Wellington, March 2, 2018
The High Court appointed interim liquidators to CBL Insurance Limited on Friday last week and issued an order prohibiting publication of information about the matter. The High Court lifted the prohibition today, enabling the Reserve Bank to state the reasons for its actions.
Deputy Governor and Head of Financial Stability Geoff Bascand, says the Reserve Bank asked the High Court to appoint interim liquidators to CBL Insurance after the company made payments of $55 million in breach of directions by the regulator. The payments to overseas companies were made in the context of significant doubts about CBL Insurance’s solvency.
He said that the Reserve Bank’s concerns about CBL Insurance’s reserving policies and regulatory solvency were being reviewed with CBL Insurance and through an independent investigation commissioned by the Reserve Bank.
CBL Insurance had recently confirmed to the Reserve Bank that it was continuing to operate despite being below the minimum regulatory solvency level.
Consultation a must
“In this context, the Reserve Bank had issued a direction that CBL Insurance must consult with us and have our approval for significant transactions. CBL Insurance did not have our approval but nevertheless paid a total of $55 million to two other entities. The payments may provide some creditors of CBL Insurance with an advantage over other creditors,” Mr Bascand said.
The affidavit released on Tuesday explains the Reserve Bank’s reasoning.
Some information in the affidavit has been redacted due to the need for ongoing confidentiality around some commercial matters.
CBL Insurance provides insurance and reinsurance internationally and in New Zealand. Most of its business is overseas, with about one percent of premiums originating from its New Zealand insurance business.
In New Zealand, CBL Insurance provides (a) Underwriting for “Homefirst” builders guarantee (b) Contractor bonds, which cover financial losses if a contractor defaults on contractual obligations (c) Deposit Power branded property deposit bonds, which provide security to reduce the deposit needed when financing or refinancing mortgage loans (d)
Rental guarantee bonds, which insure against loss of rental income; and (e) Travel and cargo agent bonds, offered through IATA (International Air Transport Association), which protect airlines against collapse of agents.