The U.S. Attorney's Office in Manhattan and the Securities and Exchange Commission has asked Lloyd's of London to assist in their inquiry into improper finite reinsurance transactions, a Lloyd's representative said.
Their request, which arrived some time ago, did not involve subpoenas, said the Lloyd's spokeswoman, Melanie Batley, who added that investigators "are basically asking for information that is not related to Lloyd's. They are looking into other parties."
According Ms. Batley, Lloyd's was asked for material several months ago and has been supplying the requested information. She said Lloyd's has been centrally coordinating the response from its 62 syndicates.
Lloyd's is now accustomed to handling such requests, having previously been asked for information by Georgia Insurance Commissioner John Oxendine.
Federal authorities have been investigating the insurance industry's finite reinsurance deals since 2003, when it began uncovering a number of questionable deals involving American International Group.
At issue are transactions that allegedly are improperly accounted for as reinsurance, when they actually involve no transfer of risk and should be treated as loans. In some cases investigators say they have involved secret side agreements to disguise what arrangements are actually involved.
Asked about the information requests to Lloyd's, Heather Tasker, a representative for the U.S. Attorney's Office in Manhattan, said that as a matter of policy the office "neither confirms nor denies ongoing investigations."
According to Lloyd's, the use of finite reinsurance by its syndicates is minimal==in part because they would be difficult to process because such deals involve risks spread out over several years, which do not fit with Lloyd's accounting methods.
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