General Electric Co. announced that it has received a subpoena from the Securities and Exchange Commission seeking documents related to “certain loss mitigation insurance products.” The subpoena is general in nature, stated GE, adding that it will cooperate fully with the commission.
According to a company statement, its GE Insurance Solutions business “has made limited use of reinsurance with finite characteristics to manage the risks of catastrophic events such as storms or hurricanes, and to protect itself and GE shareowners from the volatility that is inherent in its business.”
After “intensive strategic reviews” of these agreements during the past several years by GE’s audit staff and by its external auditor, KPMG, the company stated that it is confident the risk-transfer agreements have been “properly structured, properly accounted for with appropriate risk transfer, and properly disclosed.”
A Banc of America research note commented that “this is not a complete surprise given ongoing scrutiny” in the industry and added that the subpoena did not allege any impropriety at GE.
Meanwhile, Frankfurt-based Hannover Re AG, the world’s fourth-largest reinsurer, also announced that it received a subpoena from the SEC, through its U.S. unit, Hannover Life Re of America.
According to the Associated Press, the subpoena focused on “nontraditional products” in Hannover’s financial reinsurance business but did not accuse the company of any wrongdoing. A spokeswoman for the insurer stated the company is cooperating fully but refused to elaborate on the nature of the insurance products in question.
New York Attorney General Eliot Spitzer’s probe of a $500 million finite reinsurance deal between AIG and Berkshire Hathaway’s General Re division, for example, played a role in the departure of Maurice Greenberg, the former chairman and chief executive officer of AIG.