CBL Insurance defying directions made by the Reserve Bank of New Zealand (RBNZ) prompted the regulator’s move against the company, it has been revealed.
Last week, RBNZ asked the High Court to appoint interim liquidators to CBL Insurance – at that point, further information was not made known to the public. The High Court has, however, now lifted the prohibition enabling RBNZ to state the reasons for its actions.
According to RBNZ, as stated in its affidavit, CBL Insurance made payments of NZ$55 million to overseas companies despite significant doubts about the firm’s solvency.
The regulator commissioned an independent investigation into its concerns about CBL Insurance’s reserving policies and regulatory solvency – matters were also being reviewed with the insurer.
CBL Insurance later confirmed to the RBNZ that it was continuing to operate despite being below the minimum regulatory solvency level, RBNZ deputy governor and head of financial stability Geoff Bascand said.
“In this context, the Reserve Bank had issued a direction that CBL Insurance must consult with us and have our approval for significant transactions,” Bascand noted.
“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,” he added.
