CBL directors attack Reserve Bank and pledge to fight

CBL's director-shareholders, Peter Harris and Alastair Hutchison, remain provocative in the face of serious charges against them and the broken insurance group they controlled.

They have now reacted to the Reserve Bank and they said that it was a set of "predetermined" actions taken by the regulator that eventually "destroyed society".

In a letter sent to shareholders of CBL Corp, Harris and Hutchison describe their dispute with the RBNZ, their history of the collapse of CBL Insurance (CBLI) and the steps taken to liquidate them.

They stated that the RBNZ had put CBLI in an effective straitjacket in August 2017, had prevented it from taking steps to improve its position and had then undertaken to justify its actions while "siding" with the plan of a French regulator to "expel" from France any overseas territory. underwriters based in France.

They also questioned the strength of an independent review of the CBLI's treatment of the CBLI case and its broader implications for the insurance regulatory regime. The bank has appointed John Trowbridge and Mary Scholtens QC to review the CBLI license in 2013, with key findings expected to be released next year.

"Given our experience so far, we are skeptical that it will be nothing but a smokescreen to justify the actions of the RBNZ," said Harris and Hutchison.

CBLI went into liquidation two weeks ago at the Auckland High Court after the directors were unable to secure the support of major creditors, including major European insurers Elite and Alpha, for a proposal restructuring.

When CBLI withdrew its opposition to the liquidation, the RBNZ was able to expose its case under the protection of an open court without rebuttal of CBL Insurance.

The bank testified to CBLI 's growing number of insolvencies, non – compliance with the regulator' s instructions and other allegations of serious irregularities.

CBLI's balance sheet analysis revealed massive violations of the solvency margin required for insurance companies since 2013, before the parent company goes public.

Citing a recent affidavit evidence of Geoff Atkins, principal of Australian actuary Finity Consulting, RBNZ attorney, Nathan Gedye, pointed out how CBL Insurance's balance sheet was insolvent to the tune of $ 86.6 million. in 2013, $ 102 million in 2014, $ 104 million in 2015 and $ 98.6 million in 2016.

By the end of June this year, CBLI's net liabilities had risen to between $ 128.2 and $ 275 million in June.

"The Reserve Bank is convinced that the company and its directors have failed to disclose the true situation of the company for many years," said Gedye.

"According to Atkins, these insolvencies date from before the IPO and certainly relate directly to the information provided to the Reserve Bank for the acquisition and holding of its license and in each SRI statement made. .

"According to the bank, based on the evidence provided by Mr. Atkin, the information provided to him was dishonest and that there was a consistent trend between 2013 and 2017."

In their letter to shareholders, Harris and Hutchison described the RBNZ's assertions that directors misrepresented or concealed solvency information as unproven, unverified and untrue.

"The RBNZ has made a number of solvency-related allegations without discovery, without verification, and using reports containing material errors and a clear lack of knowledge." PWC and Deloitte would take 4 to 5 months to achieve a solid end of the year or a semester Finity performed its last biannual review, on June 30, 2018, over a weekend. "

Judge Patricia Courtney, however, was satisfied with the evidence provided by the RBNZ during the winding-up order. In its judgment, it stated that the transactions described in evidence "suggested a willingness to manipulate records on which third parties, including the regulator, relied.

"They suggested a lack of frankness in their dealings with the auditors of the company and the regulator.The Bank asserted that in these circumstances, it was entitled to express a lack of confidence in the conduct and management of the company's business and I agree. "

CBL Corp remains in the volunteer administration and the outlook for shareholders of a company formerly worth $ 750 million is disastrous.

The liquidators of CBL Insurance, Kare Johnstone and Andrew Grenfell of McGrathNicol, are responsible for maximizing recoveries for creditors and pursuing any legal action while the Autorité des marchés financiers and the Serious Fraud Office conduct their own investigations.

Meanwhile, Harris said he and Hutchison would continue to work with the CBL liquidator to try to get better results for New Zealand policyholders.

"According to our proposal, the remaining creditors and policyholders in New Zealand would have been fully paid, and the RBNZ liquidation proposal would suffer a substantial loss."