said Monday that securities regulators are considering filing civil charges against its chairman and CEO, James Stanard, a sign that the investigation into the misuse of so-called finite insurance is continuing.
The Bermuda-based insurer said the
Securities and Exchange Commission
sent a so-called Wells notice to Stanard in connection with an ongoing investigation into the insurer's previously announced restatement.
The SEC also is considering bringing a civil enforcement action against Michael Cash, a former RenRe senior vice president. Cash resigned earlier this month over his refusal to cooperate with the investigation.
Following the disclosure, shares of RenRe were down $3, or 6%, in midday trading to $44.21.
In February, RenRe said it planned to restate earnings from 2001 through 2003 because of "accounting errors'' associated with its use of finite insurance contracts. The company allegedly used the finite contracts to manage its earnings.
Finite insurance transactions -- deals between insurers and reinsurance firms to transfer a portion of a projected claim -- have become the scourge of the industry because they are easily abused and lend themselves to earnings manipulation. While many finite insurance contracts are legitimate, others are nothing more than disguised loans from one insurer to another with little or no transfer of risk.
The SEC, federal prosecutors and New York Attorney General Eliot Spitzer have launched a wide-ranging investigation into the misuse of finite insurance transactions.
Most notably, regulators and prosecutors have focused on an allegedly fraudulent finite transaction between
American International Group
and General Re, a division of
, that enabled AIG to burnish its corporate books. The investigation of AIG led to the ouster of industry titan Maurice Greenberg as chairman and CEO of the big insurer. Several former GenRe executives have been criminally charged in the investigation.
The investigation of RenRe allegedly stems from dealings it had with
, a reinsurer that RenRe partially owned, according to