RSA says ex-Irish boss failed to set aside enough money to cover claims

By Conor Humphries

DUBLIN, March 11 (Reuters) - Former RSA Ireland boss Philip Smith failed to set aside enough money to cover potential insurance claims, contributing to the British insurer having to inject 200 million pounds ($302 million) into its Irish arm in 2013, a lawyer for RSA said on Wednesday.

RSA blamed a handful of executives at the division for accounting irregularities that led to the group overstating its profits in Ireland (Other OTC: IRLD - news) and required it to tap shareholders for cash to plug the hole in its finances.

Smith, pursuing a constructive dismissal case against RSA in Dublin this week, has said he was directed by RSA group executives to release over 250 million euros in reserves over several years to support underperforming parts of the wider group.

Smith said the policy of tapping into surpluses generated by the Irish unit meant it did not have a financial cushion when problems were uncovered in 2013.

Quoting a draft report from an RSA internal probe into the issues, Brian O'Moore, lawyer for RSA, said on Wednesday that Smith authorised a "catastrophic level of under-reserving".

The report found RSA Ireland's so-called "large claim" reserves were consistently under-reserved by about 10 million euros between 2008 and 2013, O'Moore said.

He cited internal auditors as saying that the informal processes to set reserves were contrary to a number of company policies.

Smith, who resigned in late November 2013 after being suspended while the company investigated accounting procedures at its Irish business, said he didn't have an "intimate knowledge" of all of the relevant policies.

He said he also disagreed with O'Moore's assertion that there was a "catastrophic" level of under-reserving. (Writing by Padraic Halpin; Editing by Mark Potter)