Aviva insurance firms fined €2.45m over breaches

Two Aviva insurance companies have together been fined a total of €2.45 million for breaches of investment rules.

The Central Bank levied a fine of €1,225,000 on both Aviva Life Pensions and Aviva Insurance Europe after discovering problems with the firms’ procedures and controls in relation to stock lending. Stock lending is the short-term transfer of assets to a borrower, which will undertake to return them at a later date.

The breaches were uncovered when the Central Bank’s Insurance Directorate undertook a survey of liquidity swaps, or deals whereby insurance companies lend assets to banks on a secured basis. In both Aviva Life Pensions and Aviva Insurance Europe, the stock lending was performed by an investment manager within the Aviva group, pursuant to an investment management agreement.

The Central Bank found that neither firm had adopted adequate investment policies or objectives in relation to stock lending and neither had set sufficient limits on their investment manager for stock lending. Reporting and control systems were also found to be inadequate, as was monitoring of the investment managers. Neither firm received regular information on the risk management aspect of stock lending and neither reviewed its investment policies on an annual basis.

In the case of Aviva Life Pensions, supervision of stock lending investment activities was deemed inadequate.

The Central Bank said the penalties applied, which come at the upper end of the bank’s recent history, reflect the seriousness with which it views breaches of rules designed to protect policyholders or to ensure that assets are managed properly.

The Central Bank also reprimanded both companies.