RSA introduces 25% non-audit fee cap

THE AUDITORS of embattled insurer RSA will have a cap put on the amount of non-audit fees they can earn, limited to 25% of the total audit fee.

KPMG, which was brought in to replace Deloitte as RSA auditors, picked up £7.2m remuneration in 2013, of which £2.2m was for non-audit services, according to RSA’s annual report. Some £1.3m of those non-audit services related to the identification of financial and claims irregularities in RSA’s Ireland division.

The previous year had been Deloitte paid £15.7m, of which £9.5m related to business transformation consultancy services, and projects related to regulatory development.

The group audit committee’s report states that the non-audit services policy will “assist with maintaining the independence of the external auditor and its personnel”.

“The policy was reviewed early in 2013 and revised to permit only specifically defined services considered to be audit related to be performed by the auditor, and that all non-audit services must be approved by the committee,” the committee stated in the annual report. “In exceptional circumstances the auditor could be considered for additional services where there is an overwhelming business rationale, but only with board approval.”

Last year, RSA’s internal audit division discovered irregularities within its claim and finance functions, equating to a £70m black hole. Further reviews, including work undertaken by PwC, found issues with the bodily claims department of its Irish division, seeing RSA announcing a £128m reserve strengthening.

RSA has also launched its £773m rights issue, in a bid to restore its capital position and protect it against further headwinds.

Stephen Hester, CEO, RSA said: “Following a comprehensive review of the options available to RSA, the board believes that the rights issue will enable the group to restore its capital position and keep ahead of anticipated industry capital trends, and that this will allow the business to carry out its action and improvement plans without undue risk of suboptimal decisions forced by capital shortage or instability.”