QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL
B e f o r e :
| THE QUEEN
on the application of
(1) HANNAH BEETY
(2) SABINE VON TOERNE
(3) SUSAN SPENDER
(4) ELEANOR MISKIN-GARSIDE
|- and -
|NURSING AND MIDWIFERY COUNCIL
(1) INDEPENDENT MIDWIVES UK
(2) LUCINA LIMITED
Timothy Dutton CBE QC and Chloe Carpenter (instructed by CMS Camerson McKenna Nabarro Olswang LLP) for the Defendant
The Interested Parties were not represented
Hearing dates: 18 & 19 October and 15 November 2017
Crown Copyright ©
Mrs Justice Lang:
The Finlay Scott report
The Flaxman report
2012 – NHSLA "Ten Years of Maternity Claims"
"Maternity claims account for the highest value, and the second highest number, of claims under the Clinical Negligence Scheme for Trusts (CNST), a risk pooling scheme for NHS organisations managed by the NHSLA. By the end of March 2011, more than 13,000 obstetrics and gynaecology claims, with a total estimated value in excess of £5.2 billion, had been notified to the NHSLA under the CNST since it started in 1995…."
i) Cerebral palsy: £1,263,581,324; 40.52%.
ii) CTG interpretation: £466,393,771; 14.95%.
iii) Management of labour: £424,039,651; 13.60%.
iv) Caesarean section: £216,167,223; 6.93%.
v) Antenatal investigations: £149,986,770; 4.81%.
vi) Antenatal care: £144,811,665; 4.64%.
vii) Shoulder dystocia: £103,520,832; 3.32%.
viii) Uterine rupture: £103,264,627; 3.31%
ix) Operative vaginal delivery: £93,659,223; 3.00%
x) Perineal trauma: £31,202,836; 1.00%
"Alternative solutions for independent midwives to get affordable indemnity insurance are available, such as setting up social enterprises. These mean that no independent midwife will be left unable to work. Independent midwives in some areas of the country have already formed organisations such as social enterprises and small and medium sized businesses to buy the insurance. These organisations, such as Neighbourhood Midwives … and One to One Midwives … mean midwives can have their independence and offer mothers and babies safe, quality care which is covered by compensation should anything go wrong."
NMC Guidance 2014
"Appropriate cover is an indemnity arrangement which is appropriate to your role and scope of practice and its risks. The cover must be intended to be sufficient to meet an award of damages if a successful claim is made against you.
Determining what appropriate cover is for you will be influenced by:
- what your job involves and where you work;
- who you provide care to and the level of care you provide;
- the risks involved with your practice.
We are unable to advise you about the level of cover that you need. We consider that you are in the best position to determine, with your indemnity provider, what level of cover is appropriate for your practice. You should seek advice as appropriate from your professional body, trade union or insurer to inform your decision….
If you have made your own professional indemnity arrangements, you should make sure that you understand how your cover will work. For example, most indemnity insurance will be offered on a 'claims-made' basis, This means that the cover would need to be in place both when the event causing the claim occurred and when the claim was made (which may be years later). This also includes understanding any requirements to disclose relevant information to your indemnity provider which would influence a provider's decision whether or not to offer cover."
Lucina scheme rules and policy
"4. Benefits under the scheme
4.1 Discretion of the Board
All benefits available to Members under the scheme shall be given in the sole and absolute discretion of the Board whose decision in these matters shall be final and binding. These Rules shall not, under any circumstances, be construed to imply that any contract of insurance exists between the Member and the Board or that the benefits of the Scheme are not discretionary. Subject to the total funds available to the Scheme and the discretion of the Board, [and with the exception of any Gap benefit claim] there shall be no limit to the financial benefits available under the Scheme in respect of any one claim.
4.2 Coverage of Scheme
The liabilities covered by the scheme are any liabilities in tort owed by a Member to a third party in respect of or consequent upon personal injury or loss arising out of or in connection with any breach, after the Membership date, of a duty of care owed by that Member to any client or their baby with whom they have had a Contract for care and treatment, in consequence of any act or omission to act on the part of the Member in connection with any part of their Midwifery Practice.
4.4 Claims Made Basis
Subject to the overriding discretion of the Board benefits (other than GAP benefits which shall be provided in such manner and in such circumstances as the Board shall determine) shall be provided on a Claims incurred basis.
This means that in order to receive benefits in respect of a Claim the Member must have been a Member at the time of the incident giving rise to the Claim occurred and be a Member or Past Member at the time the Claim is made and have paid all contributions due whether in respect of the Contract under which the Claim arose or otherwise.
4.5 Legal fees
The Board may also at its absolute discretion provide funds to make payments for Legal fees.
4.6 Past Member Benefits
The Board may exercise its discretion in favour of a Past Member or their estate but only in respect of Claims arising from events which occurred during the period in which they were a Member of the Scheme and which arise in respect of a Contract entered into when they were a Member of the Scheme.
This benefit will only be available where prior to leaving the scheme the leaving Member has notified the Board in writing in the approved format that they wish to be considered for this benefit and have paid any required contribution.
4.8 "Gap" Benefits
The Board may exercise its discretion in favour of a Member or past Member where a Claim arises in respect of a Contract entered into before commencement of this scheme and which but for the timing of the Claim would have been eligible for indemnification under the Member's Prior Insurance Arrangements. [Benefits under this section shall be limited to £400,000 per Claim inclusive of Legal fees].
4.10 Limits to Benefits
The Board may refuse to provide financial benefits to any Member if they are in breach of these Rules or the rules of membership of IMUK including any subsidiary rules as laid out in The IMUK Handbook (the IMUK rules).
In exercising its discretion the Board will also consider the extent to which the Member complied with IMUK clinical risk management guidance in place at the time of the incident and the extent to which in the Board's opinion any non-compliance with that guidance may have contributed to the alleged negligence.
6. Member's contributions
6.1 Funding of the Scheme
The Scheme shall be funded by contributions made by the Members. The level of contributions shall be determined annually by the Board and shall be in three parts:-
An annual contribution payable on [July 14 2015] and annually thereafter on November 1 in each year starting in 2016.
An additional contribution payable within 7 days of signing each Contract to provide Intrapartum Care.
A single contribution payable immediately prior to leaving the scheme where a Member wishes to be eligible for Past Members benefits …"
i) bookings after 39 weeks gestation or planned breech and twin births or extension of the 8 week post-natal period would only be allowed with prior permission, and additional safety procedures could be required;
ii) members were strongly advised to arrange for a second midwife to be present at all home births;
iii) members had to comply with IMUK rules of membership, including registration with the NMC and compliance with the NMC Code of Conduct; maintaining up to date skills and being aware of current evidence based practice and guidelines.
"… our members' new indemnity arrangements have no financial cap on the level of claims that can be met…
IMUK members are now covered via an indemnity arrangement which is essentially similar to the Clinical Negligence Scheme for Trusts ("CNST") which is administered by the NHSLA and which covers registrants working in the NHS. As you are aware the NMC has approved the CNST arrangements as appropriate.
Like the CNST the new IMUK arrangement is not an insurance based scheme but an "Indemnity arrangement" under s 12(b) of the order. It follows that there is no policy but rather, like the CNST, cover under the rules of the new arrangements are governed by scheme rules…as you will see, like the CNST, cover under the rules of the new arrangement has no cap on the level of award that can be paid out… the scheme under which our members are indemnified is run by a company that is totally independent of IMUK, with a Board of Directors none of whom is an IMUK member and which exercises its powers quite independently of IMUK…"
The email attached a copy of Scheme rules and the rules applicable to the CNST.
"Thank you for your email dated 4 September 2015 and your confirmation that you are urgently seeking the required information. We are concerned that this information is not readily available. For your convenience I repeat the information that [the NMC] have requested in relation to the funding of your indemnity arrangement below:
- The funding arrangements that exist to ensure that there is an adequate pool of funding;
- The extent of the liability of members – are they joint and severally liable or is the scheme underwritten by an insurance policy;
- The current and expected pool of funding for the arrangement; and
- How the indemnity arrangement will pay out, should there be a claim against a member.
As you are aware it is the professional responsibility of nurses and midwives to ensure that they have in place an indemnity arrangement providing appropriate cover for the nature and the risks of their practice. In order for you to have determined that this cover is appropriate, you would need to have access to the above information. Therefore we are not assured that appropriate indemnity arrangements are in place…
We have examined the Companies House documentation of Lucina Ltd, the company that you have stated as providing your indemnity arrangement. We note that you are listed in the certificate of incorporation as providing the guarantee of £1. Having had sight of this, we are extremely troubled that you are neither able to provide information regarding the funding for this indemnity arrangement nor are you able to control the timescales for the provision of this information.
As you have advised that you are unable to provide a date by which you can forward the requested information and given the seriousness and the urgency of this issue, we are writing to the director of Lucina Ltd, Mr Donald Michael Graham, asking for information about the indemnity arrangements…
… we did have concerns about your previous arrangements [with Elite] and those concerns were around the level of cover provided and exclusions…
… In terms of your current arrangements our concern is in relation to the availability of funding to meet liabilities…."
i) The funding arrangements that exist to ensure that there is an adequate pool of funding;
ii) The extent of the liability of members – are they joint and severally liable or is the scheme underwritten by an insurance policy;
iii) The current and expected pool of funding for the arrangements; and
iv) How the indemnity arrangement will pay out, should there be a claim against a member.
"… We have established the Scheme as a discretionary indemnity arrangement and such discretion distinguishes the Scheme from an insurance provider. However, we consider that the standards used by the insurance industry to assess capital strength of firms can provide a useful benchmark against which to test the capital adequacy of the Scheme.
On that basis we have prepared a detailed model against which we have tested the Scheme's capital strength. In developing this model we have sought input from actuaries and have amended the model as necessary in light of their comments. As a result the board considers that this model is an appropriate tool for measuring the capital adequacy of the Scheme.
We have looked at the forthcoming "Solvency 2" requirements for insurance firms in determining the capital requirements of the Scheme. The Solvency 2 regulations set out two measures of capital adequacy for insurers… SCR… [and] … MCR….The Lucina board fully supports the intent of Solvency 2 which is to ensure as far as reasonable practical companies are adequately funded to meet expected liabilities… In light of the nature of clinical negligence claims we have applied a standard that assess the Scheme's ability to respond over a longer period than required by Solvency 2. Further, we have set a level of confidence requirement which is higher than the MCR applying under the Solvency 2 regime as we consider this to be prudent given the long tail nature of clinical negligence claims….
…each member of the IMUK discretionary scheme is liable to make contributions to the scheme as set out in Article 6 of the scheme rules. For the period October 21, 2016 these contributions have been set at the following levels:-
Annual contribution: £1000 (all members of the Scheme)
Intrapartum contribution: £400 (per Intrapartum contract)
Past member benefit: £1500 (for past members of IMUK)
The board has the power to alter these amounts on an annual basis …
… the Scheme's capital position currently exceeds the threshold requirements based on our actuarial models and so there is no insurance policy in place. The Scheme's directors will keep the capital position of the Scheme under careful review and will take such action as is considered necessary to maintain an adequate level of capital…"
"….1. Does Lucina Ltd have any other assets in addition to the contributions listed in section 6.1 of the Scheme rules which could be used to provide the indemnity under the Scheme? If yes, please provide details.
2. Please provide the pro forma financial statement, business plan and full details of the model including any supporting actuarial analysis/ assumptions and data used by Lucina Ltd.
3. Please provide clarification regarding the circumstances or criteria that would be used in determining the discretions of the Board in determining the financial benefits under the Scheme as stated in sections 4.1 and 4.9 of the Scheme rules…
We will also be providing a copy of this request to Don Graham, Director of Lucina, who also agreed to provide any necessary further information…"
"1.1 I have been requested by the Directors of [IMUK] to undertake an independent review of the reasonableness of the methodology and assumptions used to model future maternity claims…
2.1… the purpose of this report is to review the reasonableness of the methodology and assumptions used to model future maternity claims in a spreadsheet produced by IMUK. IMUK is considering establishing a mutual company based in Guernsey ("the Mutual") that will provide a discretionary indemnity for its members…
3.6. Claim rate and Amounts "….The rate of claims appears reasonable based on the data as modified and discussed in Section 3.5 above. The rate of claims is assumed to be very low so any increase could be challenging to manage…"
4.1 "…. There is a risk that the Mutual may not be able to meet all future claim payments in certain scenarios. In the event that a claim is reported that exceeds available assets, the Directors would need to decide whether to restrict the amount eventually settled having regard to their discretionary powers. Such a judgment could only be made at the time. However, there is a potential adverse impact on the Mutual's reputation if any claims cannot be met in full (and potentially an adverse impact on the relevant midwife if cover is insufficient…"
4.3.1. Base Case Scenario… The base case scenario phasing is set at 0.25 for all claim sizes… I am content that this assumption is reasonable. However, it does not allow for the random effect of claims occurring more frequently in certain periods…
4.4.3 Financial assumptions. I have reviewed the membership and subscription assumptions and these appear reasonable. However, I note that although the model allows for new members into IMUK, it does not allow for members leaving. In effect the growth in membership is assumed to be net of leavers. We do not have any data to determine whether this growth rate is reasonable…
5.1.1. Base case scenario
The model shows that under the base case scenario, the Mutual would not hold enough assets to meet liabilities in year 6 (assuming a high claims phasing factor of 0.1)….
5.1.2. Downside 1…. The model shows that under the "Downside 1" scenario the Mutual would not hold enough assets to meet liabilities in year 5 (assuming a high claims phasing factor of 0.1)…
5.1.3 Downside 2…. The model shows that under the "Downside 2" scenario the Mutual would not hold enough assets to meet liabilities in year 6 (assuming a high claims phasing factor of 0.1)…
5.1.4 Risk of Early Reporting and Settlement.
Unless the phasing factor is 0.1, the model does not include the possibility of a large claim being paid (within the above £1m claim bands) before year 19 of the 20 year projection period.
There is a risk that claims are reported and/or settled more quickly than is assumed by the model. In many scenarios, while the model shows that the Mutual would hold enough reserves to pay a claim at the assumed settlement date, there is often insufficient funds to meet the reserves at the reported date, particularly for larger claims.
Under the base case scenario, if a medium or large claim (greater than £750,000 say) were to be reported and settled within the first five years in addition to the claims projected within the model, the Mutual is unlikely to be able to meet its subsequent liabilities in full… The Mutual would remain solvent as the Directors would retain the discretionary power to decline or reduce claims. However, as considered in Section 4.1, there may be adverse reputational impacts should the Mutual not be able to pay a claim in full…
There are scenarios in which claims incurred at an early stage could exceed the resources of the Mutual at that time (even if the model projects that the claim could be met from future cashflow). I recommend that IMUK consider carefully how such a scenario would be managed and investigate whether it would be possible to reinsure or otherwise mitigate such a risk at an affordable cost…."
"1) In addition to the funds that are accumulating from members' contributions, Lucina also holds personal guarantees for £500,000 which it can draw against should the need arise. We are also in the process of putting in place an insurance policy that will give Lucina cover against claims up to £2 million. A proposal has been developed by our brokers and is currently with a number of underwriters for consideration…
In the meantime we attach a 5 year forecast pro-forma income and expenditure account, cash flow statement and balance sheet which are based on the output of the model.
i) Year commencing 1 July 2015: £294,126
ii) Year commencing 1 July 2016: £616,927
iii) Year commencing 1 July 2017: £970,459
iv) Year commencing 1 July 2018: £1,356,499
v) Year commencing 1 July 2019: £1,777,039
Plus undrawn guarantees £500,000.
These figures were based on the assumption that membership would rise by 4 each year (6 new members and 2 members leaving) and that no funds were reserved for claims or paid out.
"…1….Please confirm your current subscription paying membership numbers. Please also confirm that they align with the financial projections for year 1.
2. The Guarantees… please provide information regarding…
- Details of the parties providing the guarantees
- Detailed information of the financial resources available to the guarantors
- Details of the terms and conditions of the guarantee- a copy of any agreement if possible
- Please explain why the guarantees are not recognised in the Lucina Ltd scheme rules…
3. Additional insurance cover. You referred, in your letter of the 17 October, to searching for insurance protection up to a limit of GBP 2 million. Please confirm whether or not this insurance will act as an indemnity to Lucina Ltd and please provide details of the cover, including scope and limits of cover. Please also confirm the amount of the premium and how that will be paid.
4… Please confirm whether the "downside" scenarios [in the model] include catastrophic claims against any member of Lucina. Please also confirm how you would handle a claim that could not be covered by Lucina's financial resources…"
"1. The Financial Projections of Lucina. We confirm that the results of the period July 14, 2015 to 31 October 2015 are broadly in line with our expectations…
2. The Guarantees. We have referred this question to our lawyers for advice as to what information we can provide within our contractual obligations to maintain confidentiality.
3. Additional insurance cover… Discussions are still ongoing with potential underwriters and at the time of writing no commercial terms have been agreed. You will understand that bespoke insurance of this nature can take some time to arrange.
4. Insurance cover in relation to a claim that could not be covered by Lucina's financial resources.
a) Modelling. We confirm that all scenarios modelled, including the downside scenarios, include the possibility of catastrophic awards of damages. We would also remind you that our modelling shows Lucina meeting all awards in full in all scenarios and that the modelling does not include either the Guarantees or the Additional Insurance Cover both of which will therefore provide additional comfort that all awards will be met…
As previously advised, based on the modelling we have undertaken the Lucina board considers that the possibility of an award of damages arising that Lucina would be unable to settle is remote. We are not prepared to enter into speculation as to what actions the board might take in a future hypothetical scenario that all our modelling indicates has a very low probability of arising."
i) As at 31.12.15 Lucina had 73 members. Not all provided intrapartum care. Some provided only ante natal and post natal care. 57 members had paid additional contributions for intrapartum care covering 203 clients.
ii) He had received the necessary consents from the 2 guarantors and had asked them to write to the NMC direct.
iii) The negotiations relating to insurance were ongoing. The insurers he had approached needed to carry out an assessment of the extent of the risks associated with independent midwifery. One offer of cover had been received but as it might not represent good value, other quotes were being sought. However, additional insurance was not needed as Lucina was sufficiently capitalised without it.
iv) Lucina had asked its actuaries to prepare a calculation of the risk capital that Lucina should carry were it an insurance company using the standard model developed by the Prudential Regulatory Authority for this purpose as part of the Solvency II regulatory framework. The drafts received showed that Lucina was comfortably capitalised beyond the statutorily imposed levels that would apply to insurers.
v) In response to the NMC's concern about high value awards in cases of catastrophic injury, he set out in an appendix a "High value claim risk analysis", based on the findings in the NHSLA study. He had concluded that the risk of a successful cerebral palsy claim against independent midwives was considerably less than in the NHS because of their practice of non-intervention. In such cases, NHS practitioners had been found to be negligent in the administration of drugs to induce labour; the use of forceps; or failure to carry out adequate CTG monitoring, but independent midwives did not use these methods. He estimated that the likelihood of Lucina receiving a claim in excess of £1 million was no more than 1 in 50,000 births attended. As the NHS data showed an average settlement period of 8.47 years, Lucina would have the opportunity to increase its capital before paying out any awards.
Miller Insurance Services report
Registrar's provisional decision
52 I consider that "appropriate cover" under an indemnity arrangement means not only that the terms of the cover must be adequate but also that the provider must have access to adequate financial resources to pay the indemnity (damages), not just on paper but also in reality. Otherwise, public protection and public confidence would be jeopardised.
53 Midwifery practice, including attending a woman in childbirth, involves all the risks associated with childbirth (including the small risk that a catastrophic injury including cerebral palsy could occur), and any indemnity arrangement must reflect this.
54 IMUK has analysed that nature and extent of the risk associated with the practice of their members and has accepted that there is a very small risk that IMUK members may incur liabilities for catastrophic claims relating to cerebral palsy and uterine rupture, as well as for less devastating injuries.
55 While the chances of a successful claim for catastrophic injury are low, the cost of meeting such a claim is likely to be very substantial: paragraphs 23-28 above.
56 In light of this, it is important that Lucina can call on substantial resources. The information provided to date does not provide adequate assurance in this regard.
57 Firstly, Lucina's financial projections prepared for the NMC in October 2015 are unsatisfactory in several respects.
57.1 They assume growth in membership (and therefore financial growth) until 2019, apparently without any proper explanation and without allowing for the possibility of departures.
57.2 They explicitly assume that nothing will be paid out to cover claims over the entire five year period in respect of any of its members. This seems unduly optimistic and raises unanswered questions about what protection would be provided to IMUK members in the event of an unexpected substantial claim, which could arise at any time.
57.3 They rely on guarantees, said to be worth £500,000, without information about the identity of the guarantors, their financial strength or the terms of the guarantees, making it impossible to assess their value.
58 Secondly, even on the basis of Lucina's own financial projections, which include the guarantees, the scheme will not have sufficient resources to meet the average cost of a single catastrophic claim for cerebral palsy until July 2019.
59 Thirdly, the commentary provided by Lucina's own insurance expert, BWCI, suggests that the scheme is unlikely to hold enough assets fully to meet liabilities that may be incurred by its members in years 5 and/or 6, and makes a positive recommendation for IMUK to investigate whether it would be possible to reinsure or otherwise mitigate such a risk at an affordable cost.
60 Finally, Lucina itself has said it is in the process of putting in place an insurance policy that will provide the scheme with additional cover to meet negligence claims for up to £2 million, but so far the NMC has not had any confirmation that this has actually been done.
61 In addition, there is no assurance that cover will be maintained after departure from the scheme.
62 For these reasons, I have made a provisional decision based upon all the evidence available to me, that the Lucina scheme does not provide appropriate cover for IMUK midwives whose practice includes attending women in childbirth.
63 I have also provisionally decided to treat this as a registration issue rather that an FTP (misconduct) matter.
64 I emphasise that none of this has any immediate or inevitable effect on the right of IMUK midwives to practise, and I have not yet made any decision about the registration of any individual midwives. If my final decision turns out to be that the Lucina scheme is appropriate, there will be no impact on registration.
65 I will be sending this provisional decision to IMUK to give it an opportunity to respond to my concerns within 28 days, and provide the necessary assurance that the scheme provides appropriate cover. I will then proceed to make a final decision. Given its potential significance, I will also be sending a copy of this provisional decision to all current IMUK members, who are also welcome to comment within the same timeframe. They might, for example, wish to make specific points about the scope and characteristics of their individual practices/cover."
i) The Registrar had not properly considered or taken into account the evidence provided from Mr Graham and BWCI. BWCI's calculations based on the Solvency II model showed that Lucina was adequately capitalised and the Miller report stated that analysis drawn on Solvency II guidelines would be a reasonable benchmark to use.
ii) The instructions given to those preparing the Miller report were insufficient, and the report was incomplete.
iii) The extended definition of "attendance" in rule 2 of the Nursing and Midwifery Council (Midwives) Rules 2012 did not apply for the purposes of indemnity provision in article 12A of the NMC Order.
iv) The Registrar failed to consider properly the specific nature of independent midwifery, as opposed to midwifery in general, and therefore did not conduct a sufficient investigation into the nature and extent of the risks of practice as an independent midwife.
v) The data in the NHSLA study covered all claims against member health trusts and did not distinguish between negligence on the part of midwives, and other health professionals. Therefore using the data without adjustment gave a wholly misleading view.
vi) The negligence that caused the cerebral palsy in the case of Robshaw was misuse of drugs to induce or augment labour combined with a failure properly to monitor the effects of those drugs. A Swedish research project found that in 86% of cases where negligence of a midwife was found, it arose out of misuse of such drugs coupled with a failure to monitor their effects. Independent midwives do not use such drugs.
vii) The length of time typically taken for complex high value claims to be settled, and the use of periodical payments, reduced the likelihood of Lucina being faced with a substantial cash settlement during its early years.
viii) The NHSLA had recently reduced the premiums of One to One Midwives, an independent provider of midwifery led services that operated a continuity of care model, on the basis that the risks associated with its work were substantially lower than in the NHS.
ix) No indemnity provider could hold sufficient financial resources to meet all possible claims that might arise. Indemnifiers operate on the basis that they hold sufficient assets to cover the awards that appear likely to arise based on statistical analysis. Even though Lucina was not subject to the Solvency II regime, it had adopted the Solvency II risk limits as a benchmark, and satisfied it.
x) The modelling carried out for Lucina showed all claims being paid in full for all scenarios (including catastrophic claims) without the need for guarantees or additional insurance cover.
xi) There had been 5 claims made against IMUK members from 1994 to date, and the combined settlement figure was expected to be less than £700,000, at worst.
xii) Details of one guarantor, Mr Graham, had been provided. The other person who had agreed to provide a guarantee declined to do so, following the NMC's demand for personal financial information.
xiii) "We would also remind you that Lucina advised you in the letter of 18 February 2016 that they had received a proposal for a layer of insurance but that, given the small reduction in the overall risk profile of the company that the layer would have provided, they concluded that the commercial terms offered were not sufficiently attractive. They also advised you that they remain, via their broker, in contact with the insurance market and should a more attractive proposal emerge they would consider it. However, they do not consider that obtaining such an insurance layer is essential and …neither the detailed modelling nor the Solvency II calculations performed by their actuaries assume that any such policy is in place."
xiv) Overall, the decision was unreasonable and the manner in which the inquiry had been conducted was inappropriate. The evidence had not been properly considered or taken into account.
xv) The Registrar did not have jurisdiction to determine whether cover was appropriate; that was a matter for each registrant to assess, as stated in the NMC guidance issued in 2014. However, if the NMC was to be the arbiter of what constituted an appropriate level of financial resources then it had to provide clear and objective guidance on how such a figure is to be calculated.
Meeting of 3 November 2016
"… most insurers have midwifery as a big "No" on their registers so even when we find a willing underwriter we then have to delve into their reinsurance arrangements….. the recent withdrawal of a potential but substantial claim has improved the claims experience considerably… We are continuing with our strategy of approaching only a couple of insurers at a time. One insurer … has shown renewed interest…I have suggested that they might like to write a line rather than 100% of the risk if this provides them with a greater degree of comfort…"
21. In respect of claims data, I have identified a number of issues with how the data has been used within the Lucina Model. As such the Lucina Model does not, in my opinion, provide a reasonable or reliable basis to assess the likely financial impact of claims that may be made against members of IMUK. Accordingly I do not believe that it would be appropriate for the Registrar to rely on the outputs from the Lucina Model when considering whether the indemnity arrangement is appropriate having regard to the nature and extent of the risks facing IMUK members.
22. In respect of the assumptions and sensitivity tests used within the Lucina Model and the Lucina Monte Carlo Simulation Model, the results do not, in my opinion, provide a reasonable or reliable basis to assess the likely or variable financial impact of claims that may be made against members of IMUK. This reinforces my opinion that I do not believe that it would be appropriate for the Registrar to rely on the outputs from the Lucina Model when considering whether the indemnity arrangement is appropriate having regard to the nature and extent of the risks facing IMUK members.
23. The Lucina Scheme is a discretionary arrangement and as such is not classified as an insurance company. This means that it is not required to meet the regulatory requirements such as Solvency II that those companies face. However Solvency II would provide a sound and rational basis by which the risks inherent within the Lucina Scheme can be assessed and can be used to consider the financial resources that may be needed to support those risks. Without such an analysis it is difficult to see how Lucina can reasonably consider the extent to which the Lucina Scheme members provides of IMUK with appropriate cover against liabilities which may be incurred.
24. I have reviewed the evidence presented by Lucina that they meet the various requirements of Solvency II. Whilst some aspects have been met, for example by meeting the Solvency Capital Requirement ("SCR") as set out in the BWCI reports (but only from 2017), this is merely one aspect of the regime. Further requirements exist to ensure that firms capture adequately the nature and extent of the risks within their business. These further requirements are:
i. Ensuring the firm has a minimum level of capital in the business (the Minimum Capital Requirement ("MCR");
ii. to test the appropriateness of the methodology used to calculate the SCR for the specific characteristics of that business;
iii. undertake additional scenario tests, as part of its risk management framework, to test what situations would lead to the failure of the business (a so called "reverse stress test"); and
iv. firms to accrue for claims as they are incurred rather than as they need to be settled.
25. I have not seen any evidence that Lucina have considered these additional matters in any part of their risk management framework or process.
26. To gain further insight into the risks underlying the Lucina Scheme I have tested Lucina's assertion that they meet the 99½% confidence level test by reference to the likelihood of a claim being made over the next 12 months. I estimate that, using Lucina's own estimate of the risk factors attaching to a Cerebral Palsy claim for example (and I have noted in paragraph 58 why I believe these to be underestimates) then there is approximately a 1% chance (1 in 100) that a claim might arise over the next 12 months which is likely to cost around £6.09m to settle. Based on the evidence presented in Lucina's financial projection model, Lucina's assets are expected to be around £3.4m after 8 years which is well short of the possible £6.09m settlement cost. As such I conclude that the Lucina Scheme fails to satisfy the 99½% confidence level test."
The Registrar's decision
54 Having considered all of the information carefully, I have concluded that Lucina does not have available to it sufficient financial resource to meet its liabilities, having regard to the nature and extent of the risks. This was a conclusion which I had reached previously on a provisional basis on 4 August 2016 on the information available to me at the time. Since that date, despite extensive representations from Lucina and IMUK, I have not received the assurance I needed to conclude that the Lucina scheme provides appropriate cover to IMUK members having regard to the nature and extent of the risks.
55 I note that:
55.1 Lucina's financial projections have not significantly altered from those which were sent to the NMC in 2015;
55.2 The "undrawn guarantees" which are part of its financial assets are lower than I had assumed at the time of my provisional decision. They amount to £250,000 and not £500,000;
55.3 It has not secured any additional financial assurance by way of either additional capital funding or re-insurance.
56 I note further that:
56.1 As IMUK and Lucina agree, IMUK midwifery practice involves all of the risks associated with childbirth, including the small risk that a catastrophic injury such as cerebral palsy could occur;
56.2 Such a claim will if proved prompt a very high award of damages; the average being around £2.2 million, whilst the highest UK award for a maternity-related cerebral palsy claim so far is £14.6 million (James Robshaw v United Lincolnshire Hospitals NHS Trust  EWHC 923 (QB) 1 April 2015);
56.3 Since 2003 IMUK has been notified of four smaller personal injury claims, and on behalf of IMUK members three such claims have settled or are in the process of being settled, at a total cost of around £700,000;
56.4 Although IMUK and Lucina have asserted that Lucina has a 99.5% level of assurance that their risks will be covered, this is not a view which is shared by Mr Critchlow, an independent actuary with significant experience in dealing with smaller insurers, who has examined the detailed information provided by Lucina. Using Lucina's own estimate of the risk factors involved, their own estimate that IMUK members perform approximately 630 births per year, and the evidence presented in their own financial projection model, Mr Critchlow has reasonably stated that the chance of a cerebral palsy claim over a 12 month period, is approximately 1%.
56.5 Mr Critchlow has calculated that if a cerebral palsy claim were made over a 12 month period, assuming 630 births a year it would have a cost of £6.09 million;
56.6 Lucina's own financial projections, which have not significantly altered from those which were sent to the NMC in 2015, show that their funds over an eight year period are likely to be no more that £3.4 million;
56.7 Lucina's own actuaries, BWCI, have commented that the Lucina scheme is unlikely to hold enough assets fully to meet liabilities which may be incurred by its members in years 5 and 6;
56.8 It is evident from the transcript of the meeting on 3 November 2016 and information provided by Lucina, that Lucina has investigated the possibility of re-insurance, but has decided that it would not be prepared to pay the financial premiums that would be required to obtain an appropriate level of cover.
Deferment of my decision
57 I have carefully considered IMUK and Lucina's request that I defer my decision as to whether the Lucina scheme provides appropriate cover for IMUK midwives. I have concluded that it would not be appropriate for me to defer my decision, for the following reasons:
57.1 The NMC has had concerns about the appropriateness of the indemnity cover provided by IMUK to its members, since July 2014. The investigation into the appropriateness of the cover provided by the Lucina scheme dates from mid-2015;
57.2 As I have noted above, it is for the individual registrant to satisfy me, when asked to do so, that an appropriate level of cover is in place, and justify their decision as to the scope and level of that cover;
57.3 I consider that IMUK, acting on behalf of its members and Lucina have now been afforded a full opportunity to explain how they consider that the Lucina scheme provides cover against liabilities which may be incurred in practice as an independent midwife, having regard to the nature and extent of the risks. They have provided detailed information in relation to Lucina's indemnity model, and have sought to assert that despite its low reserves, Lucina will be able to meet any claims successfully brought against IMUK member. However, based on Lucina's own financial and risk assumptions, and using standard statistical techniques, an independent insurance expert, Mr Critchlow of OAC, has stated that he does not consider that Lucina's assertion that it meets an appropriate level of assurance that their risks will be covered can be relied upon;
57.4 I do not consider that the conclusions I have reached above, namely that Lucina does not have sufficient financial resource to cover its liabilities having regard to the nature and extent of the risks, are likely to materially alter by the provision of further actuarial material. The point remains that, if IMUK were to receive a high value claim (such as a cerebral palsy claim) tomorrow at average cost, then using Lucina's own assumptions regarding the claims settlement period, asset growth and claims inflation, they would have insufficient resources to meet the claim at the point it became due for payment.
58 In my opinion, the NMC has conducted a thorough investigation and followed a procedurally fair process in investigating its concerns with regard to indemnity cover provided by IMUK for its members. These are concerns which the NMC has had for some considerable time. In my provisional decision of 4 August 2016, I expressed the provisional view that, on the information before me, I did not consider that the cover provided by the Lucina scheme was appropriate. Despite the information provided by IMUK and Lucina since that date, I remain of that view. Moreover, the debate between Lucina and Mr Critchlow principally concerns modelling and predictions as to risk. These is no real dispute as to what assets Lucina currently has or is likely to have. Reduced to essentials it is common ground that Lucina has currently a low asset base and has not strengthened its position with guarantees beyond one of £250,000, nor does it have insurance or re-insurance. My concern that Lucina has insufficient resources so as to satisfy me that appropriate cover is in place is founded upon these fundamentals and the matters set out in paragraphs 54-56 as I am not satisfied that, if a claim for catastrophic or serious injury were made Lucina would have sufficient resources to meet the claim. Lucina may debate with Mr Critchlow what may or may not happen in future, but given Lucina's low assets I am not satisfied that it will be able to meet a claim for catastrophic injury, or other claims of serious injury.
59 Further, I have had to consider the public interest. IMUK and Lucina have been given ample opportunity to meet the concerns set out in my provisional decision. Those concerns have not been met. This in turn means that members of the public attended upon by IMUK midwives are in a position where they cannot be confident that the indemnity arrangement will have the resources needed to meet liabilities for injury should they arise. This is contrary to the public interest and the objective of Article 12A.
Decisions on appropriateness of cover and registration
60 For the reasons above, I have decided that the Lucina scheme does not provide "appropriate cover" as required by Article 12A of the Order.
61 In the circumstances, practising IMUK midwives relying on the Lucina scheme as their indemnity arrangement for any aspect of their practice which involves attending women in childbirth, will be removed from the register unless they provide a signed declaration to the NMC by 10 January 2016 that they will not rely on Lucina for any such aspect of their practice, and confirm that they have appropriate alternative cover in place to satisfy the requirements of Article 12A(1).
62 I have decided that removal is a proportionate course of action, bearing in mind the risk to the public. In reaching this decision I have taken into consideration that any midwife who is subject to removal has a right of appeal under Article 37 of the Order."
Reconsideration by the Registrar on 27 January 2017
i) The Monte Carlo model was capable of generating claims with an amount greater than £10,000,000 and incorporating these losses in its evaluation of Lucina's financial position.
ii) Lucina's cover was a "claims-made" indemnity product and so claims incidence would be lower in the early years of the scheme. This effect was particularly pronounced where, as with cerebral palsy claims, the delay in reporting claims was significant. This had not been taken into account by Mr Critchlow. Therefore the 0.92% chance of a cerebral palsy claim arising over the next 12 months calculated by Mr Critchlow, should be reduced to approximately 0.2%. This would increase over time, only reaching 0.92% in several years' time when the Lucina scheme had matured.
iii) The analysis by Mr Critchlow showing £10.7 million liability over the next year in paragraph 109 of his report was incorrect. He had failed to multiply the probability of a claim arising in each of the four claim bands in the linear model and instead simply added the total value of the claims. The probability of a claim arising in each of the bands over one year was effectively zero (0.000012%).
iv) The chances of there being a total claim above £6.1 million in the next 12 months was 0.1% and not 0.92% as Mr Critchlow had calculated.
"I consider, having read Mr Graham's email of 9 January 2017 and Mr Marcuson's letter of 6 January 2017 as well as Mr Critchlow's comments on these documents, that neither document addresses the fundamental concerns I expressed in the Decision; namely, that the Lucina scheme has available insufficient financial resources to meet liabilities arising out of a claim for catastrophic injury upon which it might have to pay out within an eight year period.
I note the core area of dispute between Lucina and Mr Critchlow is in relation to the size of that risk during the next 12 months. As has been made clear by Mr Critchlow in his report of 30 November 2016 however, it is precisely because of the challenges of producing a reliable estimate of the actual size of that risk that the other requirements of the Solvency II regime are so significant in this case. Mr Critchlow explained in paragraphs 133 – 148 of his report that the smaller the indemnity arrangement and number of expected claims, the greater the uncertainty that exists in terms of the number of claims which might be incurred and the expected ultimate cost. He gave his opinion that smaller schemes such as the Lucina scheme need to recognise the risk that they will have a claim made against them, even though the likelihood of such an event happening may be remote; and they must have sufficient funds in place to ensure that they can meet the costs of the claim. He stated that in order to give a sufficiently high degree of confidence that Lucina will have sufficient funds to pay claims as they fall due, they would need to assess and answer the questions listed at paragraph 117 and 163-165 of his report. Mr Critchlow stated that there is no evidence that Lucina has addressed or answered these questions, and that accordingly it would not be appropriate for the Registrar to reply on the outputs of the Lucina model. Mr Critchlow set out in paragraph 174 of his report the arrangements which he considered necessary for Lucina to take in order to provide IMUK members with an appropriate level of cover. These include securing reinsurance or additional funding to enable them to meet a high value claim. I note from the transcript of the meeting between IMUK, Lucina and the NMC on 3 November 2016 that Lucina accepts that the cost of such a claim could be in the region of £12.5 million.
There is nothing in the Marcuson report to indicate that Lucina have asked themselves the fundamental question of whether they have sufficient funds to pay out (in 5-8 years' time) on a high value claim which they might be notified about tomorrow, as they would be expected to do under the Solvency II regime, in order to give them the 99.5 percent confidence level they profess to have. I also note that it is common ground that Lucina currently has a low asset base and has not strengthened its position with guarantees beyond one of £250,000 provided by Mr Graham, Managing Director of Lucina Ltd, himself. In particular, it has not secured any additional financial assurance by way of either additional capital funding or re-insurance, so as to provide the necessary assurance that it would be able to pay out on a high value claim within the next 5-8 years.
My fundamental concern about the Lucina scheme is that it does not have available to it sufficient financial resource[s] to meet its liabilities, having regard to the nature and extent of the risks. The Marcuson report does not provide any new evidence that the resources that will be available to Lucina over the next 10 years or beyond are higher than those presented by Lucina. In my view, this evidence and indeed any new modelling that is now undertaken by Lucina, does not change the underlying point that, if IMUK did in fact receive a cerebral palsy-related claim (or similar catastrophic injury claim) tomorrow, then using Lucina's own assumptions of claims settlement period, asset growth and claims inflation, they would have insufficient resources to meet the claim at the point it became due for payment.
It follows that I do not consider that anything in the further actuarial evidence provided on behalf of Lucina causes me to alter my previous decision as to the sufficiency of the indemnity cover provided by the Lucina scheme.
I should inform IMUK or Lucina of the level of assets required
DPG have asserted that it is my duty as Registrar to inform IMUK and Lucina of the level of assets I require Lucina to hold in order to be satisfied that IMUK midwives have appropriate indemnity cover. …
As I have stated, I consider it necessary for any indemnity provider to ensure that it has sufficient resources to meet claims which may be made against members when they fall due for payment. It is the indemnifier who must take steps to ensure that it has sufficient financial resources, whether by increasing its capital or by obtaining appropriate reinsurance, to ensure that it is able to meet (at a minimum) the cost of paying for a single large claim. As Mr Critchlow explained at paragraph 144 of his report, securing such reinsurance or such funding must be done in advance of needing the funding, since if a large claim has already been made, no reinsurer will be willing to take on the liability, and no investor will be willing to invest. In the absence of any evidence that Lucina has taken these steps, I do not consider that the scheme provides appropriate cover for IMUK midwives, having regard to the nature and extent of the risks.
The Decision has not taken into account an adjusted past claims figure
DPG informed me that the figure of £700,000 cited at paragraph 56.3 of the Decision as the approximate figure for settlement of past claims is incorrect, and that I have not taken into account the adjusted figure of £200,000 given to us after the meeting of 3 November 2016.
I note that Lucina emailed us on 24 November 2016 to say that the figure for past claims and number of claims settled against IMUK which Mr Graham provided us with during the meeting of 3 November 2016 was incorrect; that the number of claims was in fact three and the figure £200,000. I have no reason to doubt this information (although I note that the Marcuson report also refers to four claims rather than three) and I accept that this correction was not reflected in the Decision.
Be that as it may, I have asked myself whether if the correct figure is £200,000 rather than £700,000, this make any difference to my Decision. I have reached the firm conclusion that it does not. When assessing whether Lucina will have sufficient resources to meet claims which may be made against IMUK members, I was not assuming that past claims in any way affected Lucina's available resources. I was also aware that Lucina's own risk modelling is not predicated on IMUK claims history, but on the NHSLA data, and that this was clearly reflected in Mr Critchlow's report.
I do not consider therefore that the adjustment to the settlement figure caused any error in my conclusions about Lucina's available assets or the Decision as a whole. My Decision is unaffected by the settlement error.
The Decision is flawed due to an error in Mr Critchlow's report
DPG solicitors contend that the Decision is flawed because of the reliance placed on paragraphs 106-109 of Mr Critchlow's report. In particular, they contend that I have failed to properly consider Lucina's submissions that Mr Critchlow used a historic claims factor of 2 when testing Lucina's assumptions, whereas at paragraph 57 of his report he cited 1.47 as a more accurate historic claims inflation figure; and that had Mr Critchlow used a 1.47 factor this would have produced a lower future cost of claims figure that the £6.09 million figure cited.
As Mr Critchlow made clear in his report, his purposes at paragraphs 106 - 109 was to test Lucina's own assumptions, using their own data, in the absence of evidence that they had appropriately stress-tested their model in such a way as to meet Solvency II requirements. It was for this reason that he used the historic claims inflation figure used by Lucina in its own modelling. Whilst it is correct that Mr Critchlow stated, at paragraph 57 of his report, that the historic claims factor has been overstated and that a factor of 1.47 would be more accurate, he has also pointed out at various points (for example at paragraph 80) that the future claims inflation date [rate] should be raised from the minimum level of 3.4 percent to a level for up to 6 per cent. It is further clear from Mr Critchlow's report as a whole, that any overstatement by Lucina in relation to historic claims merely offsets the understatement of average claims value. This is fully explained at paragraphs 150 - 153 of Mr Critchlow's report.
Further, Mr Critchlow has since confirmed (see Annex 1) that the point which he was seeking to make was that the risk faced by Lucina is not trivial, and that in order to be able to show that they have the 99.5 percent confidence level which they assert, he would expect them to carry out some or all of the steps set out at paragraph 117 of the report. This is in my view abundantly clear from the report as a whole and is also reflected in the Decision, which clearly states that my fundamental concern is that Lucina has available insufficient resource to meet a high value claim which might be incurred within the next twelve months, at the point at which it fell due for payment.
I therefore do not consider that the Decision is flawed due to such reliance as I placed on paragraphs 106-109 of Mr Critchlow's report….."
Grounds for judicial review
(1)Error of law
(2)Breach of EU rights and Human Rights Act 1998
(3)Failure to take account of material considerations and/or errors of fact
i) Error of law and Wednesbury unreasonableness. This ground included the matters pleaded in the original ground 1. It added a detailed critique of the competing evidence available to the Registrar, from Lucina and Mr Critchlow, criticising the Registrar's analysis and conclusions. It developed submissions previously made under ground 3. In conclusion, it made the wide-ranging submission that the decision was vitiated by "error of law and/or a failure to undertake adequate enquiry and/or to take relevant considerations into account and/or a fundamental error of analysis and/or is unreasonable".
ii) Infringement of TFEU, the Charter and A1P1. This ground repeated the original ground 2, as pleaded in the Statement of Facts and Grounds. It added a submission that the NMC failed to comply with the EU principle of equality, since it has allowed registrants to continue to rely upon the indemnity scheme offered by the Royal College of Nursing, which capped the level of cover per claim at £3 million.
"3.— The Nursing and Midwifery Council and its Committees
(2) The principal functions of the Council shall be to establish from time to time standards of education, training, conduct and performance for nurses and midwives and to ensure the maintenance of those standards.
(3) The Council shall have such other functions as are conferred on it by this Order or as may be provided by the Privy Council by order.
[(4) The over-arching objective of the Council in exercising its functions is the protection of the public.
(4A) The pursuit by the Council of its over-arching objective involves the pursuit of the following objectives—
(a) to protect, promote and maintain the health, safety and wellbeing of the public;
(b) to promote and maintain public confidence in the professions regulated under this Order; and
(c) to promote and maintain proper professional standards and conduct for members of those professions.
[(5) In exercising its functions, the Council shall—
(a) have proper regard for—
(i) the interests of persons using or needing the services of registrants in the United Kingdom, and
(ii) any differing interests of different categories of registrants; …"
"satisfies the Registrar that there is in force in relation to the applicant, or there will be as necessary for the purpose of complying with article 12A, appropriate cover under an indemnity arrangement."
Article 10(2) makes similar provision for persons seeking to renew registration or applying for re-admission.
"12A.— Indemnity arrangements
(1) Each practising registrant must have in force in relation to that registrant an indemnity arrangement which provides appropriate cover for practising as such.
(2) For the purposes of this article, an "indemnity arrangement" may comprise—
(a) a policy of insurance;
(b) an arrangement made for the purposes of indemnifying a person;
(c) a combination of the two.
(3) For the purposes of this article, "appropriate cover", in relation to practice as a registered nurse or midwife, means cover against liabilities that may be incurred in practising as such which is appropriate, having regard to the nature and extent of the risks of practising as such.
(4) The Council may make rules in connection with the information to be provided to the Registrar—
(a) by or in respect of a person applying for registration (including an application for restoration or readmission) for the purpose of determining whether or not the Registrar is satisfied that if the person is registered, there will be in force in relation to that person by the time that person begins to practise, an indemnity arrangement which provides appropriate cover;
(b) by or in respect of a person applying for renewal of their registration for the purpose of determining whether or not the Registrar is satisfied that if the person's registration is renewed, there will be in force in relation to that person by the time that person resumes practice, an indemnity arrangement which provides appropriate cover; and
(c) by or in respect of a registrant for the purposes of determining whether at any time there is in force in relation to the registrant an indemnity arrangement which provides appropriate cover.
(5) Rules made under paragraph (4) may require information to be provided—
(a) at the request of the Registrar; or
(b) on such dates or at such intervals as the Registrar may determine, either generally or in relation to individual registrants or registrants of a particular description.
(6) The Council may also make rules requiring a registrant to inform the Registrar if there ceases to be in force in relation to that registrant appropriate cover under an indemnity arrangement.
(7) The Council may also make rules requiring a registrant to provide the Registrar with such information as is necessary for the purpose of satisfying the Registrar that there is or will be in force in relation to that registrant appropriate cover provided under an indemnity arrangement by an employer.
[(7A) For the purposes of verifying that information, the Registrar may disclose to any person information relating to a person's indemnity arrangement which is provided to the Council by virtue of rules made under paragraph (4) or (7).]
(8) If a registrant is in breach of paragraph (1)—
(a) the Registrar may remove that person from the register; or
(b) the person's fitness to practise may be treated for the purposes of article 22(1)(a)(i) as being impaired by reason of misconduct, and the Registrar may accordingly refer the matter to persons appointed by it under article 22(5)(b)(i) (where rules under article 23 provide) or to a Practice Committee under article 22(5)(b)(ii).
(9) If an applicant breaches rules under paragraph (4), or there is a breach of rules under that paragraph in respect of the applicant the Registrar may refuse the applicant's application for—
(a) admission (or readmission) to the register;
(b) restoration to the register; or
(10) If a registrant breaches rules under paragraph (4)(b) or (c), that person's fitness to practise may be treated for the purposes of article 22(1)(a)(i) as being impaired by reason of misconduct, and the Registrar may accordingly refer the matter to persons appointed by it under article 22(5)(b)(i) (where rules under article 23 provide) or to a Practice Committee under article 22(5)(b)(ii). …"
The Member State of treatment shall ensure that:
… (d) systems of professional liability insurance, or a guarantee or similar arrangement that is equivalent or essentially comparable as regards its purpose and which is appropriate to the nature and the extent of the risk, are in place for treatment provided on its territory."
The Solvency II regime
"In order to promote good risk management and align regulatory capital requirements with industry practices, the Solvency Capital Requirement should be determined as the economic capital to be held by insurance and reinsurance undertakings in order to ensure that ruin occurs no more often than once in every 200 cases or, alternatively, that those undertakings will still be in a position, with a probability of at least 99.5 %, to meet their obligations to policy holders and beneficiaries over the following 12 months. That economic capital should be calculated on the basis of the true risk profile of those undertakings, taking account of the impact of possible risk-mitigation techniques, as well as diversification effects."
"The Minimum Capital Requirement should ensure a minimum level below which the amount of financial resources should not fall. It is necessary that that level be calculated in accordance with a simple formula, which is subject to a defined floor and cap based on the risk-based Solvency Capital Requirement in order to allow for an escalating ladder of supervisory intervention, and that it is based on the data which can be audited."
"(3) For the purposes of this article, "appropriate cover", in relation to practice as a registered nurse or midwife, means cover against liabilities that may be incurred in practising as such which is appropriate, having regard to the nature and extent of the risks of practising as such."
i) The linear model did not make explicit allowance for the impact of delays in reporting claims in determining the expected incidence rate per birth. This understatement in incidence rates per birth could be 30% to 40%, possibly higher.
ii) In calculating the incidence rate per birth, the linear model used the entire population of births as the divisor, even though some of those births would not apply to IMUK members. The effect of this exclusion potentially would increase the incidence rate per birth used within the linear model by as much as 67%.
iii) The methodology used by the linear model to calculate an average claim value ignored the impact that settled claims had on the calculation. Mr Critchlow estimated that the average claim value could be understated by around 38%.
iv) Allowance for historic claims inflation was likely to be overstated by around 36% which partially offset the understatements above. However, even after taking this into account, as a result of the facts above the incidence rate per birth should be approximately doubled.
v) The approach taken by the linear model to the timing of claim payments, and splitting the analysis by banding category, meant that there is likely to be such a material distortion in timing of when claims might be expected to be incurred that it invalidated its use in any cash flow or balance sheet analysis of the possible liabilities the Lucina scheme might be expected to bear.
vi) The linear model had not been subject to sufficient stress testing.
vii) The lack of qualitative as opposed to quantitative analysis carried out by Lucina meant that the linear model should not be relied upon.
"I have decided that removal is an appropriate course of action, bearing in mind the risk to the public. In reaching this decision I have taken into consideration that any midwife who is subject to removal has a right of appeal under Article 37 of the Order."
Rights under EU law
"Any limitation on the exercise of the rights and freedoms recognised by this Charter must be provided for by law and respect the essence of those rights and freedoms. Subject to the principle of proportionality, limitations may be made only if they are necessary and genuinely meet objectives of general interest recognised by the Union or the need to protect the rights and freedoms of others."
"The court has consistently held that the principle of proportionality is one of the general principles of Community law. By virtue of that principle, the lawfulness of the prohibition of an economic activity is subject to the condition that the prohibitory measures are appropriate and necessary in order to achieve the objectives legitimately pursued by the legislation in question; when there is a choice between several appropriate measures recourse must be had to the least onerous, and the disadvantages caused must not be disproportionate to the aims pursued."