Irish Axa unit fined €3.64m for insurance breaches

An Irish unit of insurance giant Axa has been fined €3.64m and reprimanded by the Central Bank of Ireland for failures in corporate governance and risk management and handling of conflicts of interest.

he fine related to three breaches of European insurance regulations by AXA Life Europe DAC (ALE) which is authorised by the Central Bank to carry out life insurance business and in 2006 set up a German branch and started selling an insurance product known as TwinStar.

The breaches are technical, relate to insurance cover sold in Germany and no customers suffered a loss as a result of the issues uncovered.

The German Federal Financial Supervisory Authority (BaFin) regulated the German branch for conduct of business. In 2012, ALE stopped underwriting new TwinStar policies, which were only sold in Germany, and closed its German branch in 2014. Between 2006 and 2012, ALE sold approximately 350,000 TwinStar policies, of which approximately 203,000 remain in place.

After an investigation begun when ALE was being primed for a potential sale the Central Bank found that its risk management systems failed because, over a 13-year period, ALE did not put in place an effective process to identify, manage, monitor and report the risks arising from approximately 30,000 TwinStar policies in Germany with terms and documentation which referenced a referenced a Parental Claims Guarantee (the PCG), which had been provided by Axa but differed from an insolvency protection scheme for German life insurance companies most German policies benefit from.

The PCG was never called upon but the investigation found that ALE failed to establish effective conflict of interest policies and procedures and that it failed to conduct an adequate assessment of potential conflicts of interest when the board of ALE considered issues relating to the guarantee at a meeting in July 2018.

The Central Bank has determined the appropriate fine to be €5,200,000, which has been reduced by 30pc to €3,640,000 in accordance with the early settlement discount scheme provided for in the Central Bank’s ASP.

The three breaches have been admitted by ALE.

The Central Bank’s Director of Enforcement and Anti-Money Laundering, Seána Cunningham, said:

“It is important that firms identify, assess and manage the risks to which they are or might be exposed, to ensure that they can meet their commitments to consumers. ALE’s weak internal control framework meant that it failed to identify and monitor a cohort of policies in relation to which policy related documentation was unclear, despite having been made aware of concerns in this regard. This failure meant that ALE was unable to inform its policyholders of information which was relevant to them.

The Axa fine is the Central Bank’s 154th enforcement outcome, bringing the total fines imposed by the Central Bank to over €404.5m to date, including large scale fines for banks implicated in the tracker mortgage scandal.

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