It took more than three years, nearly £1.8 million in fees, and an FCA rule change to sort out one Lloyd's broker's books.
EC3 Brokers Limited was, by all appearances, a solid operation - an FCA-regulated insurance and reinsurance broker registered with Lloyd's of London, with a corporate client base stretching across the Americas, Australia, and New Zealand. It placed policies in construction, live events, and property. Then came 2020, and things started to unravel.
The pandemic led to a reduction in sales. Losses continued into 2021, made worse when key staff left to join a competitor. A restructuring attempt in 2022, with Santander UK involved as secured creditor, was cut short when HMRC presented a winding-up petition. On 25 November 2022, Santander appointed administrators under its qualifying floating charge.
Joint administrators Anthony John Wright and David Paul Hudson walked into a company holding approximately £13 million in client money - premiums in transit, claim payments, and refunds owed to clients around the world. The problem was working out who was owed what.
The company had used three separate Excel spreadsheets over the years to track transactions. A broking software platform, the Global XB Insurance System, was introduced in 2016 but turned out to be, in the court's words, "to some extent unreliable unless corroborated by other records." The oldest spreadsheet could not be reconciled with the system at either an aggregate or client-by-client level. Bulk payments to and from Lloyd's and LIRMA had not been undertaken with care. References were incorrectly allocated. Monies were misallocated.
Under FCA rules - specifically CASS 5, the part of the Client Asset Sourcebook that governs how insurance intermediaries handle client money - those funds sit in a statutory trust. When a firm fails, the money is pooled, and clients share it proportionally, with non-insurer clients ranking ahead of insurers. But dividing the pool fairly requires knowing who is owed what, and the records simply could not answer that question.
The situation was serious enough that the FCA took the unusual step of modifying CASS 5.6.7R specifically for this case. The change allowed the administrators to distribute money based on their best practical reconstruction of the records, rather than precise figures the company could not supply.
In a judgment handed down on April 14, 2026, Chief Insolvency and Companies Court Judge Briggs approved the distribution scheme. It works in two stages: insurers prove their claims first, then non-insurer clients follow. Where the administrators cannot establish whether a risk transfer arrangement existed, the money is presumed to be held for non-insurer clients - a presumption that can be rebutted with evidence. A bar date applies. Balances below £100 are excluded from the notice process. Unclaimed funds go to the Insolvency Service.
The cost of getting to this point: £1,084,949 plus VAT through 27 February 2026, with a further £702,068 plus VAT authorised to finish the distribution. All of it drawn from the client money pool.
For brokers and intermediaries handling client money, the takeaway is straightforward. Your records do not just need to pass a compliance review on a quiet Tuesday. They need to hold up on the worst day your firm will ever have - and if they cannot, your clients are the ones left waiting.
