Tenet will wind down its captive insurer, which managed to avoid insolvency, in the coming months amid adviser concerns about run-off cover.
Some advisers have expressed concerns about the run-off insurance provided to appointed representatives of the network in the wake of Tenet’s administration.
The administration was announced at the start of June and resulted in 95 redundancies, and uncertainty for advisers.
When it ceased trading, the 170 advisers who remained appointed representatives of the network had their authorisation revoked immediately.
An administrator's report, uploaded to Companies House on July 22, said the firm was winding down due to “potentially unsuitable defined benefit pension transfer advice”, which it said had previously been provided by some of the group’s appointed representatives.
Insufficient funding to wind down the group meant insolvency was unavoidable.
Over its 30 years trading, the company has had 1,835 former appointed representatives, representing 4,589 advisers.
A review of the company took place in 2022 and it was proposed the business should be wound down in October of that year.
Paragon Insurance Company
Paragon Insurance Company was the group’s captive insurer, set up in 2008, meaning it only wrote business for Tenet and advisers who paid for run-off cover.
The latest document shows as it is a separate legal entity it remains solvent. However it is also expected to wind down in the coming months.
Tenet is expected to receive some money from Paragon when it is wound down and the administrators believe £5.5mn could be released from the Guernsey-based company to benefit creditors.
Speaking to FT Adviser, one adviser, who asked not to be named, was with Tenet for seven years but “jumped ship” a few years ago.
They said: “They would deduct an amount from your professional indemnity insurance to pay for the run-off cover. When I left they said ‘oh we haven’t been paid enough’ and asked me to pay X number of pounds.
“[I suspect] the writing must have been on the wall 12, 18 or even 24 months ago but they were still taking people’s run-off premiums in that time."
FT Adviser approached Tenet's administrators Interpath for comment on Paragon.
When it comes to the insurance position, it is understood Interpath is expected to provide an update to stakeholders, including former advisers with clarification.
The run-off scheme
Tenet members are asked to pay an annual contribution to a lifetime run off scheme, which was launched back in 2013, with Paragon.
It called it a “unique solution” to the problem of continuing liability.
A document, released at this time and seen by FT Adviser, addressed what would happen if Tenet ceased trading after someone had taken out run-off cover.
It said: “If the network were to cease being in existence then clearly there would be no PI policy and no cover for any ex-members.
“However, the majority of the exposure would also have subsided. If a complaint is made against a member firm the network as principal, has the liability and responsibility to investigate and compensate. This is true for current or ex-members.”
