Insurance Company and Former CFO Charged With Faulty Loss Reserves Disclosures

The Securities and Exchange Commission today charged international insurance company AmTrust Financial Services Inc. and its former CFO Ronald E. Pipoly Jr. with failing to disclose material facts about how the company estimated its insurance losses and reserves. They have agreed to pay a combined $10.5 million to settle the SEC’s charges. According to the SEC’s complaint, AmTrust and Pipoly failed to properly disclose the company’s process for reporting management’s best estimate of loss reserves in its filings with the SEC. The complaint alleges that AmTrust and Pipoly disclosed the company’s general actuarial process for estimating loss reserves, but failed to disclose that Pipoly made consolidated accounting adjustments that did not properly consider the actuarial analyses and diverged from the company’s actuarial estimates.