MBIA Corp., a large insurer of municipal bonds, has agreed to pay $75 million to settle an investigation by federal and New York state authorities into its accounting for a 1998 transaction, people familiar with the matter said Friday.
The individuals, who spoke on condition of anonymity because the settlement hasn’t been announced, confirmed a report by Dow Jones Newswires. The accord with the Securities and Exchange Commission, the office of New York Attorney General Andrew Cuomo and the New York State Insurance Department is expected to be announced as early as Monday.
The settlement will mark the latest action to come out of wide-ranging probes in the United States and abroad into so-called finite risk reinsurance — which regulators say is sometimes used improperly to help companies artificially inflate earnings without a real transfer of risk.
Reinsurance is purchased by primary insurance companies to spread risk.
Companies caught up in the recent investigations include insurers Ace Ltd. and American International Group Inc., and General Reinsurance Corp., a subsidiary of Berkshire Hathaway Inc.
MBIA, based in Armonk, N.Y., said in March 2005 that it would have to restate more than six years of earnings, after discovering that it improperly accounted for $70 million in the 1998 reinsurance transaction.
SEC spokesman John Heine declined comment on a possible MBIA settlement, as did Michael Ballinger, a spokesman for the insurer.
John Milgrim, a spokesman for Cuomo, said, “This office will continue to make it a priority to protect investors and to ensure the soundness of the financial markets.” He declined to elaborate or comment further.
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Associated Press writer Mark Johnson in Albany, N.Y., contributed to this report.
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