There are whispers from within the country’s key financial regulator, the Australian Prudential Regulatory Authority, that all is not well, with suggestions of leaks from a well placed source about the inquiry into the use of so-called financial reinsurance in the financial services industry.

APRA wrote to all insurers in the wake of the discovery of financial reinsurance treaties in HIH and FAI and Zurich Financial Services Australia and Zurich Australia Insurance. But now it’s emerged that there’s a a short list of nine companies which APRA is concentrating on – and the leak could only have come from senior ranks in APRA because knowledge of the short list is said to be limited.

In APRA’s letter to Zurich, the company was asked if it had used financial reinsurance contracts. Now these aren’t a problem if there’s a disclosed and fully transparent transfer of risk, but the trouble with the FAI, HIH and Zurich deals was that there was no discernible transfer of risk. General Re, part of the Berkshire Hathaway empire of Warren Buffett, was also involved with these deals, especially the very touchy ones at Zurich. General Re is being officially investigated by APRA.