Accountancy and Actuarial Discipline Board is investigating KPMG’s auditing procedures of Lloyd’s insurer
Accounting firm KPMG is being investigated by the UK accountancy regulator for auditing failures of Lloyd’s insurer Equity Red Star.
The Accountancy and Actuarial Discipline Board (AADB) said it is investigating the auditing of Equity Red Star for the three years that ended December 2009 “with particular reference to technical provisions”.
The AADB is also investigating the conduct of actuaries who advised Equity Syndicate Management Ltd, the management agent and a corporate member of Lloyd’s that trades as Equity Red Star.
KPMG said it will cooperate fully with the AADB probe.
“We are confident our audit work in relation to the Equity Red Star syndicate met the relevant professional standards,” a KPMG spokesman told Reuters.
In 2010, Equity Red Star made a £240m loss after failing to set aside enough capital for personal injury claims. The insurer was reprimanded by Lloyd’s and fined £95,000.
The subsidiary of Australian insurance giant Insurance Australia Group (IAG) has since overhauled its UK management team. Former UK chief executive and current Hastings Direct executive chairman Neil Utley reportedly faced a disciplinary hearing at Lloyd’s in late January to discuss his tenure at Equity.
IAG group chief executive Mike Wilkins has consistently denied market speculation of an imminent sale of the UK arm. Wilkins announced in mid-2011 that the aim is to “break even in 2012” before returning to profitability.
Full year 2011 results showed some improvement in Equity’s books with COR reduced to 102.8%.
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