Reinsurer MBIA Inc. recently said that it had received a Wells notice from the Securities and Exchange Commission that it may face civil charges over past reinsurance transactions.

In March, MBIA restated six years of financial statements as an investigation over controversial reinsurance transactions by federal agencies and the New York Attorney General's Office continued. Reinsurance contracts are essentially insurance for insurance companies, and MBIA said that the Wells notice covered a deal it improperly reported in 1998 and clarified in the spring restatements. In that transaction, MBIA incorrectly used $70 million of proceeds from a reinsurance transaction to offset part of the $170 million loss that the firm expected when a Pennsylvania hospital chain defaulted on bonds.

MBIA said that it is in discussions with the SEC over a possible settlement. Other issues under investigation include MBIA's relationship with a reinsurer it helped establish, Channel Reinsurance Ltd., as well as its accounting for advisory fees, the way it establishes reserves, and purchases of credit-default protection on itself, the company said in March.

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