Based in Gibraltar, the company was appointed a provisional liquidator - John White of Grant Thornton (Gibraltar) - and on 1 August the FSC issued a direction that Lemma cease to be authorised to issue new contracts of insurance.
Brokers and policyholders in the UK were informed by letter on 10 October, with a statement on their website reading:
“Policyholders should be aware that there is a possibility that there will not be sufficient available funds to meet the full amount of any claims.
“Policyholders are therefore advised to contact their broker, intermediary or agent in order to consider whether to seek alternative insurance cover immediately."
The Financial Services Compensation Scheme have since announced their decision in to help customers of Lemma after declaring the firm in default. It is in discussions with Grant Thornton about the recent failure of the firm.
Lemma was an FSA authorised firm, so claims against the company may be protected by FSCS, which protects policyholders UK risks. The firm was regulated in Gibraltar and was operating in the UK under European passport arrangements.
Early indications are the failure will affect about 7,000 UK policyholders. It is too early to predict what the implications of the failure might be for the levy. However, the Scheme will probably need to raise a levy to cover the costs.
