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The Actuary The magazine of the Institute & Faculty of Actuaries

‘Life or death situation’ for Deloitte

Financial reinsurance, which has been implicated in the difficulties of Independent Insurance, HIH, and Equitable Life, is the subject of a $2bn lawsuit against auditor Deloitte in the US. In a court hearing earlier this year, Robert S Bennett, a former defence attorney for President Bill Clinton hired to defend the accounting firm, called the case ‘a life and death situation’ for Deloitte.

In discovery, the plaintiff Japanese insurers have found what they believe is a smoking gun – a series of emails and other memos from a Deloitte actuary who raised questions about why the liabilities related to financial reinsurance weren’t being recorded. ‘I have a concern over the lack of recognition’ of future liabilities, the actuary, John Slusarski, wrote in one 1999 email quoted in plaintiff filings. A year later, he quantified the unbooked liabilities at $1.4bn, the filings say.

Despite the sabre-rattling, the case seems likely to hinge on the knowledge that would reasonably be expected of the plaintiffs, both professional insurers which reinsured aviation business to Fortress Re, which failed after the 11 September 2001 disaster.