The fine, which is one of the heaviest-ever penalties is related to improper
reinsurance deals, which have tax implications.
Two reinsurance transactions signed by General Reinsurance UK purported to
transfer risk from two insurance companies to the reinsurer ‘were designed
without legitimate purpose and effect’, the FSA said.
Both deals, though billed as reinsurance, were not in fact used to transfer
significant risk, the watchdog ruled
‘Both conventional and finite reinsurance transactions should only be used
where there is a legitimate commercial purpose and sufficient risk transfer,”
said Margaret Cole, director of enforcement at the FSA.
The penalty would have been higher if General Re UK had not reported the
transactions to the regulator, cooperated and taken prompt action.
It also settled the matter earlier, which resulted in a discounted fine – the
penallty would otherwise have been £1.75m.
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