Heat is on former RSA boss at Employment Appeals Tribunal

Such was the heat in a packed room hearing Philip Smith's constructive dismissal case against British insurer RSA, that the staff at the Employment Appeals Tribunal propped the door open with a brush to allow air to circulate.

The hearing involved a sweep through Smith’s departure from RSA in controversial circumstances in November 2013 after various financial issues emerged in Ireland.

Smith had worked with consulting group Accenture where RSA was one of his big clients. He was poached by the insurer in January 2006 to become its operations director and became chief executive in 2007.

The hearing was told that Smith had an exemplary employment record with RSA, and was offered a number of promotions at group level that he turned down for family reasons.

He is not an accountant or actuary and so relied on the technical expertise of others on certain aspects of the business, such as reserving for insurance claims.

Satisfactory results

On his watch, RSA Ireland had some 30 audits – internal, external and by the Central Bank of Ireland – and they all produced satisfactory results “save for relatively minor or technical issues”.

Under his leadership, RSA went from being the fifth-biggest insurer in Ireland to the number one slot, doubling its staff numbers. There were six acquisitions during his time at the helm and he also oversaw its domestication, when it became a regulated local insurer rather than being a branch of the UK business, and its integration with RSA in Northern Ireland to become a 32-county company. The picture Smith painted was of a successful Irish business that had its presses raided in the boom years by its parent company in the UK.

Smith told the hearing of how some €255 million in reserves were released in the Irish business on the instruction of its parent, who saw Ireland as a “treasure cave”. These were used to flatter the group’s results, he claimed.

After the crash came, a handful of large injury claims emerged on the motoring side and exposures began to emerge in its professional indemnity business, which provided insurance to the likes of solicitors. RSA exited this business in December 2010. With its reserves having been depleted, red flags began to be raised.

The nub of Smith’s defence is that the issues that arose in the Irish business were known to his bosses at regional and group level at all times.

Performance changed

He claims to have been “unceremoniously thrown under the bus” when the performance changed and the Central Bank began looking at its reserving and its handling of large claims.

Smith is also questioning the process followed by RSA in the run-in to his being suspended in November 2013, including the composition of a sub committee of the board charged with investigating the issues dubbed Project White.

The heat is likely to be turned up on Smith when RSA gets the chance to cross examine him on these events. Hopefully, the tribunal will have figured out the air conditioning by then.