Tuesday, May 3, 2005
The General Electric Company joined the crowd of insurers under the microspope (AIG, General Re, Marsh Mac, AON) by disclosing that it received a subpoena from the SEC on April 29 requiring it to produce documents related to its sales of so-called "finite risk" insurance. This type of policy, which GE describes as a "loss mitigation insurance product" (doesn't that sound benign, just like any other plain vanilla insurance policy), is at the center of the investigation of AIG and General Re by state and federal regulators and the Department of Justice. GE's press release (here) states:
GE understands that a number of other insurance and reinsurance companies have been subpoenaed by the SEC in relation to finite risk. One of GE's businesses, GE Insurance Solutions, has made limited use of reinsurance with finite characteristics to manage the risks of catastrophic events such as storms or hurricanes, and to protect itself and GE shareowners from the volatility that is inherent in its business.
I notice that GE points out quickly that "we're just like all those other guys" so there's nothing to be worried about. What the heck, AIG's shares went up 5% after it announced the scope of its accounting woes, so maybe confession is good for the stock price in addition to the soul. (ph)