‘Significant doubts’ over CBL solvency
Troubled insurer CBL was placed in liquidation after paying $55 million to ‘‘other entities’’ against the orders of its regulator, the Reserve Bank says.
On Friday it emerged that the company had asked the High Court to appoint liquidators but the reasons for it doing so were not made public.
With the lifting of the order yesterday, the Reserve Bank’s head of financial stability, Geoff Bascand, said it asked the court to take action after CBL made payments of $55m in breach of directions by the regulator.
‘‘The payments to overseas companies were made in the context of significant doubts’’ about solvency, Bascand said.
Thousands of recently built homes are covered for shoddy building work under guarantees backed by CBL Insurance, which was put into interim liquidation on Friday. The company was floated on the New Zealand and Australian stock exchanges in 2015.
In 2017, managing director Peter Harris was named EY Entrepreneur of the Year. According to reports, in June he is due to head to Monte Carlo to take part in the global finals of the EY competition.
CBL’s reserves and solvency were being probed in an independent investigation commissioned by the Reserve Bank. The company had confirmed to the central bank that it was continuing to operate, despite being ‘‘below the minimum regulatory solvency level’’.
Bascand said: ‘‘In this context, the Reserve Bank had issued a direction that CBL Insurance must consult with us and have our approval for significant transactions. CBL Insurance did not have our approval but nevertheless paid a total of $55m to two other entities.
‘‘The payments may provide some creditors of CBL Insurance with an advantage over other creditors.’’
A partially redacted court affidavit makes it clear the bank was concerned more could be transferred offshore.
‘‘The directors’ decision to pay away such a significant amount of CBLI’s cash in contravention of directions from the [Reserve] Bank means that CBLI’s assets are and remain at serious risk of further dissipation if the directors remain in control of those assets.’’