Australian regulators are inquiring into the activities of up to three additional Dublin-based executives in the Cologne Reinsurance company as part of their investigation into Australia's biggest business failure
The investigation into the collapse of the HIH insurance company in 2001 has already led the regulators to disqualify two other Cologne Re executives in Dublin from acting as senior managers or executives in the Australian insurance industry.
The Irish Financial Services Regulatory Authority (Ifsra) said it is satisfied Cologne Re took appropriate "corrective action" regarding these individuals, who remain in its employment.
While the Australian Prudential Regulation Authority was previously believed to have completed its work in relation to Cologne Re's Dublin operations, informed Australian sources said yesterday that this work was still under way and that the activities of two or three executives in Dublin remained under scrutiny.
Such investigations were likely to continue for a number of months, the sources said. Sources in Dublin said yesterday that Ifsra inspectors had visited Cologne Re's IFSC office on Wednesday as part of a separate, but related investigation into the company's operations.
An Ifsra spokeman declined to comment on any aspect of the inspectors' visit. Cologne Re did not respond to calls yesterday from The Irish Times.
The company previously said it was co-operating fully with domestic and international regulators who are examining its activities in the finite reinsurance market.
Insurers use reinsurance to insure themselves against exposure to large claims. Finite reinsurance is used to soften the impact of claims that may have to be paid over a long period.
At issue in the Australian investigation was the use of finite reinsurance by a local insurer, FAI, to "improperly boost" its profit and loss account before it was taken over by HIH. The risk to Cologne Re's Australian affiliate was removed through "side letters" between the parties.
This deal was instrumental in HIH's collapse in 2001 with debts of Aus$5.3 billion (€3.16 billion) because HIH failed to detect that FAI's net value was minus Aus$300 million when it acquired FAI for Aus$300 milion. In addition to the investigations by Irish and Australian authorities, Cologne Re's operation in Dublin is being examined by US regulators in connection with a $500 million (€386 million) reinsurance deal in 2000 between its affiliate General Re and the giant US insurer, American International Group (AIG).
While AIG has acknowledged that its accounting of the transaction was "improper", US investigators believe General Re's side of the transaction was booked in Cologne Re's Dublin office.
The ultimate parent of Cologne Re and General Re is Berkshire Hathaway, a conglomerate controlled by the billionaire investor Warren Buffett.
Mr Buffett, who is co-operating with investigators, has said he was not briefed on the structure of the transactions with AIG or an any improper use or purpose of the transactions.
In relation to the HIH investigation, General Re met a deadline earlier this week to say why it should not be investigated further by the regulator there.
A senior Australian source indicated General Re had provided information in a submission filed last Tuesday relating to its IFSC office, its connection with the HIH investigation and other matters not directly linked to that process.
