ZurichAustralia Insurance (ZAI) and Zurich Financial Services (ZFS) have pledged to clean up their corporate governance, after investigations identified claims that overstated the insurance arm’s profits and made it appear to meet solvency requirements when it did not.
The misrepresentations concern the nature and accounting treatment of two reinsurance transactions undertaken with General & Cologne Re in 2000.
Australian Prudential Regulation Authority (APRA) investigations found that lies and withholding of information by several Zurich officers resulted in the insurance arm’s profits for 2000 being exaggerated by $61 million, after a loss portfolio transfer was not properly characterised as reinsurance.
No further action will be taken against ZFS and ZAI provided they abide by enforceable undertakings from both APRA and ASIC, pledging to improve their corporate governance, better regulate future reinsurance transactions, and ensure the insurance arm’s capital is maintained at its current adequate level.
Action may still be taken against the individual perpetrators, none of whom is understood to still work at Zurich.
Zurich said the enforceable undertakings would have no impact on day-to-day business, and other subsidiaries such as the life and funds management businesses were unaffected.
