CBL Insurance was ordered into liquidation because management displayed “a lack of commercial probity”, according to a judge.

The High Court in Auckland last month approved the Reserve Bank of New Zealand’s application to wind up the insurer, which has been in court-imposed interim liquidation since February.

Justice Patricia Courtney says a few transactions the insurer made suggested a “preparedness to manipulate records” that the bank and other third parties rely upon to make decisions.

One involved a €12.5 million ($19.5 million) deposit with the National Bank of Samoa. Interim liquidator McGrathNicol’s attempt to have these funds returned led to the discovery the deposit was part of a complex lending transaction.

“I was satisfied that there had been aspects of CBL [Insurance’s] management that indicated a lack of commercial probity,” Justice Courtney says in her judgement.

“They suggested a lack of candour in dealing with the company’s auditors and the regulator. The bank asserted that, in these circumstances, it was justified in expressing a lack of confidence in the conduct and management of the company’s affairs, and I agree.

“I was satisfied that it was just and equitable that CBL Insurance be wound up.”

The Reserve Bank application asserts the insurer was in breach of its required solvency margin and failed to comply with direction laid down by the regulator.

It also asserts it was just and equitable to wind up CBL Insurance because it was balance sheet insolvent and because of directors’ impropriety.

Former MD Peter Harris, who has been working on an alternative solution, has criticised the liquidation.

“We are currently working with the CBL liquidator to try to bring about a better outcome for all New Zealand policyholders,” Mr Harris says in a statement obtained by insuranceNEWS.com.au.

“Under our proposal the residual creditors and New Zealand policyholders would have been fully paid. Under the [bank’s] liquidation proposal they will make a substantial loss.”