French insurer Axa has reportedly been contacted by The New York Attorney General’s Office and the U.S. Securities and Exchange Commission regarding prior transactions its reinsurance body had with bond insurer MBIA.
Axa Re, which said it fully plans to cooperate with the requests for information, noted that the transactions related to the 1998 $1 billion-plus bankruptcy of Pennsylvania non-profit hospital group Allegheny Health, Education and Research Foundation (AHERF), as well as non-traditional products.
The subpoena notices are part of a growing probe into MBIA, a U.S. municipal bond insurer.
U.S. authorities are reportedly looking into reinsurance deals MBIA made related with a $170 million loss it had in 1998 on $265 million in MBIA-insured bonds issued by AHERF, along with “loss mitigation” insurance products MBIA sold.
Axa Re, Munich Re and Converium, previously operating as Zurich Reinsurance North America, were MBIA reinsurers in 1998.
Axa Re provided reinsurance to Converium on reinsurance Converium had itself given to MBIA, according to MBIA. Axa Re said it had a verbal deal with MBIA for MBIA to replace it as a reinsurer to Converium by October 2005, according to MBIA.
Just a month ago, MBIA reported it appears likely that such an agreement was alive between it and Axa Re, leading it to restate its 1998 results. Converium reported that it accounted for the MBIA contracts and had no knowledge regarding any verbal pacts MBIA had.
Axa Re and Munich Re also reportedly had deals in place with MBIA to reimburse MBIA for $100 million of its AHERF losses. MBIA also reportedly took part in quota share agreements with Axa Re and Munich Re that involved a commitment to cede business to both of them.
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