RSA suspends executives after audit of Irish unit

Insurer’s UK parent company injects €100m to bolster Irish unit’s reserves

RSA, Ireland’s biggest insurance group, was in flux last night after the company suspended three senior executives pending the outcome of an investigation into issues involving its Irish claims and finance functions.

The Central Bank also announced that it was instigating a "multi-stranded investigation" into issues reported to it by the company.

The insurer’s UK parent company yesterday injected €100 million in capital to bolster the Irish company’s reserves.


'Routine internal audit'
RSA Insurance Ireland, which also owns the 123.ie brand, has suspended chief executive Philip Smith, chief financial officer Rory O'Connor and claims director Peter Burke pending the outcome of an investigation into issues involving "claims and finance functions which were identified during a routine internal audit".

The firm said “no findings had been made against any individuals at this time” and stressed that there has been no misappropriation of funds.

As a result of these issues, RSA said its 2013 operating profits would be £70 million (€84 million) lower than current market expectations.

Separately, RSA said it had identified the need to bolster the company’s reserves in response to “increased bodily injury” motor claims in Ireland.

“As a result of this, we are in the process of reviewing our Irish bodily injury reserves,” the company said. “This review is continuing and it is too early at this stage to draw any firm conclusions or to reliably estimate the likely financial impact.

“Nevertheless, it is probable that we will need to strengthen our Irish bodily injury reserves and this will also adversely impact the group’s 2013 performance.”

The additional capital has taken its solvency ratio to 228 per cent, well above the 150 per cent level required by the Central Bank.

This is seen as a strong signal by the UK parent company that it is committed to the Irish business and is standing behind it financially in its difficulty.


Financial impact
On Tuesday, UK-based RSA had flagged to the stock market that it had "seen the emergence of adverse bodily injury trends" in Ireland but it could not estimate the financial impact on the business.

RSA has appointed Adrian Brown, currently chief executive of its UK and western Europe division, as acting head of the Irish business.

Chris Rash, currently group chief accountant, has taken over as acting CFO here, and David Pitt, who is currently claims director for the UK and western Europe, is taking operational leadership of the Irish claims function.

RSA said no policyholders would be affected by the dramatic events of yesterday and that all of its Irish businesses would “continue to operate as normal”.

RSA has 950,000 policy holders in Ireland and a 16 per cent market share. It employs just under 1,000 staff. The Irish business is run on an all-island basis.

This is the biggest scandal to hit the Irish insurance sector since the collapse of Quinn Insurance in 2010.

However, the Central Bank and RSA were keen to stress last night there is no parallel between the two.

The Central Bank said it remained in “ close and regular dialogue” with RSA. The maximum fine that the regulator could impose was recently increased to €10 million.

RSA said it was “working closely” with the Central Bank on its investigations.

Mr Smith did not returns calls for comment last night.

Ciarán Hancock

Ciarán Hancock

Ciarán Hancock is Business Editor of The Irish Times

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