Central Bank has concerns over insurer's ability to pay its debts
The Central Bank has said there is now a "significant question" as to the ability of CBL Insurance Europe (CBLIE) to pay its debts.
Kieran Wallace has now been appointed administrator to the troubled New Zealand-owned insurer, which has 12,500 policies in Ireland.
It mainly underwrites construction-related credit and financial surety insurance, as well as professional indemnity and property insurance, and travel bonding.
New Zealand's High Court has placed insurance firm CBL Insurance Ltd, the main subsidiary of CBL Corporation Ltd, in interim liquidation after a request from the country's central bank.
The Central Bank of Ireland has said, in an affidavit published by the regulator yesterday, that its primary and most urgent current concern arises as a result of the interim liquidation.
"There must now be a significant question as to the ability of the Insurer [CBLIE] to pay its debts, having regard to the extent of its reliance on the financial position of CBLNZ [CBL Insurance] as its primary reinsurer," the affidavit noted.
"In light of the public nature of the financial difficulties faced by the CBL Group, the policy holders of the insurer face considerable uncertainty with regard to the future of the insurer and its ability to continue to meet its obligations to them."
The Central Bank said it has taken its action to protect CBLIE policyholders.
It said existing policies continue to remain in force.
But it added: "The Central Bank is recommending that policyholders contact the firm directly, or their broker (if the policy was bought through a broker) to arrange alternative cover as soon as possible."
The affidavit said that the regulator believes CBLIE is in a "financially distressed position" and that it is "incumbent upon the [Central] Bank to take such action as is necessary to protect the interests of policyholders and the integrity of the insurance market within the State."
The Central Bank said it could not support an examinership petition by CBLIE.
The Central Bank said the administration will protect CBLIE, and its policy holders, from the risk of insolvency proceedings being commenced by its creditors, including CBLNZ.
"An administration would enable an administrator to take control of the business of the insurer, and secure its business, assets and records, so that he can take immediate steps to determine whether the insurer can be restored to a sound financial footing and continue as a going concern."