The Irish Financial Services Regulatory Authority (IFSRA) has said that Hibernian Insurance has acted appropriately in paying €120,000 in compensation to 27 of its customers whose investments were transferred to it through a false agency.

Hibernian said the customers' investments were affected by a false tied agency that operated in 1994-98. Its existence was discovered on foot of an internal investigation that was triggered by a customer query. The false agency operated to benefit an intermediary who was a tied agent to Irish Life and who switched customer policies to Hibernian.

In a statement, Hibernian, which is the biggest insurer in the Republic, said it had informed IFSRA of the situation and that its investigation was continuing.

An IFSRA spokesman said Hibernian had moved to fully compensate affected customers as it would have expected. He added that IFSRA would also be moving to revoke the intermediary's licence.

Hibernian said it established that 27 customers with single-premium policies had their investments transferred from Irish Life to Hibernian through this false agency. "The charges that arose as a result of these transfers were paid by the customers," according to the statement.

Policyholders who were affected would have incurred extra charges when their investments were transferred from one company to another, a practice known as "churning" and which has been outlawed by the industry.

These customers were compensated for the relevant cost incurred and paid interest at a rate of 5 per cent per annum. The payments ranged from €400 to €6,000, according to Hibernian.

"We have moved quickly to investigate any potential impact of the transfers through this agency on policyholders, have apprised our regulator and have contacted all the customers concerned. As a precautionary measure, we have sought to determine if there were other such agencies or if other customers were similarly disadvantaged," it said.

Hibernian is continuing this investigation but said it had not found any other false agencies. "The priority for us has been to ensure that any customer affected has been compensated for the costs incurred. If any further such agencies are discovered, we will follow the same procedures and compensate any disadvantaged customer," said Mr Eoin Byrne, compliance director, Hibernian Life & Pensions.

Customers in the mid-west region are understood to have been among those affected and had originally held policies with Irish Life. Those who agreed to switch from Irish Life to Hibernian did so through the false agency.