MISSED PREMIUM RENDERS ANDERSEN’S CAPTIVE INSOLVENT

Bermuda-based Professional Services Insurance (PSI), the captive insurer of troubled US accounting firm Arthur Andersen, has become technically insolvent following the accounting firm’s failure to make a $100m premium payment, the Wall Street Journal reports. Citing “people familiar with the matter”, the paper said that the insolvency jeopardised Andersen’s previously agreed $217m settlement of a fraud case in Arizona and its pending offer to settle litigation over its audit of bankrupt US energy-trading group Enron. PSI was to have paid the $217m settlement in the Arizona case, where failed investment group Baptist Foundation of America had accused Andersen of fraud in handling its books. Andersen said at the weekend that its captive would be unable to make the payment by the settlement’s April 15 deadline, but provided no other details. Under Andersen’s offer to settle the Enron matter, PSI would have paid $250m of a proposed $375m. The Journal reported that the captive was working with Bermudian regulators to resolve the insolvency, reportedly with a $130m infusion from Andersen, but also cited an e-mail from an Andersen partner to its US board which queried whether the group was “insolvent and just not recognising it”.