The UK Financial Services Authority (FSA) has fined General Reinsurance £1.2 million ($2.9 million) for arranging two improper reinsurance transactions.

The first transaction was signed in 1999 and renewed three times until 2003. It enabled a German insurer to gain tax benefits by transferring money between Germany and Ireland, where the German insurer had a subsidiary.

The second transaction was signed in 2004 and was used to compensate for premium reduction on a reinsurance program agreed with an insurer.

In both cases, the FSA found that General Re didn’t have sufficient controls in place to prevent the transactions from being signed.

The FSA says the underwriting, accounting and compliance functions relating to the transactions were inadequate and the transactions were not fully assessed and monitored.

“Conventional and finite reinsurance transactions should only be used where there is a legitimate commercial purpose and sufficient risk transfer,” FSA Director of Enforcement Margaret Cole said. “The FSA will take robust action against reinsurance firms and their staff who act in contravention of these basic principles.”