Embattled insurance company CBL Corporation has put itself into voluntary administration to protect itself from the fallout of its troubled European business.
(file photo) Photo: 123rf
The company, which provides specialist insurance for the construction industry, said KordaMentha had been appointed as voluntary administrators for the New Zealand parts of the CBL group.
"The directors considered these appointments necessary to preserve value in the interest of all stakeholders," the company said in a statement.
Voluntary administration puts a legal cocoon around a business under stress and allows it to keep working as it looks for solutions.
"We are working closely with CBL's management and its directors to execute strategies that preserve the CBL group's various operating units," KordaMentha's Brendon Gibson said.
The administration follows the High Court order on Friday placing subsidiary CBL Insurance into interim liquidation on the application of the Reserve Bank (RBNZ).
McGrathNicol has been appointed interim liquidators of CBL Insurance - all information about why has been suppressed by a confidentiality order.
Policy holders have been told to address queries to the liquidators.
The CBL group's problems have arisen because of its French construction insurance business, which has made big losses and called into question whether it has sufficient reserves to cover the losses.
The RBNZ regulates the insurance sector and three weeks ago ordered the company to increase its reserves.
CBL has been looking to raise as much as $100 million to cover losses and accounting discrepancies in the French business.
It had warned that it would make a full year loss of between $75m and $85m.
The Central Bank of Ireland had also ordered CBL's Dublin-based European business to stop writing new business.
Adding to the company's woes, AM Best, a global credit rating agency for the insurance industry, has dropped the group's rating and slashed that of the insurance subsidiary to junk status.
Meanwhile, the company's shares have been in a trading halt since early February, and the Stock Exchange and Financial Markets Authority are inquiring into how the company has kept investors informed of developments.