Enforcement Action: RSA Insurance Ireland DAC Fined Euros3.5M
On the
* Failure to establish and maintain Technical Reserves in respect of all underwriting liabilities assumed by it
* Failure to have administrative and accounting procedures and internal control mechanisms which are sound and adequate
* Failure to have robust governance arrangements
RSAII has admitted these breaches.
The breaches arose from serious shortcomings in RSAII's internal controls and corporate governance frameworks enabling certain individuals within RSAII to deliberately manipulate claim reserve estimates through the under-reserving of multiple large loss claims from 2009 until
The extensive issues identified within RSAII's Claims and Finance functions led to an understatement of
Furthermore, the investigation found that failures in RSAII's Corporate Governance framework, particularly in its internal reporting structures, allowed the under-reserving of large loss claims to go undiscovered and unchecked for several years.
"Insurance policyholders and the wider financial system are placed at significant risk when insurance entities fail to set aside sufficient reserves. Maintaining sufficient reserves to meet underwriting liabilities is the cornerstone of conducting business in all insurance entities.
Effective governance and robust internal controls are essential in mitigating the harm caused by inappropriate behaviours. Strong governance practices, systems and structures provide regulated entities with a framework through which they can embed appropriate behaviours throughout an organisation.
RSAII's failure to implement appropriately robust controls in respect of the reserving of large loss claims made it possible for certain individuals within RSAII to engage in a practice of deliberately manipulating claim reserve estimates over a number of years. This systematic under-reserving of large loss claims resulted in a material understatement of RSAII's liabilities and ultimately contributed to RSAII requiring a significant capital injection. The starkest example of the under-reserving practice uncovered by this investigation was a personal injuries claim with a recommended claim reserve estimate of
This enforcement action reflects the gravity of RSAII's failures and, demonstrates that where regulated entities fail to comply with their obligations, the
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