Central Bank fines insurer €3.2m

Alico, a subsidiary of Met Life insurance, has been fined €3.2m by the Central Bank for various breaches of insurance law.

The fine is the third- largest fine handed down by the Central Bank to any financial institution operating in Ireland.

The largest fine imposed by the Central Bank was on Combined Insurance Company of Europe Limited who were forced to pay €3.35m. The second highest fine was paid by Quinn Life Insurance who were fined €3.25m in 2008.

The Central Bank imposed a large fine to reflect the seriousness with which they view breaches of the “legislative provisions designed to protect life assurance policyholders”.

Central Bank director of enforcement Peter Oakes said: “The key principle of life assurance regulation is that policyholder assets are adequately safeguarded. It is for this reason that there are strict rules in place to ensure that policyholder assets are clearly identifiable from other assets of a life assurance company.”

The infringements in Alico came to light during an inspection in 2009 by the Central Bank insurance division. The inspectors discovered that Alico had failed to enter certain receipts of the life assurance business into the insurance fund. It had failed to record correctly certain assets representing its life assurance fund, and failed to have sound administrative procedures and internal control mechanisms.

The firm also failed to deposit its annual returns with the Central Bank within six months after the end of its financial year.

The inspection found that from Apr 2007 to July 24, 2009, the agent on behalf of the firm, loaned securities representing approximately €500m of the life assurance fund assets supporting unit-linked policies. The board of the firm was unaware of these investments until Apr 23, 2008, by which time significant unrealised losses on securities lending had accrued.

“The Central Bank would remind firms that if they intend to engage in securities lending, they must be careful to ensure that there is sufficient consideration of the risks involved and the impact of these on policyholders.

“Furthermore, firms are obliged to have adequate systems and controls in place surrounding the investment of assets representing the life assurance fund,” Mr Oakes said.

More in this section

The Business Hub

News and analysis on business, money and jobs from Munster and beyond by our expert team of business writers.

Sign up
Puzzles logo

Puzzles hub

Visit our brain gym where you will find simple and cryptic crosswords, sudoku puzzles and much more. Updated at midnight every day.

News Wrap

A lunchtime summary of content highlights on the Irish Examiner website. Delivered at 1pm each day.

Sign up

Our Covid-free newsletter brings together some of the best bits from irishexaminer.com, as chosen by our editor, direct to your inbox every Monday.

Sign up