General Re, the reinsurance company owned by Warren Buffett's Berkshire Hathaway Corporation, was fined more than £1.2m by the City watchdog yesterday, after it was found to have breached UK regulations twice in the past seven years.
The Financial Services Authority said it was landing the group with the penalty - the tenth largest to be handed down in the regulator's five-year history - due to the company's failure to conduct its business with "due skill, care and diligence". It also criticised the company for not organising its affairs "responsibly and effectively".
The fine relates specifically to two reinsurance policies. The first, taken out in 1999, was renewed three times between 2000 and 2003, and allowed a German insurer to gain tax benefits by transferring money between Germany and an Irish subsidiary. The second relates to another erroneous policy issued in 2004.
As well as fining General Re, the FSA said it had accepted an undertaking from a former General Re employee to not apply for authorisation to carry out a regulated function for at least two years. The employee also agreed to undertake FSA-approved mentoring and training.
The regulator said the financial penalty would have been much higher had General Re not reported the rule breaches to the regulator and agreed to fully co-operate. The company also managed to have its fine reduced by another 30 per cent from £1.75m by agreeing to a settlement early on in the investigation.
Margaret Cole, the FSA's director of enforcement, said: "The FSA expects firms involved in reinsurance business to observe proper standards of conduct, act with due skill, care and diligence and to ensure that they and their staff structure and manage transactions appropriately.
"Both conventional and finite reinsurance transactions should only be used where there is a legitimate commercial purpose and sufficient risk transfer.
"The FSA will take robust action against reinsurance firms and their staff who act in contravention of these basic principles."Reuse content