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 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.
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.