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News : Irish Last Updated: Jan 10, 2014 - 6:46 AM


RSA Insurance fires two Irish executives for large loss/ accounting irregularities
By Finfacts Team
Jan 9, 2014 - 11:40 AM

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RSA Insurance, the UK firm, said in a statement today that it had fired the RSA Ireland CFO, Rory O’Connor and the RSA Ireland claims director, Peter Burke, who "were dismissed for their roles in relation to large loss and claims accounting irregularities." Both dismissals were confirmed yesterday following the completion of appeal processes. The RSA Ireland chief executive Philip Smith who was suspended with his two colleagues in November, resigned that month.

A review by PricewaterhouseCoopers (PwC) of "electronic documents of circa 60 individuals has identified documentary evidence that supports the Board’s view that there has been inappropriate collaboration involving a small number of senior executives in Ireland. Specifically, this evidence suggests that certain individuals acted in such a way as to intentionally circumvent parts of the existing Control Framework."

RSA Insurance added: "In particular the large claim reserving policy was circumvented. By so doing, financial records did not fully reflect the financial position of the business and reports made to Group and Regional Management were inaccurate and potentially misleading. This undermined the effectiveness of controls which placed significant reliance on senior management integrity."

During Q4 2013, RSA announced a total of c.£200m (€242m) of losses within RSA Insurance Ireland. These losses comprise:

  • £72m arising from irregularities within the claims and finance functions, as announced previously on 8 November 20132. These losses were the focus of the PwC investigation and comprise: £37m from inappropriate collaboration on large loss and claims accounting; and £35m primarily from inappropriate accounting for net earned premiums and pipeline earnings.
  • £128m from the completion of the internal reserve review of the Irish Business, announced on 13 December 2013. These losses comprise: £62m relating to reserve strengthening for business written in 2013, of which c.80% is due to adverse bodily injury claims trends; and £66m relating to reserve strengthening for business written in previous years, of which 70% is due to adverse bodily injury claims trends.

RSA said the end of year group reserve review is currently underway and we will report its findings as normal in our preliminary results in February.

The insurer said that controls within the Irish finance function did not operate effectively allowing inappropriate accounting for Net Earned Premium and pipeline earnings. "A local programme of remediation has already begun and we continue to work with the Irish regulator, the Central Bank of Ireland."

Martin Scicluna, RSA executive chairman said: “The issues which emerged in our Irish business in 2013 were completely unacceptable and I have made it my personal priority to ensure that this never happens again. The Board is now confident that the financial and claims irregularities were isolated to Ireland and do not reflect the quality of our control framework elsewhere in the world.

“Our investigations have confirmed that the claims irregularities in Ireland were, in large part, the result of deliberate collaboration between a small number of executives there."

The scandal at the insurance group, which led to RSA delivering three profit warnings in six weeks in the run-up to Christmas, triggered the resignation of group chief executive Simon Lee.

RSA says that it "has a long tradition in the Irish market, writing non-life insurance business here since 1721. We are the largest and fastest growing insurer in the Republic of Ireland with an extensive range of Commercial and Personal lines products channelled through a network of insurance brokers and scale partners and via the well known 123.ie brand, one of the leading direct personal insurance providers."

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