Report Fortress Re Ordered to Pay $1.12 Billion

December 23, 2003

Fortress Re, a No. Carolina-based reinsurance company, which collapsed following Sept. 11 related losses, has reportedly been ordered to pay Japan’s Sompo Insurance Co. $1.12 billion.

According to a report in the Wall Street Journal, as excerpted by Reuters, an arbitration panel found in favor of the insurance group’s claim that the company’s directors and officers had misrepresented the reinsurer’s financial strength, and had engaged in deceptive accounting practices. A lawsuit, filed last December, also alleged that the reinsurer’s accountants, Deloitte & Touche, had acted improperly, but the report did not indicate whether or not the judgment covered the accounting firm.

Sompo was formed in 2001 following the merger of Aioi Insurance Co. Nissan Fire and Marine, Yasuda Fire and Marine and Tasei Fire and Marine. All of the companies had done extensive business with Fortress Re, and had individually filed suits, following the company’s collapse. Its major specialty was aviation reinsurance, and it had been severely impacted by the losses of Sept. 11 and the crash of an American Airlines Jet in Queens in November.

Aioi had reported losses of $1.23 billion directly related to its deals with Fortress Re, while Taisei had actually failed as a result of its exposure.

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