Analysis: The Arron Banks show

Arron Banks Brightside

No stranger to controversy, Arron Banks is back in the news and under the spotlight with allegations and appeals

Since he burst onto the broking scene, Eldon Insurance owner and Brightside co-founder Arron Banks has been no stranger to controversy.

In recent years Banks, who has claimed to have fallen out with “everyone from NASA to Posh Spice”, has remained in the public eye for his role in the Brexit referendum.

However, while Banks-owned Eldon’s £250m float has not yet materialised, allegations from an Information Commissioner’s Office investigation and multiple media investigations into the source of his wealth have instead dragged the insurance magnate back into the market spotlight.

In November, the regulator revealed its intentions to fine Eldon £60,000 after an investigation found customers of brand Go Skippy allegedly received a Leave.EU political newsletter, while Leave.EU subscribers were said to have received Go Skippy marketing. The campaign group, which is registered at the same address as the broker and led by CEO Liz Bilney, is expected to face fines of £60,000 and £15,000 for the electronic marketing breaches.

Banks has disputed the findings and has lodged an appeal.

However, Eldon itself also faces an ICO audit under data protection law. “Fines could be significantly higher if we find misdeeds,” information commissioner Elizabeth Denham told a select committee.

Businesses with ties to Eldon have been urged to reconsider the relationship by campaigners. Debenhams has borne the brunt of this criticism; the broker has a contract to sell motor insurance using the retailer’s brand.

The retailer and the panel of insurance companies linked with Eldon’s capacity provision have remained guarded on the future of their their relationship with Eldon.

Both Allianz and Ageas have confirmed that they are not at this time aware of any issues affecting their customers, while a number of other panel insurers listed in the broker’s terms of business declined to comment on the specific relationship.

An Ageas spokesperson said: “At this time we do not believe that any Ageas customers were caught-up in the alleged data sharing between Go Skippy/Eldon and Leave.EU. Once published, we will consider the Information Commissioners Office’s review of Eldon and their processes before deciding on our next steps.”

An Allianz spokesman responded: “We take the use and protection of our customers’ personal data very seriously and we are not aware of any issues.”

Aviva, Axa, Markerstudy, Calpe, Covea, LV, Hannover SE, Great Lakes and Sabre declined to comment on the specific relationship when contacted. Canopius, Brit, Octane, Walsingham, Watford Insurance, Alwyn, KGM, RAC, AmTrust, Collingwood, Zurich, Legal & General, Midas & Crown, Just Insurance Agents, NIG and Axa have been approached for comment. China Taiping was not immediately available to comment.

A spokesman for Davies-owned Ambant said: “Neither Davies nor Ambant have any commercial relationship with Eldon or Go Skippy. Ambant ceased to have a relationship with Hawkwell over three years ago”.

Arron Banks did not respond directly to a request for comment on why these firms were still listed on its terms of business. Instead, Leave.EU CEO Bilney answered on behalf of Banks and Eldon. She said: “Ambant are/were the insurer behind Hawkwell. They are now no longer trading.”

Despite the breach and ongoing audit, it is understood that the ICO is not currently working with insurers on the matter.

Notice of Intent

Eldon and Leave.EU spokesman Andy Wigmore, who was listed as a Southern Rock director in 2015, said: “The Notice of Intent issued by ICO to Eldon relates to emails sent by Leave.EU, to its own subscribers, which included a banner advertisement from Go Skippy. The individuals which received these emails had given their consent to receiving emails from Leave.EU. However, while Leave.EU’s published privacy policy stated that they may send their subscribers advertising from third parties, they did not specifically name Eldon/Go Skippy as the third parties.”

“The ICO is claiming that Eldon instigated the sending of these emails (acknowledging that Eldon didn’t send them itself) with the Go Skippy banner adverts, even though the emails would have been sent with or without the advertising being included. We will be disputing that any contravention of regulation 22 of PECR was committed by Eldon. It should be noted that no complaints at all were received in relation to the emails sent or the Go Skippy banner ads included in them. The ICO recognises that any alleged breach was not deliberate.”

Further developments

Banks is also facing a National Crime Agency investigation into whether he was the true provider of an £8m political donation to pro-Brexit campaign group Leave.EU, via his company Better for the Country, for campaigning during the referendum.

Bob Posner, Electoral Commission director of political finance and regulation and legal counsel, said: “The financial transactions we have investigated include companies incorporated in Gibraltar and the Isle of Man. These jurisdictions are beyond the reach of the Electoral Commission for the purpose of obtaining information for use in criminal investigations or proceedings.”

When Banks appeared on the BBC’s Andrew Marr show, prompting “thousands” of people to raise concerns to the broadcaster, he insisted: “The money came from Rock Services, which was a UK limited company.”

Rock Services reported profits of just £47,000 for 2017, while turnover was £50.2m and administrative expenses £50.16m. Appearing in front of a select committee, Banks had previously described Rock Services as a “treasury facility around the group [of companies]”. According to testimony he gave to a select committee, its function is to settle salaries and pay suppliers and reinsurers.

Rock Holdings, an Isle of Man firm, is the holding company for Rock Services. The Eldon-owner has had connections to further offshore companies; at least two in Malta and one in the British Virgin Islands, data collected from the Panama Papers has shown.

The investigation into the £8m was in addition to an earlier announcement that the commission intended to fine Leave.EU £70,000, as it had “reasonable grounds to suspect that the responsible person for Leave.EU either knowingly or recklessly signed a false declaration accompanying the Leave.EU referendum spending return”.

Banks appealed against these findings on the morning of Tuesday 12 June, the day of his appearance in front of the select committee. Banks was therefore unable to comment on the ongoing matter.

As well as attempting to dig in to his insurance operations, the committee queried him on alleged links to controversial data firm Cambridge Analytica. Whistleblower Brittany Kaiser has alleged that insurance data could have been used for Leave.EU’s campaigning.

Banks denied having had a professional relationship with the company or using insurance data for political purposes, blasting Cambridge Analytica as “a bit of a fraud” and an “ad agency that was overplaying its hand”.

Banks the broker

Banks began his career at Lloyd’s, where in his mid-twenties he worked for what is now MS Amlin, dealing in oil rig insurance, he has previously told Post. The insurer has been unable to verify this, as its records do not go back that far.

In 2005 he headed to Bristol to co-found what would become Brightside.

Brightside rapidly became a broking success story, despite difficult conditions in the motor market. Its IPO in 2006 valued it at £14m. In 2008 it initiated a reverse takeover of Banks’ Group Direct company, which had reported revenues of £23.3m and an Ebitda of £4.4m.

In a 2010 interview the outspoken director did not hold back in sharing his distaste for the consolidator model. He said: “If you go and buy 50 businesses like Towergate has done, you might as well be trying to herd cats into a room and trying to keep them in one place — it is impossible”.

At the time, Banks was already displaying a keen interest in using disruptive technology to get ahead and monitor customer behaviour. He spoke of a program called Red Eye, used to check cursor movement on online applications for fraud detection purposes

He also addressed rumours that Brightside had considered buying fellow Bristol-based broker Jelf, now owned by Marsh. These were not well-received. Rather, then-Jelf CEO Alex Alway said at the time: “The most damning indictment of the gossip was it never moved the share price one bit. In fact it went down.”

Speaking in 2018, Alway asserted he does not recall sale discussions taking place with Brightside.

Banks stepped away from the Brightside CEO role in 2012, with plans to de-list the company from the AIM.

He told Post at the time: “Ten years ago we started with a desk and two telephones, and now we are one of the largest brokers and getting on to £90m revenue and still growing at 30% a year.

“It is a question of ambition to take the business to greater heights. It is harder sometimes with a listed business. You could relist when you have built it into a bigger business.”

Business structures

Companies listed as having a commercial relationship – or supplying capacity for – Eldon through Go Skippy or Debenhams in the broker’s terms of business

Ageas3, Allianz3, Axa, Aviva, Canopius1, Covea, Hawkwell2, Ambant1, Brit, LV, Octane, Hannover SE, Markerstudy, Sabre, Southern Rock, Walsingham, Calpe, Watford Insurance, Alwyn, KGM, RAC, Great Lakes, AmT rust, Inter Partner Assistance, UK General1, Collingwood, NIG, UK Insurance, Zurich, China Taiping, Legal & General, Midas & Crown, Just Insurance Agents

1  Denies having had a commercial relationship for 1+ years
2  No longer trading
3  Claims to have no evidence at this time of its customers being affected

Company structure (insurance arm; all Gibraltar except Rock Holdings, Isle of Man):
rock holdings company structure
Company structure (broking arm):
rock holdings company structure 2

 

A falling out

The relationship with Brightside ultimately turned sour. Banks cashed out his remaining shares in 2013, freeing up Markerstudy to take a 9% stake, having left the business to set up Goskippy.

It was by all accounts an acrimonious falling out. An email allegedly written by Banks and published by The Independent read: “Well, it’s been 15 months since my mates stabbed me in the chest.”

Banks was swiftly followed out the door by several senior staff members from Brightside. Southern Rock marketing director Jaimie Hanley said in 2013: “People get a bit grumpy but we don’t turn up with a van and throw a sack over somebody’s head and throw them in the back. These people have known Arron for a number of years, he’s a good guy to work for and it’s difficult to turn him down if he turns up and asks you to come and join him again.”

Eldon would go on to clinch the Debenhams contract from Brightside in late 2014.

Acrimony ultimately turned into legal action, although claims between Banks’ insurer and Brightside were ultimately settled out of court. These included an intellectual property dispute, a “money claim” and a row over profit-splitting of company Panacea Finance.

Later court documents, seen by Post, involving Brightside and other parties, suggest Brightside ended up paying Southern Rock at least £1.5m after the fall out.

The documents read: “Pursuant [8 May 2015] to the settlement agreement, the claimants agreed to pay the sum of £1.5m to Southern Rock and to waive the over £2m owed by Southern Rock to them in relation to the Panacea claim. The claimants agreed to pay the sum of £1.5m to Southern Rock and to waive the over £2m owed by Southern Rock.”

Brightside and its current owner, private equity group Anacap, is still embroiled in a three-year lawsuit against ex-auditor Baker Tilly, now RSM UK, and former CEO Paul Chase-Gardener. It has alleged in the commercial court that the auditor’s “negligence” left it with a £6.5m deficit that was only discovered in 2015.

It is also fighting a £2m legal battle against its professional indemnity insurers and broker, clashing over two claims with reserves totalling more than £5m, following legal wrangles with Banks at Southern Rock. Brightside, which posted pre-tax losses of £10.2m for 2017, has declined to comment on the ongoing suits.

Banks’ directorship at Eldon ended in late 2013. Half a year later, his Southern Rock directorship was also cut short, when he stepped down alongside two other directors, year end accounts show.

Southern Rock

The insurer posted a £5.4m loss for 2014; a pendulum swing from the £8.7m profit enjoyed in 2013, while its combined operating ratio shot up to 104%. Southern Rock’s accounts blamed “higher than anticipated projected cost of bodily injury claims on a part of the business written during a period of growth”.

Banks said it was “not correct” that the GFSC had found the company had been trading insolvently for three years, as suggested by MPs during his select committee hearing, but that a restoration plan had been put in place with the regulator.

“If it was insolvent, it wouldn’t be allowed to trade, would it?” he responded.

To broach the capital problem, Eldon parent company ICS Risk Solutions provided a loan to Southern Rock at the time. This consisted of Eldon selling some of its forward policy income back to Southern Rock. This is according to Banks’ testimony in front of the committee.
Southern Rock’s latest available accounts show “other income” of £73.2m in 2015.

“There wasn’t £77m that just went bosh into a bucket. It was a structured deal over four years, where the income was paid in month by month in accordance with the deal we did with the regulator,” Banks told the committee.

Later loss portfolio transfer arrangements, co-insurance and reinsurance effectively reduced Southern Rock’s exposure to claims from 2012 to 2016 to just 3% of written premium, according to its 2016 Solvency report.

Banks has not taken up a directorship at an insurance company since exiting Southern Rock. In addition to insurance ventures, he owns a UK-based jewellers and has interests in diamond mining. Banks’ Eldon made a profit of £1.8m in 2017, off the back of a £21,000 loss the previous year. It currently employs around 450 people in the UK. In 2017, he launched MGA Somerset Bridge, of which Bilney is currently listed as a director on its UK accounts. The MGA is controlled by a company in Bermuda, of which Banks is specified as the ultimate controlling party.

The investigations into his companies’ activities are ongoing.

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