
In the weeks leading up to the administrators’ appointment, the report went on, the company lost a long-standing relationship with a brokers’ network, resulting in around 40% of the remaining business falling away.
Rescue and recovery specialist Begbies Traynor was appointed as administrator on 22 October.
Two remaining employees, who had set up a new insurance broking company Aptus Brokers Limited, bought the remaining business and assets for £25,000 under a pre-pack sale. A further £17,000 would be payable within 10 months.
Claims of unsecured creditors have been estimated at £679,000, of which £263,000 is owned to HM Revenue & Customs and £400,000 is due to a former consultant of the company, named in the statement as Dafydd Griffiths. One preferential creditor is owed a further £36,000.
With both preferential and unsecured creditors, the administrators state that there are insufficient funds to enable a dividend to be repaid. It is also considered the company will have insufficient property to enable a distribution to be made to unsecured creditors.
The administrators have proposed that the company be automatically dissolved after their appointment ceases.
International firm Holman Fenwick Willan has received £8,700 for preparing administration documents and for legal assistance in seeking to obtain a refund of a rent deposit.
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