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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