Washington — Zurich Financial Services has agreed to a settlement with the Securities and Exchange Commission (SEC), settling charges that were related to reinsurance transactions at the Zurich-based company’s former reinsurance group.
The settlement stems from civil securities fraud charges brought against Zurich and Converium Holding AG, which formerly operated under the name Zurich Re until it was spun off in 2001. The SEC's orders find that the companies designed three reinsurance transactions to make it appear that risk had been transferred to third-party entities when, in fact, the risk remained with Zurich-controlled entities. According to the SEC, Zurich Re—and later Converium—improperly used reinsurance accounting for the transactions enabling them to artificially inflate their performance figures. This misconduct allowed Zurich to receive a significant windfall when it spun off Converium in a December 2001 initial public offering. Converium continued the fraudulent scheme following the IPO, the SEC says.
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