Former RSAII chief disqualified for 13 years
The Central Bank has disqualified the former chief executive of RSA Insurance Ireland (RSAII) from managing a regulated financial-services firm for 13 years.
The regulator said that the sanction against Philip Smith, after an inquiry, was due to his admitted participation in a breach of financial-services law by RSAII.
RSAII had previously been fined in 2018 for breaching article 13(1)(a) of the European Communities (Non-Life Insurance) Framework Regulations 1994, which requires insurers to maintain adequate technical reserves for all underwriting liabilities.
Shortfall
RSAII had admitted that, on 30 September 2013, there was a significant shortfall in its technical reserves resulting from the under-reserving of 17 large loss claims.
RSAII’s procedures required large loss claim-reserve estimates to be assessed by claims handlers and the recommended claim-reserve estimate to be recorded on RSAII’s claims database.
Instead, the Central Bank said, Smith, while chief executive, oversaw a process whereby claims handlers were prevented or delayed from recording their recommended estimates on RSAII’s database.
It cited as an example a claim relating to a serious motor accident that had a recommended reserve-claim estimate of €2.7 million.
The claim, however, was recorded on the database with a reserve estimate of just €20,001, with the result that RSAII’s potential liability appeared ‘on paper’ to be far less than it was.
Risk
The regulator said that the failure to maintain adequate technical reserves created a risk that RSAII might not have been in a position to pay claims made by and against its policyholders, though its investigation did not find evidence of any actual loss to policyholders.
“The period of disqualification imposed on Mr Smith reflects the seriousness of the breach he participated in and shows that where senior executives break the rules and put policyholders at risk, they will be held accountable,” the Central Bank stated.
As well as the disqualification and reprimand, found that Smith’s actions merited a financial penalty of €120,000.
After analysing information on Smith’s financial circumstances, however, it found that it could not impose such a fine.
Standards
The Central Bank is not allowed to impose a fine that would be likely to make a person bankrupt.
Colm Kincaid (Central Bank deputy governor) said that policyholders needed to be confident that their best interests would be secured.
“These consumers rely on directors and senior executives to manage their businesses in a way that not only adheres to the rules, but builds an effective organisational culture based on standards such as professionalism, integrity, and accountability to deliver fair outcomes that have the interests of consumers at heart,” he added.