Mitsui Sumitomo Insurance Co.’s European unit was fined 3.3 million pounds ($5.3 million) by U.K. financial regulators for serious corporate governance failings.
The unit’s former executive chairman, Yohichi Kumagai, was also fined 119,303 pounds and banned from working in the industry, the Financial Services Authority said in an e-mailed statement today. Kumagai failed to hire a chief underwriter to manage the expansion of the business in Europe and didn’t update its technology infrastructure, the FSA said.
“Senior management must take responsibility for the firms that they run,” Tracey McDermott, acting FSA director of enforcement, said in an e-mailed statement. “Kumagai failed to respond adequately to the changing risks facing his business even after they had been pointed out by the FSA.”
The FSA is leading a crackdown on companies that have insufficient systems and controls to manage risk. Coutts & Co., a private bank owned by Royal Bank of Scotland Group Plc, was fined 8.75 million pounds in March for not having effective anti-money-laundering controls. Bank of Scotland Plc was censured by the regulator the same month for similar failings.
Banking executives should be subject to more stringent corporate governance rules, Hector Sants, chief executive of the FSA, said in a speech in London last month.
At Mitsui Sumitomo, the agency said that “despite receiving clear guidance from the FSA that the management structure and composition of the board was ineffective,” Kumagai “failed to take prompt action to remedy the situation.”
Mitsui Sumitomo “accepts the FSA’s final notice and takes this matter very seriously,” Duncan Gallagher, a spokesman for the company, said in an e-mailed statement. “The company is disappointed that during this period its corporate governance and controls were not up to the standards the company expects.”
Kumagai and Mitsui Sumitomo agreed to settle at an early stage and qualified for a 30 percent discount on their fines.
Kumagai was transferred from the Japanese parent company and appointed as executive chairman of the U.K. business in April 2009, as part of a staff rotation program for senior managers. Seconded executives often “had only limited experience of non-Japanese insurance business and U.K. regulatory obligations,” the FSA said.