This NY Times article reports that Berkshire Hathaway Inc. has disclosed that government authorities are probing at least one of the company’s insurance subsidiaries other than General Reinsurance Corp. over accounting of “finite risk” reinsurance transactions. Here are the previous posts on the wide-ranging probe into Berkshire, General Re, and others over such transactions.
Moreover, as noted in this London Telegraph article, Berkshire announced that it is also facing regulatory investigations in England, Ireland, Germany and Australia. In that regard, Berkshire also announced that it had terminated the employment of former reinsurance executive Milan Vukelic, who has been under investigation by those overseas authorities.

Berkshire’s General Re unit surfaced earlier this year as part of state and federal authorities’ investigations into American Insurance Group and its former chairman and CEO, Maurice “Hank” Greenberg, over whether some insurance companies have disguised loans as “finite-risk” reinsurance. Reinsurance is coverage that insurance companies buy to allocate risk of loss on the policies that they sell, and finite-risk reinsurance is a nontraditional type of structured finance transaction that blends finance with insurance. This latest disclosure is the first indication that regulators are focusing on the the Berkshire subsidiaries’ own accounting own accounting of the transactions and not just their involvement with AIG in regard to such transactions. Two former General Re executives have pleaded guilty to conspiring to commit fraud to help AIG misrepresent its financial results.
Meanwhile, the magnitude of the change in Berkshire’s reported reinsurance results prompted several equity analysts — including Standard & Poor’s Equity Research — to issue a “sell” recommendation on Berkshire shares based on profitability concerns and reputational risk. Mr. Greenberg and former Enron executives are well-prepared to advise the Oracle of Omaha on the vagaries of such reputational (or sometimes called “headline”) risk.
By the way, Mr. Buffett has been an outspoken bear for some time on the U.S. dollar. However, his sizable currency bets over the past couple of years have been were a continuing drain on Berkshire’s finances. For the most recent quarter, Berkshire reported about a $620 million pretax loss in market value on its foreign-currency investments, compared with a pretax loss of almost $450 million a year earlier.