Specialty insurer CBL Corp will make a large full-year net loss, impacted by costs of $144 million following a review of its Securities and Financial Solutions Europe business, it says.
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The company, which offers specialist insurance for the construction industry, said it expected a full year loss of between $75m and $85m in the year ended December compared with 2016's net profit of $30.7m.
The review was sparked by the collapse of large Gibraltar-based insurer Elite Insurance, which had been writing policies for CBL until July last year.
CBL said it needs to add $100m to its reserves to cover claims arising in its French construction business, which had been short-funded by $10m last year, and $90m for previous years.
"The reserve strengthening is required and although disappointing, clearly the recommended levels of reserving for our French products have been too low in the past," said chief executive Peter Harris.
As well, it found some accounting discrepancies in the European business, which will cost $44m to square-up.
As a result, CBL said it was considering a capital raising to strengthen its reserves and return to profitability.
However, Mr Harris said the outlook for 2018 was positive, with strong revenue growth expected to continue.
"The group has performed well during the second half of 2017 with all companies showing significant and profitable growth in existing markets, expansion into new markets, focused on short tail business enabling a greater balance in our portfolio."
Revenue was expected to be up 35 percent in 2017, to $440m.
The Reserve Bank was also conducting a review of the Elite business, which CBL expected would support its decision to increase its captial reserves.
Mr Harris said the review process had some upside in identifying potential improvements in claims processing, which could result in a savings of more than 40 percent a year.
