Prosecutors said the defendants arranged a sham
finite reinsurance deal that purported to transfer $500 million of loss reserves to AIG without AIG assuming any real risk.
While at Zurich, he held responsibility for managing the run off of Centre Solutions, a US$10 billion business at the time of going into run-off which underwrote
Finite Reinsurance, Life and Health Reinsurance and Credit Enhancement transactions.
The case was originally filed in 2007, led by several Ohio public pension funds alleging a sham $500 million
finite reinsurance transaction between Berkshire Hathaway's Gen Re and American International Group Inc.
Garand, former senior vice president and chief underwriter of the company's
finite reinsurance operations in the United States, is still awaiting sentencing.
Although the commutation of several
finite reinsurance treaties added $110 million and $433 million to incurred losses for 2006 and 2005, respectively, CNA's finite recoverable exposure is eliminated, with no finite treaties currently in-force.
A widening investigation into the use of loss-mitigation products, including
finite reinsurance, is spawning more subpoenas, this time for GE Insurance Solutions and XL Capital Ltd.
Cooney reportedly will head up a new finite risk insurer and reinsurer, to be called Max Re, with initial investment from a New York hedge fund, Moore Capital, and Capital Z Partners, an investment fund headed by Stephen Gluckstern, who is viewed as the architect of the
finite reinsurance concept.
Although 2006 results were dampened by a $413 million charge for the commutation of the $1 billion Swiss Re corporate cover, Fitch views this and other recent commutations of
finite reinsurance contracts favorably, as they free up cash, reduce reinsurance credit risk, lower interest expense on funds withheld, improve liquidity and provide for greater transparency of results.
Some of the biggest names in the reinsurance are being called on the carpet by Georgia Insurance Commissioner John Oxendine, who has issued more than 100 subpoenas seeking information on their
finite reinsurance transactions.
Moving into this complex, both the Zurich-owned Centre Solutions--which pioneered the concept of
finite reinsurance more than a decade ago and has diversified strongly ever since--and the fast-growing Stockton Re, which specializes only in
finite reinsurance solutions, will establish higher profiles along Hamilton harbor next year.
In
finite reinsurance transactions, the expected ROE (return on equity) is the ratio of expected profit to allocated capital.
The last year that
finite reinsurance resulted in a negative statutory earnings impact was 2002, with no impact in the past three years, while finite has reduced surplus by $20 million since 2002.
