Windpool circus shuts down – just as Big Top goes up

Wednesday’s Docket for Association Casualty Ins. Co., et. al. v. Allstate Ins. Co., et. al had just two items – one an amended page 29 in the Plaintiff’s List of Exhibits and the other an Order Directing Verdit, Adopting Bench Opinion and Dismissing Complaint issued by US District Judge Keith Starrett.

This cause came on for trial on March 3, 2009, before the Court and a jury of ten. Both sides announced ready…Testimony was taken and evidence presented for eleven days. Following the completion of the Plaintiff’s case, a Motion for Directed Verdict was made by the Defendants.

The Court, in an oral bench opinion, granted Defendants’ Motion for Directed Verdict. The Court does hereby find that the Motion for Directed Verdict should be and is hereby sustained and incorporates herein by reference the bench opinion delivered this date stating the reasons and findings of the Court. This case is finally dismissed with prejudice.

Ironically, Time online was putting reinsurance under the Big Top in The Next AIG Scandal:

Outrageous. It’s the preferred adjective…But I suspect that—with apologies to a famous American patriot—we have not yet begun to get outraged. At least if some of the insurance experts I’ve been talking to are correct.

Thomas Gober, a former Mississippi state insurance examiner who has tracked fraud in the industry for 23 years and served previously as a consultant to the FBI and the Department of Justice, says he believes AIG’s supposedly solvent insurance business may be at least as troubled as its reckless financial-products unit…

Most of this as-yet-undiscovered problem, Gober says, lies in the area of reinsurance, whereby one insurance company insures the liabilities of another so that the latter doesn’t have to carry all the risk on its books. Most major insurance companies use outside firms to reinsure, but the vast majority of AIG’s reinsurance contracts are negotiated internally among its affiliates, Gober says, and these internal balance sheets don’t add up…Gober, who has a consulting business devoted to protecting policyholders…says there are numerous other examples of “cooked books” between AIG subsidiaries…

AIG spokesman Mark Herr took strong exception: “We strongly disagree with Mr. Gober’s analysis…But if Gober is right, the implications are almost too awful to contemplate…Gober has brought his allegations to the attention of the House Financial Services Committee, chaired by Rep. Barney Frank…

…More than any other Wall Street rogue, AIG has been able to indulge in “regulatory arbitrage” on a global scale, creating totally unsupervised businesses that act beyond the purview of any government…The company’s ability to escape an umbrella regulator was one reason the financial-products group was able to sell, indiscriminately and without hedges, credit-default swaps around the world in the belief that they could never all come due at once. They did… Are we missing something really big here? If so, there might be another terrible reckoning to come.

AIG’s Audubon Insurance Company was the Servicing Insurer for Mississippi’s Windpool (MWUA) according to the 2004 Windpool Exam entered as evidence by the Plaintiffs in Association Casualty Ins. Co., et. al. v. Allstate Ins. Co., et.al.

The Association also engages the services of a Servicing Insurer for various services related to policy and claims processing. These services are performed pursuant to a written agreement that authorizes payment to the Servicing Insurer for a servicing fee equal to 8,75% of the net premium written…[and]…a claim supervisory fee equal to fifty dollars (S50.00) for each claim file established for routine claims or claims assigned a catastrophe code. The Servicing Insurer is typically awarded the agreement based upon sealed bids submitted to the Association, however in the most recent period only the incumbent, Audubon Insurance Company bid on the contract.

Time is not the only online news source recognizing Gober’s expertise in reinsurance matters.

Mr. Gober probably knows as much about the dirty secrets of the insurance industry as anyone.

What I’d learned from Mr. Gober can be summed up thusly:

• There’s a lot of “off book” liabilities that don’t show up on insurance balance sheets, especially in the reinsurance sector
• Assets at stake in the insurance industry dwarf those in the banking sector of the global economy.
• There’s some very cloak-and-dagger international money laundering processed through the reinsurance sector. It’s there in the reports for anyone to find; but hardly anyone knows how to read the reports.
• Gober knows a lot more than he’s telling, because much of his knowledge is of material in sealed grand jury records. He’s not interested in contempt of court for publicizing such things, but there’s probably plenty of interest Congress could learn from him were they to have the good sense to call upon him to testify.
• There’s gonna be a lot more ugly stuff come to light before this is over. (Unless, of course, the “bailout” goes for opacity.) The end is not in sight.

The collapse of AIG has moved him to speak out. Gober’s prepared some videos about the AIG collapse. It’s nearly half an hour all told, in 4 separate YouTubes, available at his website. If you’re in the mood for a sound bite, this is not the place to go. However, if you want to listen to someone who knows the ins and outs of insurance industry three-card-monte, he’s as good as it gets.

Here’s a sample:

[youtube=http://www.youtube.com/watch?v=w4z9Fyk6D2Y]