Renaissance Re has reached a proposed settlement of a shareholder class action lawsuit arising out of alleged finite reinsurance transactions. The proposed settlement would result in a cash fund of $13.5 million against which claimants could submit claims. Class counsel filed a memorandum in support of preliminary approval of the proposed settlement and a supplemental memorandum. The court then entered a preliminary approval order, setting a fairness hearing for consideration of final approval of the proposed settlement on January 11, 2008. This proposed settlement is in addition to Ren Re's $15 million settlement with the SEC reported on in a February 16, 2007 post to this blog.
Accounting for Reinsurance
Travelers granted judgment on the pleadings in finite reinsurance case
In October 2004, New York Attorney General Elliot Spitzer announced the filing of a civil Complaint against Marsh & McLennan Companies, alleging fraud and antitrust violations and implicating major insurance companies. The next day, an analyst reported that the St. Paul Travelers Companies (“Travelers”) could expect to be involved in the investigation and be subject to a subpoena. Travelers' stock price dropped $2.06 per share. About one month later, Travelers disclosed the receipt of a second subpoena, relating to finite reinsuracne issue. A class action securities fraud suit was filed against Travelers. The Complaint did not allege a drop in stock price following the disclosure of the finite reinsurance subpoena. Travelers moved for judgment on the pleadings with respect to claims relating to finite reinsurance issues, contending that the Complaint filed to adequately allege loss causation with respect to those issues. The court agreed, and granted the motion, but provided the Plaintiffs leave to file an amended Complaint. In re St.Paul Travelers Secutieis Litigation II, Case No. 04-4697 (USDC D Minn. June 1, 2007).
Survey on US run-off operations
PriceWaterhouse Coopers has published an interesting report on a survey that it conducted relating to US run-off operations. The report covers various aspects of run-off operations and strategies. Especially combined with the recent Lloyd’s report on capitalization and operation of Lloyd’s run-off syndicates, which was the subject of a post on this blog on May 28, this makes interesting reading.
Lloyds issues guidance for run-off syndicates
Lloyds has issued a report providing minimum standards and guidance for the individual capital adequacy of syndicates in run-off. This report provides extensive guidance for the management of such syndicates, in order to assist them in achieving the capital standards.
Securities fraud putative class action against MBIA dismissed
Having settled with the SEC over charges relating to allegedly fraudulent reinsurance transactions, MBIA may be finding closure on the civil side of that problem. Relying on a 1991 Supreme Court decision stating that litigation under Section 10(b) and Rule 10b-5 must be commenced “within one year after the discovery of the facts constituting the violation and within three years after such a violation,” a District Court has dismiss a securities fraud putative class action against MBIA as time-barred. Plaintiffs filed a consolidated securities fraud class action alleging that MBIA’s financial statements were materially misstated because MBIA improperly treated a series of transactions in 1998 as reinsurance agreements, and the associated proceeds as income, although they were in fact disguised loans. In re MBIA Inc. Securities Litigation, Case No. 05-3514 (USDC S.D.N.Y. Feb. 14, 2007).