The US Securities and Exchange Commission (SEC) has stepped up its probe into the way General Re, a subsidiary of Warren Buffett's Berkshire Hathaway Group, accounted for so-called finite reinsurance transactions.
The ramp-up of the investigation is an indication that federal regulators are taking a tough stance on Berkshire Hathaway's alleged involvement in inappropriate accounting practices in the insurance industry.
Eliot Spitzer, New York state attorney-general, opted not to investigate General Re because Mr Buffett and other senior executives at Berkshire had co-operated with his inquiries into potential accounting irregularities at American International Group (AIG), a person familiar with the regulatory inquiries said.
Berkshire's latest quarterly filings, released late on Friday, say: "Governmental authorities are also inquiring about the accounting by certain of Berkshire's insurance subsidiaries for assumed and ceded finite reinsurance transactions."
The Financial Services Authority, the UK's chief City watchdog, has also requested information from General Re's UK businesses on transactions involved in their investigations into Milan Vukelic, a former General Re executive, and another unnamed former employee, including transactions with AIG, the filing said.
Berkshire said Mr Vukelic, chief executive of Faraday, the UK insurance broker controlled by General Re, had been sacked. In May, he was put on administrative leave. General Re or its subsidiaries were also providing data to regulators in Ireland, Germany and Canada, the filing said.
It is also facing an inquiry in Australia. Separately, discussions of a settlement are under way between AIG management, which was sued last month for overstating earnings, and Mr Spitzer.
The amount that AIG is to pay Mr Spitzer is likely to be far less than the $850 million (€688 million) settlement Marsh & McLennan, the world's biggest insurance broker, agreed to pay earlier this year after the group was sued by the New York state attorney-general for rigging bids on insurance contracts, according to a person close to the regulators.
That is because it is difficult to estimate the amount of harm investors suffered as a result of the alleged accounting fraud that took place.
