When insurer CBL collapsed last year costing shareholders nearly $750 million, investors found they had been kept in the dark about the true state of the company. Now a report has found the Reserve Bank, which regulates the insurance and banking industry, first had suspicions about CBL’s financial strength in 2013 but lacked the resources, and experience to investigate and did not actively pursue its concerns until 2017. The report also found the Reserve Bank should have prevented CBL from listing its shares on the NZX in 2015 until the insurer had increased its capital, a move which could have prevented CBL’s collapse. CBL Insurance was not a household name, but it was the main asset of a $750 million company listed on the NZX sharemarket which specialised in selling builders’ warranties in New Zealand and France, which homeowners believed would pay to fix their homes if faulty workmanship was found. READ MORE: * Reserve Bank orders review after CBL Insurance liquidation * Call to protect KiwiSaver exposed to $750 million CBL insurance failure * Insurance failure prompts questions about Reserve Bank monitoring * CBL Corporation, once worth $750 million, put into liquidation * Thousands of recently built homes covered by guarantees from CBL * Rich lister pulls out of entrepreneur of the year awards amid company troubles​ But when CBL hit trouble in early 2018 after claims in France began to rise, the company revealed the Reserve Bank had been investigating it for months and had issued confidentiality orders that prevented the insurer telling the market. That left investors, included many KiwiSaver funds, buying and selling CBL shares without full knowledge of the state of the company, as well as leaving New Zealand homebuyers paying premiums on building warranties they would never be able to claim on. In mid-2017 CBL was valued at $747m, while today its shares have no value. As anger mounted, the Reserve Bank ordered a review of its handling of CBL by Australian John Trowbridge, who made headlines in Australia by calling for the banning of insurance commissions, and Mary Scholtens, QC. Trowbridge and Scholtens found the Reserve Bank already had concerns about CBL as early as 2012, but it was correct to grant it an insurance licence with the intention of following up on its concerns afterwards. But between 2014 and 2016 the Reserve Bank did not act on its suspicions. It did push for CBL to beef up its balance sheet as part of its 2015 float on the NZX sharemarket, and CBL agreed to hold more capital against future claims. But, Trowbridge and Scholtens said: “We believe that the bank should have considered using its position as prudential regulator of CBL in 2015 to deter CBL Corporation from … listing on the NZX before the bank had been fully satisfied on its reserving and solvency concerns.” “The bank was raising important unresolved issues with CBL in 2016 but it was not exerting any particular pressure on the insurer to respond with urgency or comprehensiveness on these issues,” they found. From 2017 the Reserve Bank was more decisive, launched an investigation into CBL, and it became evident that CBL had been indisputably consistently under-capitilised since before its licensing in 2013, Trowbridge and Scholtens said. By the end of 2017 was insolvent, they concluded. The Reserve Bank failed in its handling of CBL because its insurance team in the early period of regulating CBL “comprised a small team of people operating a new regime, with significant other work arising, in particular, out of the Canterbury earthquakes”. “Because CBL’s business was almost entirely offshore, its impact on the NZ insurance sector and the economy was seen as low and the resources to be allocated to it needed to be balanced against other priorities.” But the report also found the Reserve Bank had acted “appropriately” by keeping its concerns and investigations confidential, but it said: “The bank is effectively duty bound to resolve those concerns as early as possible. If there is substance to the concerns, the bank is then in a position at an early time to say so publicly itself.” The report recommended law changes to beef up Reserve Bank powers, but also recommended: “When in doubt about an insurer’s financial soundness, the bank should take steps, in the interests of policyholders and the public, to investigate the company without delay and to resolve the doubts as quickly as possible.”