Aviva Life & Pensions Ireland Limited

Background The Central Bank‟s Insurance Directorate conducted a survey into the use of liquidity swaps among high and medium high impact insurance undertakings. As a result of information gathered during the survey and a further information gathering exercise, the Central Bank carried out an inspection of the Firm‟s use of liquidity swaps. As a result of information gathered during this inspection, the Central Bank became aware of the details of the Firm‟s stock lending activity and discovered these breaches. The Firm‟s stock lending activity was performed by an investment manager within the Aviva group pursuant to an investment management agreement. The Firm’s stock lending Failure in adopting an adequate investment policy or adequate investment objectives and failure to impose sufficient parameters on its investment managers 1. In November 2000, the Firm entered into an Investment Management Agreement („the IMA‟), with Hibernian Investment Managers Limited (currently known as Aviva Investors Ireland Limited („AIIL‟)), a member of the Aviva Group. 2. Following an amendment to the IMA in 2002, AIIL entered into a further outsourcing contract with another of the Aviva Group companies, Morley Fund Management Limited (currently known as Aviva Investors Global Services Limited („AIGSL‟)) for the performance of stock lending activities. 3. The Firm failed to adopt an adequate investment policy or adequate investment objectives in relation to stock lending. The Firm also failed to impose sufficient parameters for the performance of the stock lending activities on its Investment Manager, AIIL. 4. The Firm updated its investment policy in 2009.