Risk Management

SEC May Charge MBIA

The bond insurer is also in ''preliminary discussions'' with the staffs of the New York Attorney General's Office and the New York State Insurance ...
Stephen TaubAugust 22, 2005

MBIA Inc. announced late Friday night that the Securities and Exchange Commission may bring civil charges stemming from a reinsurance arrangement it made several years ago with a unit of the Pittsburgh-based Allegheny Health, Education, and Research Foundation (AHERF).

According to the bond insurer, it received a Wells notice alleging violations of federal securities laws “arising from MBIA’s action to retroactively reinsure losses it incurred from the AHERF bonds MBIA had guaranteed, including, but not limited to, its entering into excess of loss agreements and quota share agreements with three separate counterparties.”

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. MBIA is also in “preliminary discussions” with the staffs of the New York Attorney General’s Office and the New York State Insurance Department regarding the possible resolution of potential civil charges connected to the AHERF reinsurance transactions. The company added that the investigations are ongoing and that it is continuing to provide information.

In March, MBIA announced that it would restate its financials for the past seven years as a result of its accounting for two complex reinsurance agreements made in 1998 with Converium Re, previously known as Zurich Reinsurance North America.

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