The European arm of one of Japan's biggest insurance groups was yesterday fined £3.35m by the City regulator, while its former executive chairman was given a lifetime ban on working in the City.
The Financial Services Authority (FSA) said Mitsui Sumitomo Insurance Company failed to put the right systems in place and recruit senior enough people as it rapidly expanded across Europe.
Yohichi Kumagai, who was fined £119,000, was seconded to the group's European business from Japan in 2009.
The FSA said that he had limited knowledge of non-Japanese insurance and UK regulations.
Shortly after his appointment, the FSA wrote to him warning that Mitsui's rapid expansion into European markets needed careful oversight.
But he failed to recruit executives with enough experience and a new IT system did not work efficiently.
Tracey McDermott, the FSA's acting director of enforcement and financial crime, said: "Senior management must take responsibility for the firms that they run.
"Kumagai failed to respond adequately to the changing risks facing his business even after they had been pointed out by the FSA."
The FSA said the firm's fine and Mr Kumagai's penalty would have been higher, at £4.78m and £170,000 respectively, if they had not agreed to settle at an early stage.
Fines of the size imposed on Mitsui are rare and are intended to set an example to City firms that poor governance, as well as deliberate misdeeds, will be frowned up on by the regulatory authorities.
Among Mitsui's obvious more mistakes was the failure to hire a chief underwriting officer – arguably the most important job in any insurance company apart from the chief executive.
Had an underwriting boss been in place at the company, they would have prevented Mitsui from expanding too rapidly.
* Insider trader Rupinder Sidhu was yesterday ordered to pay £570,000 after being convicted of 22 counts of insider dealing.
Sidhu was jailed in December for two years over a string of offences he committed with using information gleaned from a former hedge fund trader friend.
If he fails to pay up for a so-called "confiscation order" within 28 days, he would be liable to spend a further five years in prison.Reuse content