LONDON May 8 Britain's market watchdog fined the European arm of one of Japan's biggest insurers 3.3 million pounds ($5.3 million) for serious corporate governance failings, as it takes a tougher stance on enforcement.
The former executive chairman, Yohichi Kumagai, who ran Mitsui Sumitomo Insurance Co's London arm, was also banned from working in the City of London and personally fined 119,303 pounds.
The fine is among the largest the Financial Services Authority (FSA) has handed out to companies in recent months. It slapped an 8.75 million pound fine on Coutts bank in March, and a 3.6 million pound penalty on Greenlight Capital in February.
Fines have been increasing sharply as part of the FSA's "credible deterrence" policy.
The FSA said Kumagai failed to ensure that Mitsui Sumitomo Insurance Europe (MSIEu) had the right expertise to oversee rapid expansion into activities beyond its core area of selling insurance to Japanese companies in Europe and the Middle East.
The regulator, cracking down on companies that fail to manage risk, criticised Kumagai for not hiring a chief underwriting officer.
The company breached three of the watchdog's principles for business, including failing to take reasonable care to organise and control Mitsui's European operations responsibly.
"Kumagai failed to respond adequately to the changing risks facing his business even after they had been pointed out by the FSA," said Tracey McDermott, acting FSA director of enforcement.
"If those who hold senior positions in financial services firms had had any doubt about how seriously we view their regulatory responsibilities this fine and ban should make our position crystal clear," McDermott said.
MSIEu is part of the world's seventh largest non-life insurer with assets of over 85 billion pounds.
It said in a statement that since early 2011 it has undertaken substantial steps to improve internal controls and corporate governance at MSIEu, including a new chief executive, two independent non-executive directors and a general counsel.
Martin Webster, head of corporate governance at Pinsent Masons lawfirm, said the penalties were being imposed without the need for the FSA to point to a specific breach.
"We are seeing the regulator increasingly acting on the basis of much woollier principles which leave less room for argument," Webster said.
The FSA said the fines were cut by 30 percent after Kumagai and the company agreed to settle at an early stage. MSIEu said Kumagai's resignation was agreed as soon as the watchdog's probe began.