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Zurich-related disqualifications upheld

5 Aug 2009
09.20

Australian Prudential Regulation Authority (APRA) disqualifications of Mr John Butler and Mr Alan Parsonson have been upheld by the Administrative Appeals Tribunal (AAT).
 
APRA disqualified Mr Butler on 5 February 2007 and Mr Parsonson on 28 February 2007 for their respective roles in Zurich Australia Insurance Limited (ZAIL) and Zurich Financial Services Australia Limited (ZFSA), relating to two financial reinsurance transactions with General & Cologne Re Group Australia (GCRA) in 2000 that resulted in ZAIL appearing to meet its regulatory solvency requirement when it did not.
 
Both individuals appealed to the AAT, which handed down its joint decision on both cases on Friday 31 July. As a result, Mr Butler and Mr Parsonson each remain disqualified from being or acting as a director or senior manager of a general insurer, authorised non-operating holding company or agent of a foreign general insurer.
 
Mr Butler held a number of positions at ZAIL from March 1999 to July 2004, including Chief Financial Officer, General Manager of General Insurance, Chief Operating Officer, Chief Executive Officer and Director.
 
Mr Parsonson was Regional Manager of Australia/Pacific for Zurich Insurance Company (ZIC) and a director of ZAIL and ZFSA during 2000 and 2001.
 
On 26 May 2005, APRA accepted an enforceable undertaking from ZAIL and ZFSA in respect of the two GCRA financial reinsurance transactions which resulted in ZAIL’s profits in 2000 being overstated by $61 million.
 
APRA reviewed the conduct of Mr Butler and Mr Parsonson in respect of the transactions and disqualified them on the basis that their knowledge of and involvement in the transactions demonstrated that they were not fit and proper to hold senior roles in the insurance industry in Australia.
 
The AAT affirmed APRA’s decisions to disqualify Mr Butler and Mr Parsonson, finding that they are not fit and proper and that it is appropriate that they should be disqualified pursuant to section 25A of the Insurance Act 1973.
 
AAT President Justice Garry Downes, in his decision, said [p.p. 9-10]: ‘The applicants’ involvement was such as to attract a sufficient level of impropriety to warrant disqualification. Their otherwise distinguished careers and reputation do not sufficiently redeem them, particularly in the circumstances that they continue to maintain the propriety of their conduct although accepting that, with hindsight, it might have been done differently.’
 
He continued [p. 57]: ‘To my mind the failures of Mr Parsonson and Mr Butler were serious. They were not fleeting or transient. They persisted over a substantial period of time. Although both of them said, to an extent, that they would now do things differently, this does not cause me to think that they have sufficiently changed.’
 
APRA Deputy Chairman Ross Jones said APRA has a duty to ensure appropriate fitness and propriety is maintained in the industries it supervises.
 
APRA relies on officers in responsible positions within regulated entities to act with integrity at all times and we will take action to remove those who do not act in this way,’ he said.
 
The disqualifications of Mr Butler and Mr Parsonson are listed separately on APRA’s Disqualification Register. Click here for more details.

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, 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 $3.4 trillion in assets for 21 million Australian depositors, policyholders and superannuation fund members.