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CBL: high-flying insurer to be liquidated

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CBL Insurance will be wound up after the High Court in Auckland approved an application by the Reserve Bank of New Zealand to liquidate the business.

The business has been in court-imposed interim liquidation and its parent company CBL Corporation in voluntary administration since February.

The court’s decision looks set to hasten the demise of CBL Corporation, one of the few New Zealand insurers that made a name for itself globally with businesses in Europe and Australia.

The Reserve Bank, which had pushed for the interim liquidation, says the winding up of the company is in the best interests of the public.

It says CBL Insurance failed to meet solvency conditions, breached regulations and misreported its business to the regulator.

“We are pleased a contested trial was unnecessary,” the bank’s Deputy Governor and Head of Financial Stability Geoff Bascand said.

“The Reserve Bank followed a careful and rigorous process leading up to the interim liquidation, appointing independent experts as investigators.

“This took time because of the need for fairness to the company, as well as the complexity of CBL Insurance’s overseas business. This was compounded by CBL Insurance’s poor-quality data.”

The bank has commissioned an independent review of the company and expects to release the key findings next year. The review, conducted by Australian actuary and former regulator John Trowbridge and New Zealand barrister Mary Scholtens, will identify lessons the insurance regulatory regime could learn from the saga.

CBL Corporation’s voluntary administrator KordaMentha has been working on an alternative package that would avoid placing the insurance arm into liquidation, but the move failed to gain support from two major creditors.

“In our view, a restructuring proposal implemented through a voluntary administration offered the potential to deliver a better outcome for CBL Insurance’s creditors and creditors of the wider CBL Group companies,” KordaMentha says in a statement.

“We will continue to focus on the issues across the remainder of the companies in administration, while watching with interest progress in CBL Insurance’s liquidation

The fate of the company’s business and assets are now in the hands of interim liquidators McGrathNicol partners Kare Johnstone and Andrew Grenfell, who have been appointed by the court to oversee the winding-up process.

“It has been a difficult period for employees given the ongoing uncertainty of CBL Insurance,” Mr Johnstone said.

“Policyholders should continue to notify CBL Insurance of claims, which will be assessed and processed. However, claims cannot be paid at this time.

“Policyholders should take appropriate measures to minimise their losses if they have not already. An update will be provided to policyholders and creditors as soon as we are able.”

Based in Auckland, the CBL Corporation came crashing down hard and fast since February when the scale of its financial troubles unfolded.

Led by former MD Peter Harris, who was named in 2017 as insurance leader of the year at the annual New Zealand industry awards and EY’s NZ entrepreneur of the year, CBL aggressively expanded its empire beyond the small New Zealand market.

It acquired Sydney-based Assetinsure in 2015 and listed on the Australia and New Zealand stock exchanges in the same year. Assetinsure has since been sold under a deal announced last week.

“It’s a very complementary business,” Mr Harris told Insurance News magazine in 2016.

“It carries the same sort of products that we have, and it represented an opportunity to expand in Europe.”

Mr Harris also went big in Europe, taking a majority stake the following year in Securities and Financial Solutions Europe (SFS), France’s largest specialist provider of construction insurance.

But the move turned out to be CBL’s undoing when management announced in February it would ditch the French business and seek legal recourse from the vendors.

A strategic review showed SFS consumes a high level of capital and involves significant estimations of future claims by independent actuaries.

Since then, the stream of news from CBL has been nothing but bad news for its shareholders.