LONDON – A leading art insurer withdrew coverageage from the two firms at the centre of an alleged Spanish stamp fraud because of concerns they had grossly overvalued their collections, one of the insurer's executives told Reuters.
Hiscox decided to stop insuring Afinsa and Forum Filatelico in the middle of last year and warned other Lloyd's of London insurers of its concerns, Charles Dupplin, head of Hiscox's fine art division, said on Friday.
The two privately owned Madrid-based companies are at the centre of what could be the biggest fraud in Spanish history.
Nine men, including the chairman and the founder of Afinsa and the chairman of Forum Filatelico, appeared in a Spanish court on Friday accused by public prosecutors of defrauding about 350,000 investors of hundreds of millions of euros by lying to them about the value of their investments in postage stamps. The companies have denied the charges.
Hiscox, one of Europe's leading art insurers, stopped insuring the two firms after Dupplin, himself a stamp collector, spent half a day last year at Forum's offices, where he spoke to staff, including its chairman Francisco Briones, and examined some of the stamps it held, he said.
"We felt that the stamps that we were shown were worth nothing like what they were being sold to their customers for," Dupplin said in a telephone interview.
Hiscox later reported its concerns about the stamp companies' activities to money laundering authorities in Britain, an insurance source told Reuters. Dupplin and Britain's Financial Services Authority declined to comment on that point.
"We had no evidence of wrongdoing on their part. We simply decided they were not the kind of people we wanted to do business with," Dupplin said.
The two companies' combined turnover was 10 times Hiscox's own estimate of what the annual average value for stamp transactions in Spain should be, Dupplin said.
"We did ask widely around the (stamp dealing business) in order to get some trading references for the two companies. The curious thing was that nobody seemed to do any business with them," he added.
The insurance policies, which provided coverage of up to 1 billion euros ($1.3 billion) against theft or damage for stamps in the two firms' vaults, were supplied by a collection of insurers at Lloyd's of London, the world's largest market for specialist insurance risks.
After Dupplin told his fellow Lloyd's insurers about his concerns they too decided to withdraw from insuring Afinsa and Forum Filatelico, he said.