These are details of how Ace improperly used non-traditional and finite reinsurance to enhance its earnings and those of clients, according to the settlement agreement between Ace and the three Attorneys General of US states:

In at least six separate deals, Ace created the false appearance of risk transfer, utilising methods such as secret side agreements to negotiate wording of written contracts that did not accurately characterise the agreement reached between parties, said the settlement. For example:

1998: Ace agreed to pay $45 million for $50 million in cover on a policy which Hiscox Syndicates Ltd. had insured with a $45 million limit and on which $40.8 million of losses had already occurred. The contract therefore appeared to have sufficient risk of loss to any auditor or regulator who examined it. Since losses were expected to reach the $50 million limit, Ace and Hiscox negotiated a secret side agreement providing that ACE would not have to pay any claims until 2002.

This ensured that Ace would generate sufficient investment income to cover any losses over the premium and incur no real risk, however Ace inadvertently showed a copy of the agreement to its outside auditing firm which refused to authorise the deal of reinsurance. Ace then falsely told the auditor that the transaction would proceed without the side agreement. In realty the parties reached a verbal agreement for the same terms and both sides accounted for the deal as reinsurance.

2000: Ace agreed to provide American Capital Access with $60 million in “reinsurance” in exchange for $60 million in premiums. Ace acknowledged that this was essentially a loan agreement in an internal document after the first $10 million of coverage.

“Restructured programme can be viewed as ACA making a $10 million loan to Ace at three percent rate of interest thus AFS [a division of Ace earns approximately 3000 bps on $10 million,” the document said

2000: Ace moved to provide reinsurance that would free up Ace Tempest Re's capital after it incurred property losses of $45 million. Ace engineered an internal deal between Tempest Re and Ace Bermuda Insurance Ltd. which appeared to involved Tempest Re paying $70 million for $120 million in reinsurance with part of the sum meant to cover the $45 million loss that had already occurred.

Through a side agreement, the parties agreed to cancel the contract as soon as Tempest Re had paid the first $45 million of premiums. Ace Bermuda received a $5.67 million fee for participating in the deal while Ace Tempest Re was able to remove its losses for the set fee of $5.67 million. Both parties accounted for the deal as reinsurance despite the lack of risk.