A buyer of finite reinsurance gets Earnings Acceleration/Smoothing, Accounting Arbitrage and Balance Sheet Engineering/Optimisation.

These were three of the audacious bullet points from a presentation made at the Casualty Loss Reserve seminar held by the Casualty Actuarial Society in September, 2001.

The presentation, by David Molyneux, a vice president at Bermuda reinsurer Partner Re, then described the seller's perspective: "Motivation behind transaction is not primarily risk transfer."

New York Attorney General Eliot Spitzer and the Securities and Exchange Commission have turned their eyes to this arcane area of the reinsurance business, but, so far, investors have yawned.

Finite reinsurance ? also known as "financial" or "retroactive" reinsurance ? is a term for an array of reinsurance products, many legitimate and some not. When they aren't, a reinsurance company is, in effect, providing a loan that a company uses to mask its true financial situation from regulators and shareholders. A key aspect of these questionable deals is that there is little to no risk transferred to the reinsurer.

Regulators are focused on the sellers of these products, in yet another example of the new and shifting rules of conducting business post-bubble.

Companies are increasingly being held responsible for actions of their clients. This might be particularly worrisome in the reinsurance industry, which until as recently as a decade or so ago, was still the province of the gentleman's agreement.

Some investors are ferreting out vulnerable buyers of finite, but most investors are blase. They mistakenly ignored Mr. Spitzer's investigation into insurance-brokerage contingency fees early on, too. Shares of AIG, which is under investigation for selling similar products in at least eight instances ? including some that don't involve insurance accounting at all ? are mysteriously bouncing back.

On Tuesday, Platinum Underwriters Holdings, a Bermuda insurer, disclosed that it had delayed its earnings said it terminated an existing finite contract that didn't involve enough risk transfer. No matter. Platinum's stock rose 8.4 percent.

Presentations such as Partner Re's are all the more worrisome because of the brazen descriptions, made among friends at a professional meeting. Partner Re declined to make Mr. Molyneux available. Marvin Pestcoe, who heads up Partner Re's alternative risk-transfer business, said of the presentation: "Some of these terms have taken on negative connotations because of their association with bad or even fraudulent transactions, but at least some of them can also be applied to transactions that are perfectly legitimate."

He said the presentation wasn't a marketing document and "isn't related to any specific transactions that Partner Re was doing at the time or since".

Disclosures and allegations of the existence of undisclosed side letters in the industry might be more disturbing. After accounting-rules changes in the early 1990s, did the reinsurance industry move sufficiently away from the handshake culture?

The SEC complaint in the case involving AIG and cellphone distributor Brightpoint cites the existence of an "oral side agreement." Australian regulators also noted side agreements in a case involving an insolvent Australian insurer and Berkshire Hathaway's General Reinsurance unit.

In another byzantine case, Tennessee and Virginia regulators are suing Gen Re in a case involving the bankruptcy of Reciprocal of America, a medical-malpractice and professional-liability insurer. In an amended lawsuit filed last month in Tennessee, the regulators allege that Gen Re and ROA had "non-contractual" understandings in a 1998 finite reinsurance agreement and subsequently arrived at two "unreported side agreements" in 2000 and 2002 that had the effect of protecting Gen Re from excess losses.

The allegation is that ROA misrepresented the agreements to regulators, allowing them to think ROA had more reinsurance protection than it did.

Of course, given the pattern in other cases, regulators have an incentive to characterise things as unreported side agreements. Gen Re Chief Executive Joe Brandon says, "The lawsuit doesn't allege that we misrepresented anything to anyone at any time."

He adds that "there were no 'understandings' that changed the terms of our reinsurance contracts with ROA." Indeed, the 2000 and 2002 agreements appear to be typical amendments to existing contracts from years earlier, according to documents reviewed by The Wall Street Journal.

One of the main issues in the case is what Gen Re's obligation was to know whether ROA was misrepresenting its agreements to regulators and to alert them if it did.

Mr. Brandon says Gen Re was "not aware of any inaccuracy in ROA's financial statements" and "not aware of how ROA described its reinsurance contracts to regulators and rating agencies."

Without a smoking gun, regulators will have a high hurdle to prove responsibility. Investors have a lower threshold: They simply want to trust their companies to behave above board.