Brazilian Superintendence of Private Insurance imposes over BRL 1 million in fines and disqualifies an auditor over EY’s actuarial audit of IRB Brasil Resseguros

The Brazilian Superintendence of Private Insurance concluded its review of two administrative sanctioning proceedings tied to the independent actuarial audit of IRB Brasil Resseguros S/A’s financial statements as at 31 December 2019, imposing penalties on Ernst & Young Serviços Atuariais S/S (EY) and three professionals involved in the engagement for suspected breaches of regulatory requirements. The decisions were taken by SUSEP’s Board of Directors in a confirmation review of judgments issued by the General Coordination for Special Regimes, Authorisations and Judgments (CGRAJ) and remain subject to appeal. SUSEP’s analysis indicated that the actuarial audit did not apply sufficient diligence to the assessment of IRB RE’s technical provisions, and that documents and information available at the time could have pointed to inconsistencies that were not properly reflected in the actuarial opinion. In one proceeding, the Board identified elements indicating deficiencies in assessing the adequacy of the Outstanding Claims Provision (Provisão de Sinistros a Liquidar, PSL) and the PSL “Legal Cedents”. In the other, it found indications that the actuarial opinion was issued before relevant analyses were completed and without reservations regarding information still pending clarification. Penalties included fines exceeding BRL 1 million and the disqualification of one auditor from holding a position or function for 4.4 years (1,606 days). EY was held jointly liable for payment of the fines applied to the professionals.