Standard Life wins £100m case

Standard Life has won a legal dispute against a group of insurers who refused to pay out on a £100 million claim.

The Commercial Court in London yesterday backed the Edinburgh-based life and pensions group, though the insurers have been allowed to appeal.

The dispute arose over Standard Life’s Pension Sterling Fund, which lost 5 per cent of its value in early 2009 due to its holdings in asset-backed securities, despite being marketed as a “cash” fund. The fund value took a hit following the failure of Lehman Brothers in September 2008.

Standard Life pumped £102m into the fund to protect its 97,000 investors, having decided that many policyholders were “not fully aware of the nature of the fund”, and therefore may not have been able to anticipate such a dramatic drop in a single day.

The group then attempted to claim the bulk of the money back through a professional indemnity policy which was backed by a group of 11 re-insurers based in London and Barbados.

The Financial Services Authority later fined Standard Life £2.45m in December 2010 for “serious systems and controls failings” that resulted in the production of “misleading marketing material” for the fund.

A spokesman for the firm, which is led by chief executive David Nish, admitted that “with hindsight, some of the literature we provided in respect of this fund fell short of our own high standards”.

In a statement yesterday, Standard Life said any money awarded by the court would not be counted in its 2011 results.

But the Scottish firm could claim the cash, worth about a quarter of its operating profits in 2010, this year as any appeal will be likely to be heard in the autumn.

“The ultimate recognition of claim proceeds will depend on the outcome and timing of the appeal,” the statement said.

A lawyer for the insurers, which are led by London-based Ace European Group and Liberty Mutual Insurance Europe, said the firms were “actively considering an appeal”. Both Ace and Liberty Mutual were unavailable for comment.

The insurers include Aspen Insurance UK, Axis Speciality Europe (trading as Axis Speciality London), Catlin Insurance Company UK and Chartis Insurance UK (formerly AIG UK), as well as Timothy Carroll, Philip Foley and John Neal – individuals who are leading various syndicates.

Standard Life shares rose 2.6 per cent to 223.5p.