How good was oversight before insurer’s problems appeared?

CBL Corporation’s voluntary administration is another blow to the NZX. It raises numerous questions about the oversight of our listed companies by regulators, directors, investment bankers, brokers and analysts.

The first point to note is that the insurance sector is regulated by the Reserve Bank of New Zealand (RBNZ) with the principal aims of:

● Promoting the maintenance of a sound and efficient insurance sector

● Promoting public confidence in the insurance sector

Deputy Reserve Bank governor Geoff Bascand remarked in a speech this week that public disclosure is a cornerstone of the Reserve Bank’s approach to prudential regulation and supervision.

Unfortunately, the central bank hasn’t fully complied with its public disclosure objectives as far as CBL is concerned.

A High Court affidavit released on Thursday revealed that on July 27 last year, the Reserve Bank directed CBL Insurance — which is 100 per cent owned by CBL Corporation — to raise its solvency ratio to 170 per cent. This compared with its solvency ratio of

189 per cent at the end of December

2016 and Tower Insurance’s 236 per cent solvency ratio at the end of September 2017.

CBL Insurance, which generates 61 per cent of its gross written premium in France, represents approximately two-thirds of the NZX listed company’s business.

The affidavit by the Reserve Bank’s head of supervision went on to state: “In the meantime, the bank’s own internal review concluded in August

2017, based on information available at the time, that CBL Insurance had significantly under-reserved its French business to such an extent that its adjusted capital for solvency