An international insurance company and its former CFO settled SEC charges for failing to disclose material information regarding how the company estimated its insurance losses and reserves.
According to the SEC Complaint filed in the United States District Court for the Southern District of New York, while the insurance company disclosed its general actuarial process for loss reserves estimations, it failed to disclose that the CFO made adjustments that did not coincide with internal actuarial estimates or the effect of such adjustments on the reported loss reserves and expenses of the company. The SEC alleged that the company failed to disclose the "specific factors or assumptions" supporting the CFO's adjustments. Additionally, the SEC claimed that the company failed to maintain sufficient documentation in support of the estimates of the "management's best estimate" loss reserves.
According to an SEC release, the insurance company and its former CFO agreed to settle the case, accepting penalties of $10.3 million and $75,000, respectively. Additionally, the company's former CFO agreed to disgorge $140,000 with $22,499 in prejudgment interest. The settlements are subject to Court approval.
Primary Sources
- SEC Press Release: Insurance Company and Former CFO Charged with Faulty Loss Reserves Disclosures
- SEC Complaint: AmTrust Financial Services, Inc. and Ronald E. Pipoly, Jr.
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