British Insurer Names R.B.S.’s Former Chief as Its C.E.O.

LONDON - The British insurer RSA Group said on Tuesday that it had tapped the former chief executive of the Royal Bank of Scotland as its top executive two months after the insurer announced a huge hole in its balance sheet.

Stephen Hester, who took the helm at R.B.S. after a government bailout in 2008, will assume the role of chief executive immediately.

He replaces Simon Lee, who stepped down in December after the insurer said for the second time in just over a month that it would have to significantly increase the reserves for its Irish business and again warned that its profit would be lower. Mr. Lee was named RSA’s chief executive in August 2011 after eight years with the insurer.

“I am extremely pleased that Stephen is joining RSA as our new chief executive. He is an exceptional business leader with extensive global financial services expertise,” said Martin Scicluna, RSA’s chairman. “He has an outstanding track record of transforming the performance of businesses, bringing new energy and focus and implementing a challenging agenda to ensure significant value is delivered for customers and shareholders.”

In December, RSA said it would need to strengthen the reserves for its Irish operations by an additional 130 million pounds, or about $211.8 million, primarily because of increased potential for bodily injury claims by customers with automobile and liability policies.

The company said in early November that it would have to add £70 million to its reserves because of irregularities uncovered in its claims and finance operations in Ireland, and that it had suspended three top executives in it Irish business amid an accounting investigation.

“The challenges of recent months have demonstrated that we have not lived up to our stakeholders’ expectations and performed to our true potential,” Mr. Hester said in a statement on Tuesday. “We have an obligation to deliver shareholder value and excellent products and services that provide everyday protection for our customers.”

Mr. Hester will receive an annual salary of £950,000.

He was named the chief executive of R.B.S. in October 2008 and left the bank last September. He was previously chief of the real estate investment trust British Land and chief operating officer of Abbey National, which is now part of the Spanish lender Banco Santander. He spent 19 years at Credit Suisse in New York and London.

After the company said in early November that its operating results would be £70 million lower than market expectations because of the accounting irregularities, Philip Smith, the chief executive of its Irish business, was suspended by the insurer and later resigned. Mr. Smith has said that he is being made a “fall guy.”

Two other executives were dismissed in January following an internal investigation.

In December, RSA said it would inject £135 million of capital into its Irish unit to ensure that the business’s solvency ratio is maintained above 200 percent.

Following a review by PricewaterhouseCoopers, the company said that the issues were isolated to its Irish business.

RSA was created in 1996 by the merger of two of the largest British insurers, Royal Insurance and Sun Alliance. Their combined history dates back more than 300 years, with the Sun Insurance Office being formed in 1710 and later merging with Alliance Assurance in 1959.

The company employs about 23,000 people worldwide and wrote £8.4 billion in net premiums in 2012.