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Member, Beacon International Group, Ltd.
(Reuters) — Former RSA Ireland boss Philip Smith failed to set aside enough money to cover potential insurance claims, contributing to the British insurer having to inject £200 million ($302 million) into its Irish arm in 2013, a lawyer for RSA said Wednesday.
RSA blamed a handful of executives at the division for accounting irregularities that led to the group overstating its profits in Ireland and required it to tap shareholders for cash to plug the hole in its finances.
Mr. Smith, pursuing a constructive dismissal case against RSA in Dublin this week, has said he was directed by RSA group executives to release over €250 million ($271.1 million) in reserves over several years to support underperforming parts of the wider group.
Mr. Smith said the policy of tapping into surpluses generated by the Irish unit meant it did not have a financial cushion when problems were uncovered in 2013.
Quoting a draft report from an RSA internal probe into the issues, Brian O'Moore, lawyer for RSA, said Wednesday that Mr. Smith authorized a "catastrophic level of under-reserving."
The report found RSA Ireland's so-called "large claim" reserves were consistently under-reserved by about €10 million ($10.8 million) between 2008 and 2013, Mr. O'Moore said.
He cited internal auditors as saying that the informal processes to set reserves were contrary to a number of company policies.
Mr. Smith, who resigned in late November 2013 after being suspended while the company investigated accounting procedures at its Irish business, said he didn't have an "intimate knowledge" of all of the relevant policies.
He said he also disagreed with Mr. O'Moore's assertion that there was a "catastrophic" level of under-reserving.
Philip Smith, chief executive of RSA Insurance Group Inc.'s Irish unit, has resigned and said he had been made the "fall guy" after alleged accounting irregularities in the unit, The Guardian reported.