ACE takes US$298 million reserve charge; U.S. insurance CEO resigns

It has been a busy two days for Bermuda-based ACE Ltd., which Thursday announced it would take a US$298 million reserve charge on fourth quarter earnings as a result of asbestos & environmental liabilities, and sell three run-off reinsurance operations. Just a day before, the head of its U.S. insurance operations resigned, and parent company CEO Evan Greenberg sent a memo to employees updating them on the ongoing internal investigation which was spurred by allegations by New York Attorney General Eliot Spitzer.ACE undertook the internal review when it was cited in court papers filed against Marsh & McLennan’s insurance brokerage arm by Spitzer alleging the broker had engaged in bid-rigging and conflict of interest as a result of accepting contingent commissions. Three other insurers were also cited in the court documents, although none face civil suits from Spitzer. ACE also widened its internal review to include non-traditional insurance products in response to investigations by Spitzer and the U.S. Securities Exchange Commission (SEC).Greenberg tells employees that beyond earlier disclosed instances of wrongdoing uncovered at ACE USA’s casualty risk division, the investigation has uncovered no other evidence of wrongdoing.The same day the letter was released, it was also announced ACE USA chair and CEO Susan Rivera was resigning after three years, to be replaced by Brian Dowd. Dowd has been with ACE since 1995.In terms of the impact of the reserve charges announced Thursday, much of this comes from the Brandywine operation, which has already been downgraded by A.M. Best. To reduce its environmental exposure, ACE intends to sell run-off operations Brandywine Reinsurance Co. (UK), Brandywine Reinsurance Co. S.A.-N.V. and ACE American Reinsurance Co. to international run-off investment firm Randall & Quilter.