Australia Probing Gen Re Over Finite Deals

NU Online News Service, April 14, 8:21 p.m.EDT?The Australian Prudential Regulation Authority, afinancial regulatory agency, said it is investigating GeneralReinsurance sales of finite reinsurance that may have contributedto Australia's largest corporate collapse.[@@]

Involved are non-traditional finite reinsurance contracts thatthe Berkshire Hathaway Inc. unit sold to FAI Insurance that aresuspected of being used to inflate FAI's financial picture.

FAI was sold to Australian insurance giant HIH Insurance in 1998while the finite reinsurance contracts were in force. HIH Insurancecollapsed in March 2001 with debts in excess of $4 billion and thecompany's liquidator has charged that General Re's finite dealswith FAI ultimately contributed to the HIH's failure.

General Re, one of the biggest providers of non-traditionalreinsurance products, is already under intense scrutiny in theUnited States over its finite transactions with the AmericanInternational Group.

The Australian regulator said that its investigation willinvolve "General Re's complex financial products in relation tofinancial and finite reinsurance and the marketing and promotion ofthose products."

"This includes ensuring that any transactions entered into areproperly recorded and are appropriately treated in regulatory andfinancial reporting," according to Ross Jones, deputy chairman ofthe Australian Prudential Regulation Authority.

The U.S. investigations have forced the resignation of AIG'slongtime boss Maurice Greenberg, first as the CEO and then asnon-executive chairman of the board.

This week, the widening U.S. probes saw investigators questionBerkshire Hathaway Chairman and Chief Executive Warren Buffettregarding his knowledge about the GenRe transactions with AIG.

Former AIG Chairman and CEO Maurice Greenberg was alsoquestioned and his lawyers said rather than answer he had invokedhis Fifth Amendment right against self incrimination.