RSA Insurance Group plc viewed some reserves set aside to cover potential claims in its Irish unit as “treasure” to be used to offset underperformance elsewhere in the business, a former executive who said he was forced out of the company told a Dublin court.
The Irish reserve margin was “almost unique” in terms of its scale relative to other businesses in the group, Philip Smith said at Employment Appeals Tribunal in Monday on Dublin. Between 2007 and 2011, under group direction, RSA in Ireland released over 250 million euros ($272 million) in prior year reserves to support the company elsewhere, Smith said.
The Irish margin reserve “was a group asset to be used as it saw fit,” Smith said. The company’s former group chief executive officer “would call it the caves, treasure in Irish caves.”
The policy meant that the Irish unit was shy of surplus reserves when it encountered problems in 2013, said Smith, who resigned the same year during an investigation into the Irish business’s accounting practices.
His lawyer, Tom Mallon, said Smith had been made a “‘fall guy” who endured a “public whipping.”
An outside spokeswoman for RSA didn’t immediately respond to a request for comment.
RSA’s lawyer, Brian O’Moore, said in January that the company would defend itself against Smith’s claim “tooth and nail.” RSA is still awaiting the results of an Irish regulatory probe following the accounting scandal and a 200 million-pound ($302 million) capital injection in Ireland that cost former Group CEO Simon Lee his job.
RSA’s Irish unit cost it another 100 million pounds in 2014, taking its total bill since the accounting irregularities were first reported to about 300 million pound.
A message left on a cell phone for Simon Lee wasn’t immediately returned.
–With assistance from Sarah Jones in London.
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