The bombshell was disclosed to investors in a note in the company's remuneration report, released on Monday, which said the company's board found that "some recent personal decisions by the CEO have been inconsistent with the board's expectations".

QBE's code of conduct states that employees must disclose to their manager any close personal relationships that may cause a conflict of interest and that "depending on the nature of the conflict or potential conflict, action will be determined on a case-by-case basis".

Mr Neal told journalists on Monday that he had not been "timely in disclosing to the board a personal relationship".

He gave no answer when asked when he told the board about the relationship and how long it had been going when he disclosed it.

"It's a deeply private matter and I really don't want to speak about it further," he said.

"It's been properly disclosed in the annual report. It's a material amount [of money] for me, I've understood it, I've accepted it, but it was not my decision."

The $17 billion company's CEO was set to receive a $2.76 million short-term incentive for 2016. The 20 per cent penalty brings the number down to around $2.2 million. His total remuneration in 2016 was $3 million.

Mr Neal said the relationship had not affected any business decision he had made as the head of the insurance giant.

"I am truly sorry that something that is so deeply private has become public knowledge," he said.

The remuneration report states the board found Mr Neal had a "commendable year and delivered a strong full-year result fro QBE. His performance is well regarded by the board."

Mr Neal said an independent audit of his office had found no inappropriate expenditure and he had not offered his resignation to the board.

Mr Neal would not say if he informed the board before or after chief operating officer Colin Fagen's sudden exit from the company on February 9, or why Mr Fagen had departed.

The company's remuneration report said Mr Fagen's annual bonus had "not been determined". Mr Neal said that was a "personal matter between the company and Colin Fagen", which was not of concern to shareholders "at this stage".

The QBE board's decision to punish Mr Neal over his affair follows the controversy surrounding Seven boss Tim Worner and his relationship with Seven executive assistant Amber Harrison.

Mr Neal is married but separated from his wife. The executive assistant is currently still at QBE but is understood to be leaving the company of her own volition.

It is understood Mr Neal started the affair with his assistant last year but did not report it to the board until January.

The news overshadowed a strong result from QBE, which announced a $1 billion share buy-back after reporting a 5 per cent jump in annual after tax net profit, at $844 million.

Corporate governance expert Dean Paatsch​, director of proxy adviser Ownership Matters, said personal relationship disclosures were needed to avoid employees receiving, or being perceived to receive, special treatment due to romantic links.

"The standard you set for others is the standard you should hold to yourself, so he's paid the price for that," Mr Paatsch said. "But while the rest might be titillating it's not material to investors."

QBE will pay a 33¢ dividend, up from 30¢ last year.