APRA probes Gen Re Australia
The Australian Prudential Regulation Authority (APRA) says the Australian subsidiary of Gen Re, General Reinsurance Australia (GRA), engaged in “questionable behaviour” in the late 1990s.
The regulator appointed an industry expert to act as inspector and prepare a report into a set of financial reinsurance transactions entered into by GRA between 1997 and 2001.
A financial reinsurance arrangement provides a limited transfer of risk to the reinsurer, with the insurer for the most part funding its own losses.
The report has been released to GRA after advice from the Federal Attorney-General.
It finds GRA engaged in questionable behaviour by issuing to certain companies financial reinsurance contracts enabling them to falsely state their profits and/or solvency position.
“GRA knew that the intended purpose of these transactions was improper and did nothing to prevent or discourage the improper use,” the report said. “In fact, GRA structured these transactions in a way which assisted in the improper use of the arrangement.”
The inspector’s report is critical of numerous aspects of GRA and its affiliates, including an alleged failure to fully and completely disclose all relevant information to APRA about particular transactions.
Of the six financial reinsurance arrangements entered into by GRA, three were found to have been designed and used for improper purposes by parties including Zurich Australia, FAI and New Cap Re.
Enforcement action is being taken against several individuals in connection with the transactions. In October 2004, APRA disqualified six individuals who had been employed by the General Re group. It had already disqualified four former FAI employees, and is now preparing enforcement action against certain former New Cap Re employees.
Following the investigation, APRA imposed a condition on GRA to maintain a majority of independent directors on its local board. GRA is understood to have met this condition.
The regulator appointed an industry expert to act as inspector and prepare a report into a set of financial reinsurance transactions entered into by GRA between 1997 and 2001.
A financial reinsurance arrangement provides a limited transfer of risk to the reinsurer, with the insurer for the most part funding its own losses.
The report has been released to GRA after advice from the Federal Attorney-General.
It finds GRA engaged in questionable behaviour by issuing to certain companies financial reinsurance contracts enabling them to falsely state their profits and/or solvency position.
“GRA knew that the intended purpose of these transactions was improper and did nothing to prevent or discourage the improper use,” the report said. “In fact, GRA structured these transactions in a way which assisted in the improper use of the arrangement.”
The inspector’s report is critical of numerous aspects of GRA and its affiliates, including an alleged failure to fully and completely disclose all relevant information to APRA about particular transactions.
Of the six financial reinsurance arrangements entered into by GRA, three were found to have been designed and used for improper purposes by parties including Zurich Australia, FAI and New Cap Re.
Enforcement action is being taken against several individuals in connection with the transactions. In October 2004, APRA disqualified six individuals who had been employed by the General Re group. It had already disqualified four former FAI employees, and is now preparing enforcement action against certain former New Cap Re employees.
Following the investigation, APRA imposed a condition on GRA to maintain a majority of independent directors on its local board. GRA is understood to have met this condition.