SEC issues further finite reinsurance subpoenas
The Securities & Exchange Commission issued more subpoenas to US insurers yesterday as it continues its investigations into the industry’s use of finite reinsurance.
On the 2 May General Electric said its insurance arm had received a subpoena from the SEC’s New York office seeking information relating to “certain loss mitigation insurance products”.
The reinsurance specialist said that the company, its corporate audit staff and auditor KPMG LLP have examined the company’s use of the products and are “confident that Insurance Solutions' risk transfer agreements have been properly structured, properly accounted for with appropriate risk transfer, and properly disclosed”.
The company added that it would cooperate with the SEC. Last week GE Insurance Solutions saw its senior debt ratings cut from A1 to Baa1 by Moody’s, while the financial strength ratings of Employers Reinsurance Corporation were also cut from to A1 from Aa2, with the rating agency citing concerns about the operating performance, ongoing profitability in a softening market and the parent GE’s commitment to the company.
Separately, Bermudian insurer XL Capital said on the 2 May that it had received a subpoena from the SEC relating to its use of loss mitigation products.
The SEC, together with the New York attorney general Eliot Spitzer, also issued subpoenas last week to European reinsurers Munich Re and Converium. The demands for information were in relation to the companies’ involvement with financial guarantor MBIA Inc. Earlier this year, MBIA restated its earnings for 1998-2000 to correct the accounting for reinsurance contracts it entered into with Converium (then trading as Zurich Reinsurance North America).
While in Florida, insurance commissioner Kevin McCarty issued 17 subpoenas to reinsurers selling finite reinsurance policies last week.