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NEW YORKTwo Assurant Inc. executives could be the next to face civil fraud charges in the Securities and Exchange Commission's ongoing investigation of finite reinsurance.
In a statement last week, the New York-based specialty insurer said so-called Wells notices had been sent to Michael Steinman, senior vp and chief actuary, Assurant Solutions/Assurant Specialty Property; and Dan Folse, vp-risk management, Assurant Solutions/Assurant Specialty Property. Both are based in the company's Miami office.
Each received a Wells notice--which serves as a warning that SEC staff plans to recommend that the agency bring a civil enforcement action for violating federal securities laws--in connection with "certain loss-mitigation products."
Under the SEC's procedures, Wells notice recipients can respond to the SEC staff before staff members make a formal recommendation whether civil enforcement action should be brought.
A spokesman for Assurant declined to comment on how Messrs. Steinman and Folse would respond.
"I can't speculate on any future actions by the SEC...but we are working with the SEC to try and help them conclude their investigation in a timely manner," the spokesman said.
David Rosenfeld, associate regional director of the SEC's Northeast Regional Office, declined to comment on the Wells notices, or on the status of the SEC's investigation of companies' use of finite reinsurance.
The Wells notices against the two executives come more than two years after Assurant--along with a several other insurers and reinsurers--received an SEC subpoena as part of the inquiry into loss- mitigation products (BI, May 9, 2005).
Since then, various companies have settled related charges. However, only a few company executives have faced federal charges stemming from alleged finite reinsurance-related wrongdoing.
Last October, three former top executives of Bermuda-based RenaissanceRe Holdings Ltd. were accused of fraud for their alleged roles in orchestrating a finite reinsurance scheme designed to smooth the company's earnings and mislead investors (BI, Oct. 9, 2006). Many of those charges remain pending.
Following Assurant's announcement, New York-based Standard & Poor's Corp. revised its outlook to stable from positive on the collective group of companies referred to as Assurant Solutions and Assurant Specialty Property. The action does not affect the ratings on holding company Assurant Inc. or its other operating companies.
"Although we do not expect that these events or a potential accounting restatement will hurt the company's financial position, we believe management will likely be challenged for the remainder of the year if the business unit loses the two cited officers," said Shellie Stoddard, S&P credit analyst.
Last month, Assurant announced the departure of John B. Owen, Assurant Specialty Property president and chief executive officer, effective July 13.
Mr. Owen's departure was "totally unrelated" to the SEC's investigation, the Assurant spokesman said.