|AIG unit subpoenaed over deals with offshore reinsurer
By Alistair Barr
May 13, 2005
SAN FRANCISCO (MarketWatch) -- Transatlantic Holdings Inc. was subpoenaed recently by New York insurance regulators investigating links between the company and an offshore reinsurer, according to Securities and Exchange Commission filings.
The New York Insurance Department is investigating transactions between Transatlantic (TRH) and Sunrise Professional Indemnity Ltd., a Cayman Islands-based firm, Transatlantic said in a filing on May 10.
The state regulator is also probing the relationship between Transatlantic, Sunrise and Gallagher Healthcare Insurance Services, a subsidiary of insurance broker Arthur J. Gallagher (AJG), Transatlantic said.
Transatlantic is 59% owned by AIG (AIG), the insurance giant at the center of widening investigations into whether companies have used reinsurance to manipulate their financial statements.
The probes precipitated the departure of longtime AIG CEO Maurice "Hank" Greenberg in March and forced AIG to admit to a series of accounting improprieties that could wipe $2.7 billion, or 3.3%, off its net worth.
More than $1 billion of that restatement is related to reinsurance that AIG purchased from Union Excess, a Barbados-based firm that AIG controls. Previously, AIG had claimed Union Excess was independent and reflected that in its results.
Transatlantic is the only U.S. customer of Sunrise, a fact that may have drawn the recent regulatory scrutiny because it suggests Sunrise was controlled by Transatlantic, Bloomberg News reported Friday, citing regulatory filings and Mark Rouck, a senior director at Fitch Ratings.
Sunrise is owned by WFG Interests LLC, which, in turn, is owned by William Galtney, Jr., according to an SEC filing by Everest Re Group (RE), a Bermuda-based insurance and reinsurance company.
Galtney, an Everest Re director, was president of Gallagher Healthcare Insurance Services up until the end of 2004 and chairman of the Arthur J. Gallagher unit until March 31, 2005.
Gallagher Healthcare sold policies to Everest Re, which then reinsured 82% of those risks with Transatlantic.
Transatlantic then reinsured up to 100% of those risks with Sunrise - the offshore firm ultimately controlled by Galtney, Everest's filing explained.
Everest said it canceled its agreements with Galtney's business on April 1 and is negotiating new terms.