Reg­u­la­tor fines RSA In­sur­ance €3.5m

Cen­tral Bank takes ac­tion over ac­count­ing scan­dal at in­surer Reg­u­la­tory breaches were re­sult of ‘se­ri­ous short­com­ings’, says watch­dog

The Irish Times - Business - - FRONT PAGE - JOE BRENNAN

The Cen­tral Bank of Ire­land has fined RSA In­sur­ance Ire­land €3.5 mil­lion for reg­u­la­tory breaches re­lat­ing to the ac­count­ing scan­dal at the gen­eral in­surer five years ago.

The Dublin-based in­surer’s UK par­ent, RSA In­sur­ance Group, in­jected €423 mil­lion of cash be­tween 2013 and 2015 into its Ir­ish sub­sidiary, which was pre­vi­ously the largest gen­eral in­surer in the coun­try. This was to fill a hole left in the Ir­ish unit’s bal­ance sheet by the de­ba­cle.

While the set­tle­ment con­cludes the Cen­tral Bank’s en­force­ment case against the in­surer, it is be­lieved that the reg­u­la­tor con­tin­ues to look at the ac­tions of cer­tain in­di­vid­u­als. “We can’t com­ment on on­go­ing or po­ten­tial ac­tions,” a Cen­tral Bank spokesman said.

The reg­u­la­tor said that in­di­vid­u­als in RSA In­sur­ance Ire­land were able to “de­lib­er­ately ma­nip­u­late claim re­serve es­ti­mates” by set­ting aside less money than needed for large in­sur­ance loss claims be­tween Oc­to­ber 2009 and 2013.

This served to ar­ti­fi­cially in­flate the com­pany’s prof­its.The reg­u­la­tory breaches were a re­sult of “se­ri­ous short­com­ings” in the Ir­ish unit’s in­ter­nal con­trols and cor­po­rate gov­er­nance frame­work, it said in a state­ment yes­ter­day. Ex­ten­sive is­sues iden­ti­fied within RSA In­sur­ance Ire­land’s claims and fi­nance func­tions led to an un­der­state­ment of €78.2 mil­lion in the firm’s tech­ni­cal re­serves in Septem­ber 2013. “The stark­est ex­am­ple of the un­der-re­serv­ing prac­tice un­cov­ered by this in­ves­ti­ga­tion was a per­sonal in­juries claim with a rec­om­mended claim re­serve es­ti­mate of €4.75 mil­lion where the amount ac­tu­ally recorded on the firm’s data­base was €20,000,” said Seána Cun­ning­ham, the Cen­tral Bank’s di­rec­tor of en­force­ment.

Ac­ri­mo­nious de­par­ture

RSA set­tled a dis­pute in 2016 with Philip Smith, the for­mer chief ex­ec­u­tive of the Ir­ish unit, who had been awarded €1.25 mil­lion a year ear­lier by the Em­ploy­ment Ap­peals Tri­bunal re­lat­ing to his ac­ri­mo­nious de­par­ture in the wake of the con­tro­versy. Mr Smith re­signed weeks af­ter his sus­pen­sion in late 2013, along­side his chief fi­nan­cial of­fi­cer, Rory O’Con­nor, and claims di­rec­tor, Peter Burke.

“Whilst no pol­i­cy­hold­ers were ad­versely af­fected, upon iden­ti­fi­ca­tion of the is­sues in 2013, and fol­low­ing an in­ter­nal in­ves­ti­ga­tion, we took swift ac­tion to strengthen our con­trols and re­move the in­di­vid­u­als we deemed re­spon­si­ble,” a spokes­woman for RSA In­sur­ance Ire­land said yes­ter­day.

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