Delta Lloyd has been fined €22.8m ($27.9m) and ordered to sack its chief financial officer (CFO) after it was found to have used confidential information to make a financial gain.
The Dutch insurer described the move by the country's regulator, De Nederlandsche Bank (DNB), as "drastic... and too far-reaching" and has requested that a court rules on the decision.
The issue dates back to 2 July 2012, when DNB introduced an 'ultimate forward rate' - a fixed interest rate to be used when calculating insurance liabilities exceeding 20 years. In the week before the rate was introduced, Delta Lloyd's Dutch life subsidiary decided to reduce its interest rate risk and equity risk hedges.
DNB said the hedging change resulted in a gain of €21.6m for Delta Lloyd, the regulator basing its fine on this figure plus a €1.2m charge. According to the insurer, DNB said the reduction of the hedges was conducted without due care and in order to gain advantage from confidential information, and was inconsistent with Delta Lloyd's risk policy.
Furthermore, DNB ruled that Delta Lloyd's CFO Emiel Roozen should leave his position by 1 January 2016.
Delta Lloyd said it did not believe the information was confidential and it did not act for financial gain. The company said that reducing its hedging of equity and interest rate risks were consistent with its risk management policy.
However, as a result of the review, Delta Lloyd said it would improve its risk management and will strengthen the function at all levels, including nominating a board-level chief risk officer (CRO).
Delta Lloyd supervisory board chairman Jean Frijns said: "For Delta Lloyd it is regrettable that we have to inform you of a difference of opinion with DNB. We cannot reconcile DNB's view with the facts as established by us."
Frijns said that by the end of June 2012, the company's solvency position had risen to such an extent that it was safe to buy back short equity futures and reverse its position in certain interest rate instruments, but he admitted that documentation of this decision could have been better.
Frijns confirmed that Roozen will remain in post, pending the legal proceedings which are due to begin in January. He said DNB's decision about Roozen was one of the main reasons why the firm was seeking an independent court ruling. The board-level CRO will be appointed before the annual general meeting in 21 May, he added.
Shares in the insurer were down 4% on the news, priced at €17.99 on the afternoon of 22 December compared with €18.82 on the 19 December.