UK regulators have fined Rosemont Re?s sister company Goshawk Syndicate Management Limited for systems and control failures related to its management of third party underwriting agreements.

Goshawk Insurance Holdings, owns both Bermuda-based Rosemont Reinsurance and Goshawk Syndicate Management Limited which was previously responsible for the management of Syndicate 102 at Lloyd?s of London which closed to new business in 2003.

The UK Financial Services Authority (FSA) said in a statement that Goshawk breached its principles for business and rules on senior management arrangements, systems and controls, during September 2002 and October 2003.

Goshawk did this by signing ?a number of binding authorities permitting third parties to take on risks or settle claims, without properly vetting the third parties or monitoring their operation?.

?This exposed the syndicate managed by Goshawk to unnecessary risk and contributed to significant losses on these binding authorities,? the FSA said.

The regulator added that the breakdown in the system of independent review during the period meant that ?there was an inadequate review of risk?.

Margaret Cole, FSA Director of Enforcement, said: ?Goshawk did not meet the standards the FSA expects from managing agents. It did not have adequate systems and controls in place to manage its binding authorities or to ensure adequate independent review of underwriters? activities.

?Had these been in place, they could have reduced the large losses experienced by the syndicate.?

She added that the failings were ?particularly serious? given that Goshawk received reports from Lloyd?s in previous years that highlighted weaknesses in respect of controls over binding authorities and the system of independent review.

While the firm took steps to rectify the weaknesses and improvements were made, she said that the revised controls were not implemented in an effective way.

The FSA?s fine of $387,178 acknowledges that the syndicate is now closed to new business and Goshawk has limited assets available to pay a penalty. It also recognises that Goshawk?s current senior management were not responsible for the breaches and have been co-operative with the FSA investigation.

Lloyd?s has confirmed that it will not bring disciplinary procedures against GSML in respect of the matters the subject of the FSA fine. The fine was fully provided for in Goshawk?s 2004 accounts and Goshawk ?has not admitted any liability in paying the fine,? the company said in a statement yesterday.

Earlier this week Goshawk upped its gross hurricane loss estimates 30 percent from $99 million to $130 million. It also said that it needed to raise capital or its ?ability to write new business will be severely impaired.?

Its Board of Directors is now considering proposals ?which would either entail a significant capital injection into Rosemont Re or a sale of Rosemont Re? either of which would allow Rosemont Re to participate fully in the excellent trading conditions expected in 2006 as a much stronger company, the company said.