RenaissanceRe Holdings announced that two executives have received a Wells notice from the Securities and Exchange Commission, indicating that the regulator could bring a civil enforcement action against them for possible securities laws violations.
The notices were issued to chairman and chief executive officer James Stanard and former senior vice president of specialty reinsurance Michael Cash in connection with the SEC’s ongoing investigation into the company’s restatement of results from 2001 to 2003. Cash resigned earlier this month after refusing to accept service of an SEC subpoena.
RenaissanceRe is a provider of insurance and of reinsurance, which helps insurers lay off some of their risk on other companies. The SEC has very actively been investigating reinsurers regarding so-called finite insurance, which allegedly can be used to artificially inflate a company’s financial results. In February, RenaissanceRe said it would restate results from 2001 to 2003 to correct how it accounted for reinsurance it had purchased from companies including Inter-Ocean Holdings Ltd., which specialized in finite insurance.
Under SEC procedures, a Wells notice indicates that the staff has made a preliminary decision to recommend that the commission bring a civil action; recipients have the opportunity to respond to the SEC staff before a formal recommendation is finalized. RenaissanceRe stated that it continues to cooperate with the SEC.
Several other reinsurers have also felt the sting of restatements and SEC probes during the past year. Last November, the SEC and the New York Attorney General’s Office issued subpoenas to MBIA Inc. related to nontraditional reinsurance arrangements, also called finite insurance. In March, MBIA announced that it would restate its financials for the past seven years to correct its accounting for two complex reinsurance agreements made in 1998 with Converium Re.
In May, the SEC issued one subpoena to General Electric seeking documents related to “certain loss mitigation insurance products” and another to the U.S. division of Hannover Re AG.
New York Attorney General Eliot Spitzer’s probe of a $500 million finite reinsurance deal between American International Group Inc. and Berkshire Hathaway’s General Re division, also played a role in the departure of Maurice Greenberg, AIG’s former chairman and chief executive officer.