Risk Management

Finite-Related Subpoena for Fairfax

Several months ago, the property-casualty and reinsurance company had disclosed that its Fairmont Specialty Group unit received an SEC subpoena reg...
Stephen TaubSeptember 26, 2005

Fairfax Financial Holdings Ltd. announced that it received a subpoena from the Securities and Exchange Commission as part of the regulator’s investigation into certain loss mitigation products, also known as finite insurance.

The Toronto-based property-casualty and reinsurance company added that the SEC has requested documents regarding any transactions in securities of Fairfax Financial, the compensation for these transactions, and the trading volume or share price of the securities. Fairfax stressed that it is cooperating with the request.

In June, according to Reuters, Fairfax disclosed that its Fairmont Specialty Group unit had received a subpoena from the SEC requesting documents covering transactions with General Reinsurance, the insurance unit of Warren Buffett’s Berkshire Hathaway Inc. General Re has also been dragged into a criminal investigation involving American International Group Inc.

The SEC is also mulling civil charges against General Re chief executive officer Joseph Brandon stemming from the regulator’s investigation into finite insurance. For at least the past few months, federal prosecutors as well as regulators have been investigating Brandon’s role in a 2000 transaction between General Re and AIG. That transaction resulted in AIG’s having to restate its financials and led two General Re executives to plead guilty to charges of criminal conspiracy and fraud, according to The Wall Street Journal.

The finite insurance transaction reportedly enabled AIG to boost loss reserves, but it was deemed by regulators to be more akin to a loan than an insurance transaction.