Zurich slapped over reinsurance statements
ZurichAustralia Insurance (ZAI) and Zurich Financial Services (ZFS) have pledged to clean up their corporate governance, after investigations identified claims that overstated the insurance arm’s profits and made it appear to meet solvency requirements when it did not.
The misrepresentations concern the nature and accounting treatment of two reinsurance transactions undertaken with General & Cologne Re in 2000.
Australian Prudential Regulation Authority (APRA) investigations found that lies and withholding of information by several Zurich officers resulted in the insurance arm’s profits for 2000 being exaggerated by $61 million, after a loss portfolio transfer was not properly characterised as reinsurance.
No further action will be taken against ZFS and ZAI provided they abide by enforceable undertakings from both APRA and ASIC, pledging to improve their corporate governance, better regulate future reinsurance transactions, and ensure the insurance arm’s capital is maintained at its current adequate level.
Action may still be taken against the individual perpetrators, none of whom is understood to still work at Zurich.
Zurich said the enforceable undertakings would have no impact on day-to-day business, and other subsidiaries such as the life and funds management businesses were unaffected.
AUTHOR
Michael Bailey
Recommended for you
Policy and advocacy specialist Benjamin Marshan has left the Council of Australian Life Insurers after less than a year, having joined in March from the Financial Planning Association of Australia.
The declining volume of risk advisers meant KPMG has found a rising lapse rate for insurance policies arranged by independent financial advisers, particularly in the TPD and death cover space.
The Life Insurance Code of Practice has transferred from the Financial Services Council to the Council of Australian Life Insurers.
The firm has announced it will no longer be writing new life insurance policies in the retail advised and corporate group insurance channels, citing a declining market and risk adviser numbers.
