Alico Life International Limited

Background The Central Bank’s Insurance Division discovered these breaches during an inspection of the firm in July 2009. Following this inspection, an examination into these was conducted by the Central Bank’s Enforcement Division with the assistance of the Insurance Division. As a result of information gathered during this examination, the Central Bank became aware of the details of the firm’s securities lending activities and their impact. The firm’s securities lending 1. The firm entered into a Securities Lending Agency Agreement on 9 February 2007 whereby through an investment agent it loaned securities held within the firm’s portfolio to various borrowers. 2. Prior to entering into the Securities Lending Agency Agreement and in breach of its internal asset management policy, the firm failed to seek the approval of its investment committee. 3. From April 2007 to 24 July 2009, the agent on behalf of the firm, loaned securities representing approximately €500 million of the life assurance fund assets supporting unit linked policies. This represented approximately a quarter of those assets in each of the years 2007 and 2008. 4. The Board of the firm was unaware of these investments until 23 April 2008 by which time significant unrealised losses on securities lending had already accrued. Securities lending receipts 5. The borrowers paid the firm a lending fee for use of the loaned securities and also provided collateral as security for the loan of those securities. 6. Receipts generated by the loan of these securities were not attributed to the firm’s life assurance business fund. Losses arising from securities lending 7.