Companies that buy finite risk insurance may find peace of mind in specialist services now coming to market, after increasing scrutiny of the contracts by regulators.

Finite risk ? a type of insurance and reinsurance policy that typically caps the losses that can be sustained in exchange for the possibility of sharing in the profitability of a contract when there is a low loss experience ? has recently come under fire after several companies, including insurance giant American International Group, were accused of misusing the contracts to hide losses.

Now a crop of new services are sprouting to help clients independently assess if finite risk contracts, and other types of alternative risk policies, will pass regulatory muster, and more.

The services, generally coming from industry specialists that see a need, can range from assisting parties in how to best construct one of the re/insurance contracts to the financial effect of the policy, including its possible impact on a company?s stock price, to whether it meets risk transfer requirements.

?There is a tremendous need for institutional investors to have a full and complete financial picture of an insurance or reinsurance company beyond what the traditional rating agencies currently provide,? said John Lepire, chairman of California consulting firm Ludger Limited LLC.

The need is especially great now that new requirements adopted by regulators in the US and UK in October will require companies at year-end to fill in special disclosures on any finite risk business they enter into.

Mr. Lepire, who has been involved in the review, auditing and reporting on finite and risk bearing reinsurance treaties since 1979, including audits performed for prominent insurers like The Hartford, Commercial Union, Travelers, Firemen?s Fund and CNA, recently joined another finite expert, Andrew Barile, to form an intitiative offering specialist services to the industry, including advisory services specific to finite risk contracts.

Mr. Lepire said the idea to offer the service followed a need from the international investment community ? specifically for reinsurance treaty review and analysis. Clients are also seeking out the services because they are coming from an independent group.

Mr. Barile, who wrote the only finite textbooks in print and runs a California-based consulting firm under his own name, told The Royal Gazette although the giant accounting firms offer reinsurance contract review services some companies may find comfort in using an independent service such as his and Mr. Lepire?s.

Accounting firms, which offer audit and advisory services, say there is a wall of separation between the activities, cutting out conflict concerns.

But Mr. Barile said some corporations want to be certain they are getting advice from a completely independent party.

Another firm stepping up to offer analysis of finite risk contracts, amongst other services, is newly formed Bermuda company, the Horseshoe Group.

Principal and founder Andre Perez said his clients value the fact that Horseshoe is an independent group without any affiliations to brokers or audit firms.

?We render our services with complete objectivity,? he said.

And Mr. Perez, an actuary who also has extensive industry experience underwriting finite contracts, said differences between how US and European regulators looked at finite were important for a company to take into consideration.

?While there is a movement towards convergence of accounting and regulatory standards around the world, they are still separate and distinct,? he said.

Another central issue surrounding the accounting of finite risk contracts is ensuring the policies transfer enough risk to be accounted for as reinsurance. Under accounting rules, insurance that falls short of risk transfer requirements must be recorded as a deposit.

And, under new regulations from US insurance commissioners, company executives must attest to the contracts not having any side agreements, oral or written, that could alter the terms of the contract.

Although the zeal that regulators have shown in rooting out finite contracts used to alter balance sheets may have scared some off the product, the expectation of higher pricing in the traditional markets in 2006 may put a new shine on finite policies.

?With the turmoil surrounding finite re/insurance in the past few years there has been a decrease in demand for this type of reinsurance,? said Mr. Perez.

?I don?t think it is the reflection of the usefulness of the product itself, but rather the unfortunate consequences of few high profile contracts which were designed to deceive the true financial position of an insurance company or a corporation.?

Finite contracts can be more flexible in their terms, and more affordable than traditional coverage.

They have previously proved popular during hard markets ? a time when insurance and reinsurance rates typically rise because there losses have sapped capital from the sector, while demand for coverage grows.

?Typically during a hard market, insurance companies will look into finite products to help them address capacity issues to expand into profitable lines of business, increase in retentions or provide an alternative to expensive traditional reinsurance,? Mr. Perez said.