NU Online News Service, May 12, 5:00 p.m. EDT–Genworth Financial, Inc., said it has received a subpoena from the Securities and Exchange Commission requesting documents in the ongoing investigation of finite reinsurance products.
The insurance company, with its U.S. office based in Richmond, Va., said it received the subpoena yesterday seeking documents “related to ‘certain loss mitigation insurance products.’”
The company, which deals primarily in life, mortgage insurance, and employee benefits, said it conducted an “initial review” of its reinsurance arrangements early in the fourth quarter of 2004 and found no issues of concern.
The company said it would continue to review the arrangements and cooperate with the SEC in the investigation.
The company has operations in 22 countries and is a subsidiary of General Electric. The Fairfield, Conn.-based holding company began selling its stake in Genworth in March through a public offering after creating the insurer last year.
The investigation into finite reinsurance programs has swept up insurance giants American International Group, Berkshire Hathaway, and a number of others as regulators, New York Attorney General Eliot Spitzer, the U.S. Justice Department and the SEC ask questions over the validity of some of the programs.
Finite reinsurance has come under scrutiny because of revelations concerning misuse of such transactions by insurers to provide a false financial picture.
An issue arises when the business a company cedes to a reinsurer has virtually no risk attached and amounts to a loan to the reinsurer, which is paid back through claims payments.
In the widely reported American International Group General Re deal AIG allegedly reinsured GenRe in such a risk-free deal in an effort to bolster AIG’s loss reserves. Without detailing what was wrong, AIG has admitted the transaction was documented improperly.
Chubb Corp. this week revealed it had been subpoenaed by federal prosecutors in New York regarding use of finite risk.