The case, which led to three insurers going into administration, has prompted the FCA to fine five individuals overall and two firms a total of £15.5m. The regulator has banned four of the quintet for what it called “significant integrity and competence failings”.

The FCA fined Shay Reches, a director, at Coverall Worldwide Limited with responsibility for managing general agent Aderia UK Limited £1,050,000.

Many solicitors were left without adequate professional indemnity insurance as a result of the actions, the FCA said.

Mr Reches has also agreed to pay a sum of £13,130,000 to the three insurers, which will make a substantial contribution towards the liabilities to the FSCS and UK policyholders, the FCA said.

The FCA stated: “If he fails to pay this amount or any part of it, the fine will be increased by the amount unpaid. These payments to insurers will deprive Mr Reches of the indirect benefit that the FCA considers he has gained from his misconduct.

“Mr Reches recklessly directed payments of insurance premiums to parties other than the insurers and reinsurers responsible for paying claims, increasing the risk that policyholders’ claims would not be paid.

“This misconduct contributed to the failure of several insurance schemes as well as to three insurers going into administration.

“As a result, the Financial Services Compensation Scheme has had to pay substantial claims, totalling £12.7m as at the end of 2015.

Mark Steward, FCA director of enforcement and market oversight, said: “This was a hugely complex case with the FCA liaising with over 20 regulators and agencies around the world.

“Mr Reches’ misconduct led to many solicitors and others being left without adequate insurance. He treated policyholders’ funds and their interests with reckless indifference and his misconduct was facilitated by an absence of proper controls by key persons at important stages of the insurance process. The FCA has also taken action against those responsible for poor controls and oversight.

“This case not only demonstrates the consequences of poor controls but also what can happen when the distribution chain becomes overly complex, participants fail to ask obvious questions or take rudimentary precautions, including those insurance intermediaries and brokers checking whether Mr Reches was approved to carry out the functions he was performing.”

Mr Reches has also been prohibited from performing any function in relation to any regulated activity.

FCA action was also taken against Colin McIntosh, Millburn Insurance Company Limited, Coverall, Robert Bygrave, Andrea Sadler, Wayne Redgrave and Bar Professions Limited (Bar).