Annual Report 2011 - SNL Financial

Annual Report 2011 - SNL Financial

AIG Arbitration

On September 6, 2011, the Company served a written demand (the “Arbitration Demand”) initiating arbitration

proceedings against various AIG Companies under 24 reinsurance treaties pursuant to which the Company reinsured AIG

Companies for certain pollution liability risks related to underground storage tanks for the policy years 1990 through 1999

(the “Treaties”). The Treaties were cancelled by the Eastern Re in 1999. In the Arbitration Demand, the Company seeks an

award from the arbitration panel compelling AIG Companies to permit the Company to audit the books and records of AIG

Companies relevant to the Treaties, among other reasons, to enable the Company to examine the bases for certain paid losses

and loss reserves ceded by AIG Companies to Eastern Re under the Treaties. The Company believes that the Treaties permit

such an audit (and the Company’s prior requests have been denied by AIG Companies).

On October 3, 2011, AIG Companies responded to the Arbitration Demand by advising that they will seek an award

from the arbitration panel of approximately $1.9 million plus future amounts that may become due under the Treaties before

the final hearing in the arbitration. Both the Company and AIG Companies seek attorney’s fees and costs in the arbitration.

At this stage of the proceedings, both the Company and AIG Companies have appointed arbitrators. The parties are

currently in the process of attempting to select an umpire.

While the Company believes it has adequately reserved the claims at issue in the arbitration, and that it is entitled to the

relief it requested in the arbitration, it is reasonably possible that the final outcome of the arbitration could go against the


Item 4—Mine Safety Disclosures

Not applicable.


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