The European life assurance and pensions arm of the AXA Group has been fined €3,640,000 by the Central Bank for a series of regulatory breaches.
The three infringements, which relate to failures around risk management systems and conflict of interest policies and procedures, have been admitted by AXA Life Europe (ALE) DAC.
It was fined €5.2m but this was reduced by 30% to €3.64m under the early settlement discount scheme which is part of the regulator's Administrative Sanctions Procedure.
"It is important that firms identify, assess and manage the risks to which they are or might be exposed, to ensure that they can meet their commitments to consumers," the Central Bank's Director of Enforcement and Anti-Money Laundering Seána Cunningham said.
"ALE’s weak internal control framework meant that it failed to identify and monitor a cohort of policies in relation to which policy related documentation was unclear, despite having been made aware of concerns in this regard," Ms Cunningham said.
"This failure meant that ALE was unable to inform its policyholders of information which was relevant to them," she added.
ALE is an insurance business authorised by the Central Bank to sell life insurance, but the reprimand arose from a probe related to policies sold by a German branch of the company.
The German entity was set up in 2006 and sold an insurance product called TwinStar until 2012 when ALE ceased underwriting the policies, before the German branch was closed two years later.
Around 350,000 policies had been sold in Germany and around 203,000 of those remain active.
When the policies first went on sale between 2006 and 2007, there was a reference in the documentation to a Parental Claims Guarantee provided by ALE’s parent, AXA SA.
ALE was not able to participate in the German insolvency protection scheme and the guarantee gave it the funds it needed to pay all outstanding German policyholders claim liabilities in the event it was unable to do so itself.
The guarantee was never actually called upon and while AXA SA deemed it terminated in 2011, a replacement guarantee has since been put in place.
The German Federal Financial Supervisory Authority, BaFin, wrote to ALE's German branch in 2006 and told it that the references to the guarantee in some of the documentation inferred a higher level of security than was actually been provided.
Twelve years later, in 2018, when the sale of ALE was being considered, the Central Bank discovered that policy documentation for 2006 and 2007 may not have been updated to make clear the conditional nature of the guarantee, despite the BaFin warning.
This led the Irish regulator to begin an investigation, which subsequently discovered ALE's risk management systems had failed over a 13-year period.
It established that the business had not put in place an effective process to identify, manage, monitor and report the risks in around 30,000 TwinStar policies.
This is because in around 80% of these it had not been made clear that the guarantee was conditional.
The probe also found that ALE did not establish effective conflict of interest policies and procedures, nor did it conduct an adequate assessment of potential conflicts when its board considered the guarantee issues in July 2018.
"Firms must also manage conflicts of interest appropriately and establish and apply robust mechanisms for doing so," Ms Cunningham said.
"Conflicts of interest are an inherent risk to all regulated entities and, when not properly managed, they pose a risk to consumers and diminish market integrity," she said.
"In this case, ALE's failure to implement effective processes and procedures to manage conflicts of interest, meant that it did not give adequate consideration to potential conflicts of interest," she added.