Bermuda Has Its Own AIG Insurance Probe
By Lilla Zuill
Reuters - ABC News
April 6, 2005
HAMILTON, BERMUDA (Reuters) - Bermuda's financial regulator has launched its own probe into U.S. insurer American International Group Inc. as pressure mounts to speed up changes that would stiffen the territory's financial regulations.
Bermuda Monetary Authority Chairman Cheryl-Ann Lister said in an interview on Tuesday the investigation could accelerate moves to formalize reinsurance regulations and tighten the island's reporting requirements for international businesses.
Lister also said the island's regulatory framework not only gave the BMA powers to assist U.S. regulators in their investigation, but the Bermuda regulator is undertaking its own probe. Lister did not provide details on the BMA investigation.
"We are doing more than monitoring developments," she said. "With all of these actions coming up, we are taking action as appropriate. We've obviously been in contact with all of the various companies."
An AIG spokesman in New York declined to comment.
Bermuda, which has some 1,600 insurers incorporated there, or about one for every 40 residents, communicates with the U.S. Securities and Exchange Commission and cooperates "to the extent that our powers do allow," Lister said.
U.S. authorities are scrutinizing AIG and a number of its affiliates, including Starr International Co., the private holding company that holds about 12 percent of AIG's stock as its only asset, in a widening investigation.
New York Attorney General Eliot Spitzer, the SEC and the Department of Justice are all conducting investigations into AIG's accounting of certain relationships with offshore entities and whether the insurer dumped its losses onto companies it secretly controlled.
Lister said the BMA is dealing directly with the SEC, while inquiries from the Spitzer's office and the DOJ would go through the government of Bermuda.
A report last week in the Wall Street Journal said Spitzer's office had subpoenaed documents from some of the Bermuda-based AIG affiliates.
"These transactions took place through the New York operation. I think that is what people fail to understand," Lister said. "The subpoenas were issued to the New York office, not individually to the Bermuda company."
Shelby Weldon, Bermuda's acting supervisor of insurance, said any criminal indictments by U.S. authorities against someone in Bermuda would go through the island's attorney general's office, falling outside the BMA's regulatory powers.
Bermuda's insurance law gives the BMA the power to demand that a company licensed and regulated there, and under a bona fide investigation by a foreign regulator, hand over information, records, or answer questions related to the inquiry.
A legal source said U.S. and Bermuda authorities can and have previously cooperated on criminal indictments and, if necessary, extradition.
Asked if the current AIG investigation may have highlighted any weak areas in Bermuda's insurance sector, Weldon said: "It is not an insurance regulatory issue, but the manner in which those companies purchasing those particular products chose to record them."
AIG's longtime chief Maurice "Hank" Greenberg last week severed ties with the company he ran for over 37 years, as the scandal facing the company grew. Three other senior executives — including AIG's Bermuda-based legal counsel, Michael Murphy, — were fired for failure to cooperate with investigators.
Greenberg and Murphy retain their ties with Starr, while a number of AIG executives on the Starr board have been dismissed. Murphy helped prepare early drafts of Bermuda's Insurance Act in the late 1970s and also was an architect of the United States-Bermuda tax treaty.
AIG admitted over the weekend that an effort had been made to remove documents from its Bermuda building.