Bureau gets NAIC cooperation in 'proactive look' at reinsurancedeals

By ARTHUR D. POSTAL

AND MATT BRADY

Washington

The Federal Bureau of Investigation backtracked last week onearlier statements that it was conducting a broad investigationinto the insurance industry based on the findings of probeslaunched by New York Attorney General Eliot Spitzer.

At the same time, the National Association of InsuranceCommissioners said its role in the FBI's examination isroutine.

In a statement to National Underwriter, FBI spokesman Joe Parisclarified earlier statements about the bureau's probe into theindustry and American International Group, stating: “We're not'investigating' anyone.”

Mr. Paris said Chris Swecker, assistant director of the FBI'scriminal investigation division, was “widely misquoted” in articlesin the daily press, and in fact the bureau is only taking a“proactive look” at aspects of the insurance industry.

Published reports also said that FBI investigators were workingwith the NAIC in the bureau's probe of widespread problems in theindustry.

Diane Koken, president of the NAIC and Pennsylvania's insurancecommissioner, said in a statement that state insurance regulators,working through the NAIC, “have been tapped by the FBI to provideguidance in understanding the technical requirements for accountingand reporting of reinsurance transactions, including arrangementsthat limit a reinsurer's risk of loss.

“We understand the FBI is seeking to determine whether theaccounting practices recently identified represent an industrywideconcern,” she added. “Several states are currently pursuing anumber of investigations in this area and have been reconsideringexisting financial reporting standards since last December.”

Ms. Koken said the NAIC “routinely provides technical assistanceto state and federal law enforcement agencies, as well as state andfederal regulators in insurance-related investigations. It iswidely understood that investigations and examinations of insureractivity are treated as confidential.”

Addressing the FBI's interest in the industry, Robert E. Vagley,president of the American Insurance Association, said that “anytime an individual breaks the law, they should be punishedaccordingly.”

However, he added, investigators need to be reminded there are“hundreds of thousands of individuals who work diligently andhonestly every day to serve the needs of policyholders. It would begrossly unfair to tar these hard-working individuals with a broadbrush based on the isolated actions of a few bad actors.”

He added that “the business of insurance is based on good faithand trust. We and our member companies are committed to upholdingthose principles every day.”

The FBI says a top official was “widely misquoted” about awide-ranging probe of industry practices.