GENERAL RE UNDER SCRUTINY:

General Reinsurance, a subsidiary of Berkshire Hathaway Inc., has been subpoenaed in an investigation of Reciprocal of America, a former Virginia-based professional liability insurer whose collapse is considered one of the largest insurance fraud cases in that state’s history. The General Re subpoena, issued in October 2003 by the U.S. Attorney for the Eastern District of Virginia, Richmond Division, was noted in a March 2 filing by Berkshire Hathaway with the Securities and Exchange Commission.

Berkshire also reported that in December 2004 and on several occasions since then, the same U.S. Attorney and the U.S. Justice Department requested additional information about ROA and its offshore reinsurer, First Virginia Reinsurance Ltd., and information related to transactions between General Re or its subsidiaries and other insurers.

Four employees of General Re, including a former president, were cited in the subpoenas, Berkshire said.

General Re provided various reinsurance coverages to ROA from the late 1970s through 2002. ROA, which insured doctors, hospitals and lawyers, failed in 2003 after rolling up unpaid liabilities of $450 million. Just last month, two former employees pleaded guilty to using accounting tricks to hide the financial problems from state regulators.

The SEC and state regulators, including New York Attorney General Eliot Spitzer, have been looking into certain reinsurance products that some critics charge are more like loans to hide losses than insurance. In December, Spitzer’s office and the SEC subpoenaed General Re seeking documents relating to its non-traditional products. Berkshire said it and General Re were cooperating with all requests.

Topics USA Virginia Reinsurance