Troubled CBL paid out $55m overseas
Troubled insurer CBL was placed in liquidation after paying $55 million to ‘‘overseas recipients’’ against the orders of its regulator, the Reserve Bank says.
On Friday it emerged that the Wellington-headquartered 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 the regulator’s directions.
‘‘The payments to overseas companies were made in the context of significant doubts about CBL Insurance’s 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 floated on the New Zealand and Australian stock exchanges in 2015.
In 2017 managing director Peter Harris was named the 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.
EY said yesterday it was ‘‘working through the issues’’.
According to the National Business Review Rich List, Harris’ fortune, mainly linked to his 22.8 per cent shareholding in CBL, was worth $180m. CBL’s deputy chairman, Auckland financier Alistair Hutchison’s 19.5 per cent stake was valued at $160m.
CBL’s reserves and solvency were being probed in an independent investigation commissioned by the Reserve Bank and the company had confirmed to the 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 $55 million to two other entities.
‘‘The payments may provide some creditors of CBL Insurance with an advantage over other creditors.’’
The Reserve Bank has published a partially redacted High Court affidavit in the name of its head of prudential supervision, Toby Fiennes, outlining the doubts about CBL’s solvency, and that it had breached statutory directions.
As well as questioning CBL’s assessment of the troubles it is facing, the affidavit makes it clear that the central 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.
‘‘Given that the bulk of the assets are held in cash, transfer offshore is simple and can be carried out quickly.’’