Regulators probe Dublin branch of insurer involved in HIH collapse

INTERNATIONAL financial regulators are probing transactions at the Dublin subsidiary of an insurance company owned by billionaire investor Warren Buffett.

Regulators in America, Australia and Britain are looking into deals concluded out of the Dublin branch of General Re in 2000/2001 with a number of major companies.

The International Financial Service Centre-based General Re, and its subsidiary Cologne Re, sell sophisticated financial reinsurance products.

Its activities have come onto radar of the US Securities & Exchange Commission, New York's attorney-general Elliot Spitzer, Australia's Prudential Regulation Authority and Britain's Financial Services Authority (FSA).

Specifically, the regulators are looking at deals five years ago involving "finite" reinsurance products sold to Australian financial firm FAI.

The sale of these products helped to lead to the collapse of the HIH Group (which subsequently bought FAI) in what was Australia's largest company failure and cost investors €3 billion.

So-called "finite" reinsurance contracts involve companies taking out insurance against a particular risk, but often agreeing not to make a claim under the terms of the insurance for a given period.

British financial watchdog the FSA said it would also in investigate the use of these agreements in the weeks ahead. It will place special emphasis on cases where the economic value of the insurance appeared to be significantly lower than the value recorded in a company's financial statements.

As a result of an inquiry into the HIH collapse, several executives who worked for General Re were banned from working in the Australian insurance market for engaging in abusive practices.

At least two of these executives work for General Re's Dublin branch. The company is appealing the suspension of the two executives.

A spokesperson for the Irish Financial Services Regulatory Authority would not say yesterday whether it is actively investigating General Re.

The New York Times reports that transactions between General Re's Dublin branch and American International Group are also being investigated.