Investigative subpoenas have been issued by Florida Insurance Commissioner Kevin McCarty probing the dealings of 17 reinsurers selling finite risk policies.
The companies on the receiving end of the subpoenas, including several Bermuda-based companies and those with offices on the island, were: ACE Tempest Re, Acordia Re, AIG Reinsurance, Alea
London Limited, Benfield Re,
BIG Re, Chubb Atlantic Reinsurance Specialist Ltd., E&S Reinsurers Ltd., Guy Carpenter, Hannover Re Ltd., Hannover Ruckversicherungs-Atiengell-schaft, Jardine Sayer, National Indemnity Company of the
South (a subsidiary of Berkshire Hathaway), National Union Fire Insurance Company of Pitts-burgh, Pa. (a subsidiary of AIG), Partner Reinsurance Company of the U.S., Swiss Rein-surance American Corporation and Transatlantic Reinsurance Company (an AIG subsidiary).
In recent months scrutiny has turned to finite risk policies including a high-profile investigation of AIG’s use of this type of reinsurance, with authorities probing whether companies might be
misusing finite risk as more of a loan vehicle than a risk transfer mechanism.
Florida’s insurance regulators are one of the regulatory bodies probing AIG’s use of finite risk policies with state regulators in Tallahassee taking on the commercial insurance giant in a trial regarding a finite reinsurance deal.
The improper use of finite reinsurance can hinder the ability of insurance regulators and the public to ascertain and assess the true financial condition of an insurer, Florida authorities said.
McCarty said the subpoenas were issued by Florida as a way of clarifying certain financial questions that have arisen related to reinsurance transactions. “Con-sumers and regulators must be secure in the knowledge of an insurance company’s solvency.”
Finite reinsurance that does not transfer risk has contributed to the failure of several insurance companies in Florida and the United States, Florida regulators said.
The Florida Office of Insurance Regulation said it was participating in efforts by the National Association of Insurance Commissioners to develop a nationwide solution to problems created by the abuse of finite reinsurance products.
In related news, a June 1 hearing date has been set for a reinsurance unit of Bermuda-based White Mountains to meet with Florida regulators following allegations the unit was selling insurance in the state without a license.
According to The Royal Gazette, the hearing date was set after Sirius International Insurance Corp., a subsidiary of White Mountains Re, was issued a notice by the Florida Department of Insurance Regulation. Sirius is a non-admitted insurer selling expatriate medical coverage through an exclusive arrangement with Indianapolis, Ind.-based managing general agency, International Medical Group.
“It [the notice] does relate to the health insurance policies written by Sirius through IMG” Steve Fass, White Mountains Re CEO told The Royal Gazette. “We are cooperating with the department. We will be providing them with any information they need, attending the hearing and possibly discussing some of their issues in advance.”
In a telephone interview, White Mountains Re general counsel Don Emeigh told The Royal Gazette Sirius had applied for permission to sell insurance in Florida but getting the license was conditional on certain requirements made by state regulators. White Mountains trades on the New York Stock Exchange and has a secondary listing on the Bermuda Stock Exchange having redomiciled to Bermuda from Delaware in 1999. It sells insurance and reinsurance around the world, and has total net assets of about $19 billion.
One of the company’s largest shareholders is General Re-New England Asset Management, a division of insurance titan Warren Buffett’s Berkshire Hathaway.
Buffett sat down with New York attorney general Eliot Spitzer, representatives of the U.S. Securities and Exchange Commis-sion and others from the U.S. Department of Justice earlier this month to answer questions about
a finite risk policy between Gen
Re and the American Interna-
tional Group that has come under scrutiny.
Topics Florida USA Legislation Reinsurance AIG
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