APRA asks Buffett to show cause (Warren B could be investigated in Aust)

[rooboy]

The Australian Prudential Regulation Authority is taking on the Sage of Omaha, investment guru Warren Buffett, confirming yesterday it had given Berkshire Hathaway subsidiary General Re Australia two weeks to convince it not to launch an investigation.

Berkshire Hathaway - run by Mr Buffett, the world's second richest man - told investors about the potential investigation in its annual report, released this week.

The company said General Re had received a "notice to show cause" from APRA on March 11, "in connection with a potential investigation concerning financial reinsurance".

If the investigation does go ahead, APRA will check the validity of General Re's past financial reinsurance deals with clients, which will have implications for Australia's general insurance industry.

Financial reinsurance, unlike normal reinsurance, involves no transfer of risk. It is not illegal but developed a bad reputation after the HIH Royal Commission revealed that General Re - through a loan disguised as a reinsurance contract - helped inflate FAI's profit by more than $28 million before it was bought by HIH.

http://www.smh.com.au/news/Business/Buffett-given-investigation-ultimatum/2005/03/16/1110913666663.html