Regulators worldwide are getting more nervous about the finite reinsurance contracts many insurers use to smooth out discrepancies in their balance sheets.

The Spitzer investigation team is now focusing on several companies utilising such transactions in the US. They include Berkshire Hathaway, Ace, Swiss Re, Zurich and St Paul Travelers.

US regulators are also looking into the contracts, which can effectively make an insurer look healthier than it actually is. (The Australian Prudential Regulation Authority told Sunrise Exchange News earlier this month it will soon release a discussion paper on the issue.)

In a report published late last year, Fitch Ratings described finite reinsurance as a “financial statement of distortion”. It said the contracts “hide the true credit position of the buyer and hamper the analysis process”.