RenaissanceRe Founder Resigns Under Cloud Of SEC Probe
Dow Jones Newswire
November 01, 2005
SAN FRANCISCO (Dow Jones) -- RenaissanceRe Holdings Chairman and Chief Executive James Stanard resigned Tuesday after the reinsurer he founded in 1993 became embroiled in a Securities and Exchange Commission investigation.
The company's board of directors named Neill Currie as chief executive and W. James MacGinnitie as nonexecutive chairman to replace Stanard immediately, RenaissanceRe said in a statement late Tuesday.
Chief Operating Officer and Chief Financial Officer John Lummis is also planning to leave the reinsurer on June 30 next year, and the company has started looking for his replacement. Marty Merritt, who was controller until April 2005, also has left, the Bermuda-based company added.
RenaissanceRe (RNR) has become entangled in an industry-wide investigation by the SEC and other regulators into a controversial type of coverage called finite-risk insurance and reinsurance.
The SEC, the Justice Department, New York Attorney General Eliot Spitzer and others are concerned that some companies have used finite-risk reinsurance agreements to manipulate their earnings statements.
The probes were partly responsible for the ousting of longtime American International Group (AIG) Chief Executive and Chairman Maurice "Hank" Greenberg earlier this year.
Maybe even more than Greenberg, Stanard was seen as the guiding force behind RenaissanceRe, the company he founded and ran.
"The founder of a reinsurance company can never be fully replaced," said Andy Barile, an independent industry consultant in Rancho Santa Fe, Calif. "The company will seek to bring up its management team to take over, and because of the nature of the catastrophe reinsurance decision-making process this won't be too difficult, as long as they are motivated like the founder is."
A 30-year veteran of the property and casualty insurance industry, Stanard worked in several executive, underwriting and actuarial positions at companies including USF&G, INA Re, Chubb Corp. and Prudential Re.
Considered a mathematical and actuarial whiz, Stanard formed RenaissanceRe to underwrite catastrophe reinsurance just as prices were soaring after Hurricane Andrew ravaged Florida in 1992.
In July, RenaissanceRe said that the SEC had sent Stanard a so-called Wells notice, indicating that the agency was considering civil enforcement action against him for breaking federal securities laws.
"It was really finite reinsurance issues that pushed him out," Barile said.
The SEC probe stemmed from a February restatement of results from 2001, 2002 and 2003 by the company to correct how it accounted for reinsurance it had purchased from companies including Inter-Ocean Holdings Ltd.
Inter-Ocean, which specialized in finite reinsurance and was partly owned by RenaissanceRe, shut down in April.