Insurance giants Santam, Hollard, Old Mutual, and Guardrisk have, between them, lost R944m in a saga that has resulted in Charl Cilliers and Diane Burns, directors of Insure Group Managers, being debarred as financial service providers. A Scorpio report on the Daily Maverick site notes Cilliers and Burns deny all culpability for what happened. Insure Group Managers, an intermediary which collected insurance premiums from customers, which it was meant to pay over to the insurance companies, instead secretly invested that cash in its own very illiquid, high-risk, and ultimately loss-making assets.
These ‘investments’ included a mining rehabilitation plant in Gauteng, a deep-water port in Mozambique, and a property portfolio in KZN. It also used the cash to build its own business, by financing brokers and intermediaries. But not only did not Insure tell the insurers, to whom it was meant to pay the premiums, that it was using their money for a different purpose, its conduct was also unlawful. The regulator, the Financial Sector Conduct Authority (FSCA), describes it as ‘tantamount to a misappropriation of the premiums collected’.
Industry body Financial Intermediaries Association of Southern Africa (FIA) labels this conduct ‘illegal’. Their goal, according to the FSCA, was to make a ‘secret profit’ without the consent or knowledge of about 45 other insurance companies. After Insure’s shoddy investment decisions led to a cash crunch, it was placed under ‘voluntary curatorship’, with Pieter Bezuidenhout appointed as the curator. While Bezuidenhout’s investigation so far indicates no evidence that there was any intention to steal the money, the indication is that Insure’s directors wanted to make larger profits for personal gain by secretly ‘misappropriating’ the premiums before paying them over. The upshot is, the FSCA has debarred both Cilliers and Burns for five years – a decision they both intend to appeal.