The Reserve Bank moved against insurance group, CBL, because it feared an international scramble to grab its assets and the company defied an order not to send money overseas.
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CBL Insurance was put into into interim liquidation by the High Court last week on the application of the RBNZ, but the details of the legal action were kept confidential. McGrathNicol were appointed interim liquidators by the court.
The RBNZ has now released its court application, with some deletions, detailing why it took the action.
The affidavit can be read [https://www.rbnz.govt.nz/-/media/ReserveBank/Files/News/2018/Reserve-Bank-affidavit-to-the-High-Court-re-CBL-Insurance.pdf?la=en
here.]
Deputy Governor Geoff Bascand said the central bank had been working with CBL on issues involving the insurance subsidiary's solvency and the financial difficulties of some of its European operations.
He said the company had been ordered to get any significant payments approved by the RBNZ.
"CBL Insurance did not have our approval but nevertheless paid a total of $55 million to two other entities. The payments may provide some creditors of CBL Insurance with an advantage over other creditors," Mr Bascand said.
The RBNZ application showed that CBL Insurance had assets around the world worth about $750m as at the end of December, and it told the court that if the company was not put under control other banks and creditors might try to seize them.
The CBL Group offers speciality insurance to the construction industry, including builders' warranties in New Zealand. The liquidators have said they will not accept any claims or make any payments, and are directing policy holders to contact cblinsurance@mcgrathnicol.co.nz.
The parent company CBL Corporation has appointed administrators, which effectively cocoons the company and protects its from any other interference.
The group's problems arise from its French construction insurance business. CBL was looking to beef up its balance sheet by $100m, but the RBNZ affidavit questions whether that would be enough.
The Central Bank of Ireland earlier this week asked for the Dublin-based CBL Insurance Europe, which has had the closes dealings with the problem French business, to be put into administration, because it feared a "disorderly failure" of the company which it said was is in a "distressed financial position".
CBL's shares remain on a trading halt.