UK Head Suspended

Munich Re Investigates U.K. Unit

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Ergo has suspended the CEO of its DAS Legal Expenses U.K. unit, Paul Asplin, right. On the left, Ergo CEO Torsten Oletzky.
  • Why it matters

    Why it matters

    The investigation at Munich Re’s U.K. insurance unit, if it uncovers wrongdoing, has the potential to undermine sales in Britain and cause problems for corporate parents Ergo and Munich Re.

  • Facts

    Facts

    • Munich Re’s British subsidiary DAS has suspended its local chief executive, Paul Asplin.
    • Internal risk and compliance managers found clues, which require an investigation.
    • In the past, Munich Re subsidiaries were embarrassed by prostitute visits by employees.
  • Audio

    Audio

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Something might be wrong at DAS UK, a legal expenses insurer that is part of Munich Re’s insurance group Ergo.

In a brief statement this week, Ergo and its British subsidiary said Paul Asplin, the chief executive of DAS Legal Expenses Insurance Company Ltd., had been suspended pending an internal investigation.

The inquiry focuses on relations between the insurer and one of its service providers, sources familiar with the matter told Handelsblatt, without being more specific.

An Ergo spokeswoman, Uta Apel, declined to comment, saying the investigation was ongoing.

Düsseldorf-based Ergo, a European insurer that sells life, health, property and other insurance, and its parent company Munich Re, are keen to get to the heart of the matter following a series of embarrassing scandals involving employees uncovered by Handelsblatt in 2011.

The newspaper reported that managers at an Ergo unit in 2007 had spent a night, called “Party Total”, with 20 prostitutes in a thermal bath in Budapest and had expensed the costs. Brothel visits also took place at the Spanish island Mallorca and on Jamaica, the paper reported.

Ergo also in 2011 acknowledged that some German customers had been overcharged for insurance.

“Possibly it’s a signal of corporate culture,” said Bernd Banke, a professor of business at Reutlingen University. “The good thing is that they do react. On the other hand I’m wondering why he has been suspended.”

 

Ergo-WTB-CEO-Torsten-Oletzky
-WTB-CEO-Torsten-Oletzky

The problems at Ergo, which had premium income of €18 billion last year compared with €51 billion for Munich Re as a whole, may be related to the multiple subsidiaries that Ergo has accumulated since the firm was created by the merger of four insurers in 1997.

DAS UK, which had an operating profit of 12.1 million pounds ($19.4 million) on income of 200 million pounds last year, was established as a joint venture in 1975 and is owned by DAS, which like its parent is based in Munich.

To manage the investigation and DAS UK, Ergo last week appointed three managers from Ergo and Munich Re to the British subsidiary’s board of directors, Bob Screen, head of marketing at DAS UK, said in an e-mail.

Ernst & Young is supporting Ergo to investigate the matter, sources familiar with the matter told Handelsblatt.

The British regulators have been informed about Mr. Asplin’s suspension, Ergo and DAS said in statements on their Web sites. Relieving the chief executive from his duties is a standard procedure during an investigation to protect the person involved and the company, Ergo said.

Mr. Asplin declined to answer questions when contacted by Handelsblatt.

 

Ozan Demircan is an investigative reporter for Handelsblatt in Frankfurt, specializing in Germany’s insurance industry. Lára Hilmarsdóttir reports on companies and economics for Handelsblatt Global Edition in Berlin. Gilbert Kreijger is an editor for the Global Edition and has covered companies and markets across Europe. To contact the author: o.demircan@vhb.de, Kreijger@handelsblatt.comL.Hilmarsdóttir@vhb.de 

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