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Insurance industry

General Reinsurance Corp. Faces Intensifying Reinsurance Probe

Strategic Insights

— 2 min read

The General Reinsurance Corp. is grappling with growing regulatory scrutiny over its use of finite reinsurance transactions. Investigations by U.S. regulators have attracted international attention, threatening the careers of several executives. The reinsurer's London-based subsidiary, Faraday Group, has placed its chief executive officer on administrative leave, while another executive has received a "Wells notice" from the U.S. Securities and Exchange Commission, indicating that an enforcement action is likely. Additionally, the Irish Financial Services Regulatory Authority is investigating General Re's Cologne Reinsurance Co. subsidiary, while the German Federal Financial Supervisory Authority is inquiring into Kolnische Ruckversicherungs-Gesellschaft A.G.

Key Takeaways:

  • The U.S. Securities and Exchange Commission has issued a "Wells notice" to an unnamed General Re executive, indicating that an enforcement action is likely.
  • The chief executive officer of General Re's London subsidiary, Faraday Group, has been placed on administrative leave.
  • The Irish Financial Services Regulatory Authority is investigating General Re's Cologne Reinsurance Co. subsidiary and its finite reinsurance transactions.
  • The German Federal Financial Supervisory Authority is inquiring into Kolnische Ruckversicherungs-Gesellschaft A.G. regarding finite reinsurance and transactions with American International Group.
  • Former General Re executives are also being investigated, including Elizabeth A. Monrad, who was granted a leave of absence after receiving a Wells notice from the SEC.
  • General Re's use of finite reinsurance transactions has been deemed "unacceptable" by the Irish financial regulator.
  • The company's Best's Financial Strength Rating of A++ (Superior) has not been affected by the ongoing investigations.

Statistics:

  • $500 million: The value of a finite reinsurance deal between General Re's Cologne Reinsurance Co. and American International Group that AIG has acknowledged wasn't a proper risk-transfer arrangement.
  • 1 executive: The number of General Re executives placed on administrative leave, including the CEO of Faraday Group.
  • 1 investigation: The number of investigations by the German Federal Financial Supervisory Authority into Kolnische Ruckversicherungs-Gesellschaft A.G.
  • Multiple investigations: The number of investigations by U.S. regulators, including the SEC and the U.S. Department of Justice, into General Re's use of finite reinsurance transactions.

Sources:

  • A. M. Best via COMTEX, "General Reinsurance Corp.'s finite reinsurance headache is intensifying", May 16, 2005
  • General Reinsurance Corp. Form 8-K filing with the SEC, May 16, 2005
  • Irish Financial Services Regulatory Authority, statement by Jill Forde, May 2005
  • Liam O'Reilly, Chief Executive of the Irish Financial Services Regulatory Authority, speech, May 2005
  • COMTEX, "TIAA-CREF CFO granted leave of absence after receiving Wells notice", May 10, 2005
  • A. M. Best Company, Inc., "General Reinsurance Corp. and Faraday Reinsurance Co. Ltd. have a Best's Financial Strength Rating of A++ (Superior)"

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