GenRe fined £1.225 million by Financial Services Authority
City watchdog, the Financial Services Authority (FSA), meted out one of its biggest fines ever in November. General Reinsurance UK Limited (GenRe) was fined £1.225 million for arranging two improper reinsurance transactions and for breaching two FSA principles. They were: FSA Principle 2 - not conducting its business with due skill, care and diligence; and Principle 3 - not organising and controlling its affairs responsibly and effectively.
The first transaction, signed in 1999 and renewed three times, allowed a German insurer to gain tax benefits after transferring money between Ireland and Germany. A second transaction, signed in 2004, was used to compensate for a premium reduction on a reinsurance programme agreed with a client insurer.
The FSA ruled that in both cases, GenRe did not have controls in place to stop the deals.
Commenting on the case, FSA director of enforcement Margaret Cole said: "Both conventional and finite reinsurance transactions should only be used where there is a legitimate commercial purpose and sufficient risk transfer. The FSA will take robust action against reinsurance firms and their staff who act in contravention of these basic principles."
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