Max Re Capital Ltd. disclosed that its audit and risk management committee has launched a review of the company’s accounting for three finite-risk retrocessional contracts written in 2001 and 2003.

The Bermuda-based reinsurer stated that as a result of the investigation, it may need to restate its financials for the 2001 through 2005 fiscal years. It added, however, that any restatement would reduce retained earnings at December 31, 2005, by no more than roughly $50 million, or just 4 percent of shareholders’ equity.

The company elaborated that the main focus of its investigation is whether the contracts contain sufficient risk transfer to meet the requirements of Financial Accounting Standard No. 113.

Max Re also said it has voluntarily contacted the Securities and Exchange Commission about the internal review.

For the past year or so, we have chronicled a number of insurance companies that have been subpoenaed by the U.S. Attorney’s Office for the Southern District of New York and the SEC as part of a growing investigation into finite risk insurance. Regulators are looking into whether these companies have used finite insurance to inflate their financial results.