CBL directors failed to disclose the true state of the insurance company for several years, while new details have emerged about the financial backing of a suspected South American drug kingpin, a court has heard.

CBL Insurance, a subsidiary of CBL Corporation, was put into liquidation by the Auckland High Court at 3pm today after directors withdrew their opposition to the Reserve Bank's application.

But not before the Reserve Bank's lawyer delivered a scathing statement outlining the central bank's rationale for the liquidation order.

Nathan Gedye QC told the court CBL Insurance's solvency position has deteriorated further since interim liquidators were appointed in February after the Reserve Bank became concerned out the state of its assets.

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An attempt by CBL directors Peter Harris and Alastair Hutchison to come up with a restructuring plan had fallen well short, leading major creditors, including European insurers Alpha and Elite, to support the liquidation.

Gedye said a recent "surprising" discovery of three large bonds totalling $200 million coupled with an uncertain and volatile creditor landscape and incomplete assessment of New Zealand policy holders added to the need to appoint liquidators.

The existence of substantial new creditors "paints CBL in a worse light", he said at the abbreviated hearing before Justice Patricia Courtney.

Moreover, further analysis of CBL Insurance's balance sheet showed massive breaches of the required solvency margin for insurance companies dating back to 2013, before the parent company floated on the stock exchange.

Citing recent affidavit evidence from Geoff Atkins, principle of Australian-based Actuary Finity Consulting, Gedye highlighted how CBL Insurance's balance sheet was insolvent by $86.6m in 2013, $102m in 2014, $104m in 2015 and $98.6m in 2016.

The company's solvency position as at December 2017 was 25 per cent compared to the ratio required by direction of the Reserve Bank of 170 per cent and the required 100 per cent under licence, a shortfall of $136.5m.

"The Reserve Bank's belief is that the company and its directors have failed to disclose the true state of the company for many years," Gedye said.

"These insolvencies, according to Mr Atkins, pre-dated the IPO and they certainly bear directly on the disclosures made to the Reserve Bank both to acquire and hold its licence and in every ISR return that was made.

"The bank's view is that based on Mr Atkin's evidence, the information provided to the bank was dishonestly incorrect and that there is a consistent pattern to it over the years 2013 to 2017 and it's important for liquidators with all of their powers to investigate as far as they are permitted to do so by law and make recoveries as required by law.

"The potential amounts involved are obviously large this level of under reserving and insolvency was in place for those years.

"The recent emergence of three large bonds totalling $200m were never disclosed to the bank and only come to light in the last couple of months."

El Toro funding

Gedye went on to highlight two mysterious investments made by CBL entities, including a 12.5m euro investment in the National Bank of Samoa and financial backing to a Peruvian goldmine business, named El Toro gold mine, which was owned by a Peruvian company, Minera Santa Marina (MSM).

The principal of MSM was Fidel Sanchez, also referred to as Fidel Sanchez Alayo. Sanchez was a member of the Sanchez-Paredes family, and he and others had been charged in April 2010 with money laundering offences in Peru, the Reserve Bank's submission stated.
Subsequent media reports detailed his alleged involvement in trafficking of cocaine to the US and money-laundering.

Gedye said CBLI still held an indirect shareholding in the mining company and was paid $US600,000 in dividends, which liquidators need to be aware of.

Attempts by CBL Insurance legal team to suppress the Reserve Bank's submissions failed when Justice Courtney lifted confidentiality orders and allowed Gedye to give his statement in open court.

While Harris and Hutchison had earlier stated their attempts to work up a deed of company arrangement, or restructuring plan, as an alternative to liquidation, no finalised details of that were presented to the court.

A draft proposal presented to the administrators of CBL Corp was short on detail, vague in deliverables and required the continuing involvement of Harris in the company, Gedye said.

The Reserve Bank's conclusion was it could never have been confidently asserted, absent massive funding beyond the $20m the directors claimed they would contribute, that the company could go into a solvent run-off.

Furthermore it would have stopped liquidation recoveries and the terms of the draft specified no actions against parties who might be liable or the ability to bring voidable transactions.

Kare Johnstone and Andrew Greenfell have been appointed permanent liquidators.

In a statement to media, CBL director Peter Harris said they decided to withdraw their opposition to the liquidation when two major creditors, Alpha and Elite, agreed to support it. He said efforts to advance a restructuring plan were "scuttled" by the Reserve Bank, which they said was focused on liquidation.

"Putting the litigation behind us now enables us to keep on with our plans for the restructure of CBL Corporation which is expected to go to shareholders late next week," said Harris, "and we will work with the liquidator to try and optimise the outcomes for New Zealand policyholders."

The Financial Markets Authority said it was aware of the interest in its investigation.

"Given the complexity of the issues and the involvement of other agencies, the investigation process is likely to take some time," the FMA said.

"The FMA is dedicating the required resource to ensure this matter is progressed in a timely way while maintaining the integrity of the investigation.

"We continue to liaise with the Reserve Bank of New Zealand and Serious Fraud Office, the voluntary administrator of CBL, the liquidator of CBL insurance as well as overseas regulators."