Spitzer and SEC question Lloyd's

By Jason Nisse
August 21, 2005
Eliot Spitzer, the New York State Attorney General, and the US financial regulator, the Securities & Exchange Commission, have dragged Lloyd's of London into their investigation into insurance market abuses in America.

Investigators from the SEC and the Attorney General's office contacted Lloyd's last month with a list of questions, The Independent on Sunday has learnt. These relate to a practice called "finite reinsurance", a system of complex long-term transactions which the regulators contend may have been used to make insurance companies' accounts look in better shape than they were.

The investigation has centred on particular contracts between American International Group, one of the US's largest insurers, and General Re, a subsidiary of Warren Buffett's Berkshire Hathaway investment giant. Berkshire admitted earlier this month that it was the target of the investigation and that the Financial Services Authority in London was also involved.

The probe has led to the departure of Milan Vukelic, the chief executive of a Berkshire subsidiary with links to the Lloyd's market, and to questions being asked about the reputation of Mr Buffett, one of America's most respected businessmen.

Lloyd's has confirmed that it has been in discussions with the investigators. US reinsurance accounts for nearly two fifths of the entire turnover at Lloyd's.

"We have had a request from the US regulators for information which we are in the process of complying with," said Julian James, the director of markets at Lloyd's. "We understand that the investigation is not directed at us and the business area they are investigating is a small part of Lloyd's annual business."

Labels: Eliot Spitzer, General Re, New York AG