In 2005 APRA hired hired Estelle Pearson of Finity Consulting Pty to investigate reinsurance policies that may have been used to help carriers smooth earnings or hide losses. “General Reinsurance Australia fully cooperated with APRA's investigation and is pleased the matter is now resolved,'' said Don Bradford, managing director of the company.
Omaha, Nebraska-based Berkshire Hathaway purchased General Re Corp. in 1998. General Reinsurance Australia is a unit of Stamford, Connecticut-based General Re.
Six General Re employees were disqualified in 2004 from being managers of an insurer in Australia because of reinsurance deals between General Re and Sydney-based FAI Insurance Ltd., which later became insolvent.
Regulators have been investigating a type of reinsurance known as non-traditional or finite, which can act as a disguised loan. Such policies can occasionally transfer little risk to the reinsurer, permiting buyers to postpone paying losses.
Of six transactions entered into by General Reinsurance Australia, three were found to be designed and used for improper purposes by Zurich Australian Insurance Ltd., FAI Insurance and New Cap Reinsurance Corp., Australia's regulator said.
“General Reinsurance Australia structured these transactions in a way which assisted in the improper use of the arrangement,'' the authority said. It is preparing enforcement action against unidentified former New Cap Re employees, it said.