PwC ordered to pay US$625 million for negligence
Compiled by Insurance24
HARARE, PricewaterhouseCoopers LLP, a global insurance and financial services provider, was ordered to pay the Federal Deposit Insurance Corp. more than US$625 million for negligence in the audit of Colonial BancGroup Inc., an Alabama bank holding company that failed during the financial crisis.
US District Judge Barbara Jacobs Rothstein issued the ruling Monday granting the FDIC’s damages request after she found in December that Pricewaterhouse had failed in its audits of the bank from 2003 to 2005 and for 2008. The firm didn’t design its audits to detect fraud or gather enough evidence of its funding to sign reports for those years, she said.
“PwC US is disappointed by today’s ruling and we don’t believe the FDIC is entitled to the recovery of any damages in this case in light of the Court’s prior findings that numerous employees at Colonial actively and substantially interfered with our audits,” said Phil Beck, an attorney for the firm. “We intend to pursue an appeal.”
Colonial BancGroup was the parent company of Colonial Bank, which collapsed in 2009 amid a fraud perpetrated by its largest customer, Taylor Bean & Whitaker Mortgage Corp. Former Taylor Bean chairman Lee Farkas and five other Taylor Bean executives were convicted for their roles.
From 2002 through August 2009, Farkas sold more than US$1.5 billion in mortgage loans that to Colonial Bank that Taylor Bean had already committed or sold to other investors.
Colonial Bank was the sixth-largest bank failure in US history, and its collapse cost the FDIC’s insurance fund about US$4.2 billion. PricewaterhouseCoopers settled similar allegations by the trustee for Taylor Bean in the middle of a trial in Miami, in August 2016.
Swiss Re reveals group-wide coal policy
By Insurance24
HARARE, In line with its sustainability risk framework and consistent with the Paris Agreement, Swiss Re has begun implementing a group-wide policy that will see the insurance giant shutting its doors to businesses with more than 30% exposure to thermal coal.
Announcing the plan’s effectivity, Swiss Re said the decision to come up with a thermal coal policy was based on its commitment to the “Paris Pledge for Action,” taking on global warming and supporting what it described as a “progressive and structured” shift away from fossil fuels. Implemented across all lines of business and the (re)insurer’s global scope of operations, the policy applies to both existing and new thermal coal mines and power plants.
With the policy in place, the underwriting side now matches Swiss Re’s existing practice when it comes to investments. More than two years ago, the Zurich-headquartered firm stopped investing in companies that generate 30% or more of their revenues from thermal coal mining or that use at least 30% thermal coal for power generation. Swiss Re also divested from existing holdings.
“It has been our goal to develop a comprehensive approach to coal underwriting,” noted Swiss Re group chief risk officer Patrick Raaflaub. “This has been a complex task and I am very pleased that we are now in a position to start rolling out our thermal coal policy.”
Reacting to the latest development, Unfriend Coal’s Peter Bosshard said the announcement, coming from one of the world’s “ultimate managers of risk,” sends a strong signal to governments, investors, and financiers that no new coal projects should be developed.
“It will add to pressure on Munich Re and other insurers to end support for a fuel which is inconsistent with the fight against climate change,” commented the campaign coordinator.
For Greenpeace senior finance campaigner Katya Nikitenko, the message is this: “Coal insurance is going out of fashion, and those who still insure it are behind the curve.”
Swiss Re group chief underwriting officer Edi Schmid said the implementation of the coal policy is a major step forward in ensuring that the company’s business activities are aligned not only with the Paris Agreement but also with related national efforts. Schmid added that Swiss Re is working with clients to assist them in adapting to a low-carbon economy.
Lucie Pinson, however, wants more.
The European coordinator of the Unfriend Coal campaign stated: “Swiss Re’s announcement is welcome but it lacks the ambition of Allianz, which committed to phase out coal-related business from all its underwriting and investment portfolio by 2040, as will be required to meet the Paris climate target of keeping global warming well below 2°C and as close as possible to 1.5°C.”
