New Zealand-based CBL Insurance Ltd. was placed in interim liquidation after paying NZ$55 million to two overseas companies against regulatory orders, the Reserve Bank of New Zealand said.
The central bank revealed the breach in the March 1 release after the country's High Court lifted a ban on the publication of information about the liquidation.
Geoff Bascand, deputy governor and head of financial stability at the central bank, said the payments were unauthorized and made despite "significant doubts" over CBL Insurance's solvency.
Prior to the breach, CBL Insurance's reserving policies and regulatory solvency were being probed by an independent investigation, the official noted. The insurer also confirmed it was operating below the minimum regulatory solvency level. It was then ordered to seek central bank approval first before making significant transactions.
The noncompliant payments may hence "provide some creditors of CBL Insurance with an advantage over other creditors," Bascand said.
On Feb. 23, the High Court appointed interim liquidators to take control of the insurer's financial and other records, as well as to conduct any investigation when deemed necessary.
CBL Corp. Ltd., the insurer's parent, then placed itself in voluntary administration to prevent other regulators from taking action on CBL Corp., said Managing Director and CEO Peter Harris.
Earlier in February, New Zealand's stock exchange suspended CBL Corp's shares from trading amid concerns over whether the company had provided all material information regarding its overseas insurance operations to the market.
Local and overseas regulators have also questioned CBL Corp.'s adequacy of reserves for its French construction insurance business, which it has since decided to exit.
As of Feb. 28, US$1 was equivalent to NZ$1.38.
