RSA Insurance Group Plc hired former Royal Bank of Scotland Group Plc Chief Executive Officer Stephen Hester to lead the U.K. insurer, as it seeks to put a scandal at its Irish unit behind it.

Hester, 53, succeeds Simon Lee, who quit the London-based insurer in December after injecting a second round of capital into its Irish business within six weeks amid an accounting probe into the unit. Hester, who left RBS in October, will be paid an annual salary of 950,000 pounds ($1.6 million), the company said in a statement today.

“The challenges of recent months have demonstrated that we haven’t lived up to our stakeholders’ expectations and performed to our true potential,” Hester said in the statement.

RSA is seeking to bolster its finances after injecting 200 million pounds into its Irish unit in the fourth quarter of last year. The head of the company’s Irish business, Philip Smith, resigned in November, as the company investigated whether the unit reported the amount of premiums paid to the company earlier than it should have and the timing of when it set aside reserves to cover insurance claims.

Hester is “a well-respected name in the City and he’s done a good job at RBS,” said Barrie Cornes, an analyst in London with Panmure Gordon & Co., who has a sell rating on the firm’s shares. “RSA needs someone with credibility.”

RSA rose 2.9 percent to 99 pence in London trading, giving it a market value of 3.6 billion pounds. Some 1.07 billion pounds has been wiped off the company’s value over the last three months.

RSA’s Capital

Hester will oversee efforts to rebuild RSA’s capital. The company is planning the sale of assets in central and eastern Europe, three people with knowledge of the plan said on Jan. 23. Chairman Martin Scicluna said last month that a review of the company’s capital position was progressing and “all options” were being considered.

At RBS, Hester had to deal with losses in an Irish subsidiary. The U.K. government-controlled lender pumped 14.3 billion pounds into its Dublin-based unit Ulster Bank since 2009 as bad loan losses soared following Western Europe’s worst real estate collapse.

Hester, a former investment banker who joined RBS in 2008 after its rescue, announced his departure in June after the U.K. Treasury pushed the Edinburgh-based bank to shrink its securities unit.

Hester, who replaced Fred Goodwin as CEO, shrank RBS’s balance sheet by more than 900 billion pounds and cut some 41,000 jobs out of 199,800.

Fresh Perspective

American International Group Inc. and Hartford Financial Services Group Inc., the U.S. insurers that received the biggest taxpayer bailouts in the financial crisis, each turned to former bank executives to help their recoveries.

“It’s not as different as he will be told it is,” Liam McGee, who was hired to run Hartford, said in an interview today. “A fresh perspective and a fresh set of eyes is very helpful, and I think employees and partners and other constituents will find it refreshing.”

McGee became CEO of Hartford Financial in 2009, after about two decades at Bank of America Corp. McGee repaid the insurer’s rescue, bought hedges to guard against market fluctuations in Japan and sold units including a life insurer.

“An important perspective to bring to the industry is decisiveness,” McGee said. “I’m a believer in ‘you run through fire, you don’t walk through it.'”

Vision, Flexibility

AIG in 2010 hired Peter Hancock, who had spent 20 years at a predecessor to JPMorgan Chase & Co., where he established the derivatives group and served as chief financial officer. Hancock initially oversaw finance and risk at New York-based AIG and now runs the property-casualty operation, the insurer’s largest business.

“These people were effective because they had a core skill set and a vision and also a degree of flexibility,” said Cathy Seifert, an insurance equity analyst at Standard & Poor’s Capital IQ. “It’s the ability to manage a mature, slower growing, yet very competitive, highly regulated business.”

–With assistance from Zachary Tracer in New York. Editors: Dara Doyle, Steve Bailey