The Central Bank has taken action against Alico Life International for breaching insurance regulations, handing down a €3.2 million fine.

Alico, which is owned by US group Met Life, was previously the Irish division of AIG.

The fine relates to a securities lending programme where €138 million of collateral provided by borrowers was invested by the firm's agent in mortgage backed securities. About €42 million in losses was sustained in respect of the investments. Alico then received a capital injection of about €50 million from its parent firm, without which it would have breached its solvency margin requirements in 2008.

Regulators said the firm failed to account for certain receipts of the life assurance business properly, and also did not correctly record certain receipts of the life assurance business.

The breaches were discovered during an inspection in 2009, which led to an investigation by the Central Bank's enforcement division.

The fine is the third largest issued by the Central Bank, with Combines Insurance Company of Europe and Quinn Insurance topping the list.