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Member, Beacon International Group, Ltd.
SYDNEY, Australia--Australian regulators are investigating a series of reinsurance transactions related subsidiaries to Zurich Financial Services Group to determine whether they involved any risk transfer.
The Australian Prudential Regulation Authority, and the Australian Securities & Investment Commission, said that they were investigating now-unwound reinsurance transactions related to Zurich Australia Insurance Ltd.'s general insurance business in 2000.
According to an APRA spokesman, "there are multiple transactions, so it's a case of putting the pieces together to form the correct picture; but, if it turns out that the total affect of the structure means there is no transfer of risk, then the net effect could be a disguised loan," he said.
The reinsurance transactions of Australian insurers have been under greater scrutiny since the collapse of HIH Insurance Ltd. in 2001. Last month GeneralCologne Re Australia Ltd. had to pay $27.2 million Australian ($19.9 million) to the liquidator of HIH Insurance Ltd. to settle charges that reinsurance contracts it wrote were designed to hide the true financial condition of a troubled insurer that HIH later acquired.
"Back in March 2002, we asked that all insurers report on any transactions they had in place and what the characteristics were of those transactions, how they were being done and by whom," the APRA spokesman said.
APRA said that there is no immediate concern about the financial situation of the Zurich Australia as it meets minimum regulatory capital requirements.
Zurich refused to comment on the investigation.