Irish Axa unit fined €3.64million for insurance breaches

An Irish unit of insurance giant Axa has been fined £3.64m by the Central Bank of Ireland.

The fine related to three breaches of European insurance regulations by AXA Life Europe DAC (ALE), which is licensed by the Central Bank to operate life insurance business and established a German branch in 2006 and began selling an insurance product called TwinStar.

The violations are technical in nature, relate to insurance coverage sold in Germany, and no customers have suffered any damage as a result of the issues uncovered.

The German Federal Financial Supervisory Authority (BaFin) regulated the rules of procedure of the German branch. In 2012, ALE stopped underwriting new TwinStar policies sold only in Germany and closed its German branch in 2014. Between 2006 and 2012, ALE sold approximately 350,000 TwinStar policies, of which approximately 203,000 are still in existence.

Following an investigation begun as ALE was preparing for a possible sale, the central bank found that its risk management systems were failing because ALE had not had an effective process for identifying, managing, monitoring and reporting on risk from around 13 years 30,000 TwinStar policies in Germany with terms and documentation that referenced a Parental Claims Guarantee (PCG) provided by Axa, but distinct from a German life insurance company bankruptcy protection scheme that most German policies benefit from.

The PCG was never consulted, but the investigation found that ALE failed to establish effective conflicts of interest policies and procedures and failed to adequately assess potential conflicts of interest when ALE’s board of directors raised issues related to the guarantee at a meeting discussed in July 2018.

The Central Bank has set the reasonable fine at €5,200,000, which has been reduced by 30% to €3,640,000 under the early settlement rebate scheme provided for in the Central Bank’s ASP.

The three violations were admitted by ALE.

The Central Bank’s Director of Enforcement and Anti-Money Laundering Seána Cunningham said:

“It is important that businesses identify, assess and manage the risks they face or may face to ensure they can meet their obligations to consumers. ALE’s weak internal control framework resulted in its failure to identify and monitor a cohort of policies for which policy-related documentation was unclear, although concerns were raised. This failure meant that ALE was unable to provide its policyholders with information relevant to them.

The Axa fine is the central bank’s 154th enforcement finding, bringing the total fines imposed by the central bank to over €404.5 million, including large penalties for banks implicated in the tracker mortgage scandal. Irish Axa unit fined €3.64million for insurance breaches

Fry Electronics Team

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