Assurant Inc. says it fired the two executives who were linked to a Securities and Exchange Commission investigation into loss-mitigation products, also called finite insurance. The two — Michael Steinman, former senior vice president and chief actuary, and Dan Folse, former vice president-risk management — were put on administrative leave after they received Wells notices from the SEC in July.
A Wells notice indicates the SEC staff has made a preliminary decision to recommend that the commission bring a civil action. Recipients have the chance to respond to the SEC staff before a formal recommendation is finalized.
The insurer announced last month that company president and CEO Robert B. Pollock, CFO Philip Bruce Camacho, and Adam Lamnin, CFO of Assurant Solutions/Assurant Specialty Property, also received Wells notices and were placed on administrative leave. The three executives remain on leave at press time.
In a regulatory filing, Assurant confirmed it will continue to cooperate with the regulator’s probe. The company previously disclosed that its board formed a special committee of nonmanagement directors to continue evaluating the matter and to recommend appropriate actions. Assurant also said it continues to believe the SEC’s investigation involves a catastrophe reinsurance contract the company had with one reinsurer that began more than a decade ago, expired in 2004, and was not renewed.
In May 2005, Assurant — formerly called Fortis — announced it had received a subpoena from the SEC seeking documents relating to “certain loss mitigation insurance products.” The subpoena came amid a wider investigation into finite-insurance practices. Indeed, other companies involved in finite-insurance probes that received subpoenas that year included XL Capital, Genworth Financial, and Frankfurt-based Hannover Re AG.
Critics view finite insurance as an accounting scheme to manipulate earnings. In those cases, a “substantial” amount of risk is transferred, allowing the transaction to be booked as insurance. At that point, the underlying asset can be removed from the policyholder’s balance sheet.
Last year American International Group agreed to pay $126 million to settle Department of Justice and SEC charges that it sold products that helped PNC Financial Services Group Inc. and Brightpoint inflate earnings via the use of finite insurance, Reuters noted.