Risk.net

Playing to lose

The largest loss relating to operational risk during July occurred at VBS Mutual Bank in South Africa. The bank’s directors, and directors of its major shareholder, are reported to have defrauded VBS of 1.52 billion rand ($112.5 million) by entering fictitious deposits, withdrawing funds from the bank for their own purposes and even bribing officials at state-owned institutions. In the second largest loss of July, US insurer John Hancock agreed to pay $91.3 million to settle a class action lawsuit which accused it of inflating life insurance policy rates. According to the lawsuit, John Hancock did not lower its cost of insurance calculations as nationwide mortality rates improved, used improper non-mortality factors when calculating its rates, and charged excessive premiums for a rider that was applied to insured people aged 100 or over.