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FAI insurance-related disqualification announced

1 May 2009

The Australian Prudential Regulation Authority (APRA) today announced the disqualification of Mr Ashraf Kamha from being, or acting as, a director or senior manager of a general insurer or authorised non-operating holding company (NOHC), or a senior manager or agent in Australia of a foreign general insurer, effective 20 March 2008. The announcement of Mr Kamha’s disqualification was deferred by APRA pending the resolution of other proceedings relating to the HIH Insurance group of companies (HIH).
Mr Kamha was a senior executive of FAI General Insurance Company Limited (FAI) from June 1994 to September 1998 in the position of general manager of the corporate and professional division (CPID). He was also a director of FAI from February 1997 to September 1998.
A delegate of APRA found that on three separate occasions between July 1997 and July 1998, Mr Kamha’s conduct failed to meet the standard of fitness and propriety expected of a senior manager of a general insurer, and that this conduct contributed to the misrepresentation of FAI’s true financial position and misled FAI shareholders, the market and the relevant regulators.
The APRA delegate found that Mr Kamha:
  • instructed an internal FAI actuary not to disclose certain draft valuation results and data to FAI’s external actuaries, PricewaterhouseCoopers (PwC), with the purpose and result of keeping from PwC information material to its assessment of FAI’s liabilities as at 30 June 1997;
  • was instrumental in January 1998 in effecting reductions to CPID case estimates amounting to $24.78 million, which in turn led to an inflated profit being reported by FAI as at 31 December 1997; and
  • provided PwC with FAI data as at 30 June 1998 that was inaccurate in circumstances where Mr Kamha was reckless as to whether this data was accurate and complete. This resulted in a process whereby critical data was withheld by FAI from PwC leading PwC to undervalue FAI’s outstanding claims liabilities. This in turn led to FAI overstating its profit as at 30 June 1998.
The disqualification of Mr Kamha is listed on APRA’s Disqualification Register. Click here for more details.
APRA also notes that on 7 July 2008 Mr Kamha pleaded guilty to a charge arising out of an investigation by the Australian Securities and Investments Commission into the affairs of HIH, resulting in his automatic disqualification pursuant to the Insurance Act 1973 from being or acting as a director of senior manager of a general insurer or authorised NOHC, or a senior manager or agent in Australia of a foreign general insurer.

The Australian Prudential Regulation Authority (APRA) is the prudential regulator of the financial services industry. It oversees banks, credit unions, building societies, general insurance and reinsurance companies, life insurance companies, friendly societies, and most members of the superannuation industry. APRA is funded largely by the industries that it supervises. It was established on 1 July 1998. APRA currently supervises institutions holding approximately $3 trillion in assets for 21 million Australian depositors, policyholders and superannuation fund members.