Sunday 20 October 2019

Central Bank fines RSA Insurance €3.5m for 'manipulating' reserves

Fined: RSA Insurance failed to have proper mechanisms in place. Photo: Bloomberg
Fined: RSA Insurance failed to have proper mechanisms in place. Photo: Bloomberg

Charlie Weston Personal Finance Editor

ONE of the largest insurers in the State has been hit with a €3.5m fine by the Central Bank.

The sanction follows a massive accounting scandal that emerged in RSA Insurance Ireland five years ago.

Imposing the fines upon the insurer, the Central Bank said individuals within RSA Insurance Ireland had "deliberately manipulated claim reserve estimates, through the under-reserving of multiple large loss claims from 2009 until October 2013".

The Central Bank said RSA Insurance Ireland had failed to establish and maintain technical reserves in respect of all underwriting liabilities assumed by it.

The starkest example of the under-reserving practice uncovered was a personal injuries claim with a recommended claim reserve estimate of €4.75m. The amount actually recorded on the firm's claims database was €20,000.

It had failed to have proper accounting and internal control mechanisms in place.

The insurer admitted the breaches.

This was done by recording claim reserve estimates which were much lower than recommended by claims handlers. The insurer was also accused of delaying the recording of claim reserve estimates.

These failings led to an understatement of €78.2m in the firm's technical reserves in 2013.

Central Bank director of enforcement Seána Cunningham said policyholders are placed at risk when insurers fail to reserve properly.

In a statement, RSA said no policyholders were adversely affected when the issues were identified in 2013.

It said it took swift action to strengthen its controls following an internal investigation.

The Irish operation of London- listed RSA Insurance Group had to pump around €500m into the Irish operation between 2013 and 2015 due to the crisis.

The UK's Financial Reporting Council, which polices the corporate governance codes for listed companies, fined and imposed sanctions against the former chief financial officer and two actuaries of RSA Insurance Ireland Ltd.

Former RSA Insurance Ireland CEO Philip Smith is not an accountant or an auditor, and was not fined, neither was former claims director Peter Burke. He is also understood to have no membership of accounting or auditing bodies.

RSA settled a legal dispute with Mr Smith in 2016 where he was awarded €1.25m by the Employment Appeals Tribunal. It is not known whether or not he received the full €1.25m once the dismissal dispute was settled.

Irish Independent

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