Washington–Markel Corp., a specialty insurer based in Richmond,Va., has been caught up in the apparently widening net federal andstate regulators are casting into the use of finite insurance, aproduct used to manage earnings.

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The company said in its quarterly 10-Q filing Nov. 2 that it hasreceived a subpoena from the Securities and Exchange Commission"seeking documents concerning transactions by the Company in thesecurities of Fairfax Financial Holdings Limited (Fairfax) and'non-traditional product' transactions between the Company andFairfax." It said the subpoena was received late last month.

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In its filing, Markel said it "has not historically purchased orsold finite reinsurance products or used other structures whichwould have the effect of discounting loss reserves."

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Finite insurance arrangements have come under scrutiny becausein some cases regulators have found them to have been employedimproperly to improve company financial statements.

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Markel said it is cooperating fully with the SEC probe beingconducted by the regional office in New York and does not believeit has any transactions with Fairfax meeting the SEC's definitionof "non-traditional products."

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Steven Markel, a vice chairman of the company, said the firmbelieves the subpoena is linked to its sale of a reinsurance unit,Corifrance, to a Fairfax subsidiary in January.

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"We have never bought any type of finite insurance," Mr. Markelsaid. "We're not interested in trading investment for underwritingincome."

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Markel insures in such niche markets as director's and officers'liability, dance studios, restaurants and delicatessens, homelessshelters, financial institutions, taxicabs, museums, snowmobilesand earthquakes.

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It had earned premiums in 2004 of $2.5 billion, and reported netincome of $165 million for the year.

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