Zurich, Germany: (Aug-27-07) A class action lawsuit was brought against Zurich Financial Services over the spin-off of former reinsurance unit Converium Holding AG. The suit, filed in 2004 by a number of Converium shareholders, alleged that Zurich Financial had deliberately underestimated insurance risks when floating its reinsurance unit back in 2001. In order to cover insurance underwritten in the years 1997-2001, Converium was at the time forced to boost its reserves by $400 million. The US business was subsequently sold to Berkshire Hathaway Inc.
In a settlement reached, Zurich agreed to resolve the class action suit with a settlement fee of $30 million. Zurich Financial said the settlement does not represent an admission of guilt and that it has only entered the settlement in order to avoid lengthy court procedures. Converium is currently in the process of being taken over by French rival Scor SA. [FORBES: CONVERIUM SHAREHOLDERS]
