(Bloomberg) Zurich Financial Services AG's Australian unit was found by regulators to have used reinsurance transactions with a unit of Warren Buffett's Berkshire Hathaway Inc. to overstate its 2000 profit.

Zurich Australian Insurance Ltd.'s contracts with Berkshire's General & Cologne Re Group boosted earnings by A$61 million ($47 million) for the year, allowing it to appear to meet solvency requirements, the Australian Prudential Regulation Authority said in a statement today.

"Deliberate misrepresentations concerning the nature and the accounting treatment of reinsurance transactions" with the Berkshire unit were identified, the regulator said.

Action will not be taken against Zurich because it restated its accounts, though individuals may be pursued, APRA said. Zurich is among more than a dozen insurers being investigated as regulators from as far away as the US and Ireland examine instances when a type of non-traditional reinsurance is abused to mask losses or smooth earnings.

General Re's former chief executive Ronald Ferguson last week refused to answer questions from US federal prosecutors, and in March probes of American International Group Inc., the world's largest insurer, triggered the ouster of Maurice (Hank) Greenberg, who'd run AIG for almost four decades. "Financial reinsurance has a legitimate origin in supporting the solvency of new or small insurance companies until they establish themselves," said Andries Terblanche, senior insurance partner at KPMG Australia. "Over time, some companies started abusing it."

The Australian regulator didn't say if General Re had knowledge of the improper use of its policies by Sydney-based Zurich Australia. Mark Westfield, a spokesman for General Re in Australia, declined to comment.

"A number of people knowingly misled APRA about the true nature of the Zurich reinsurance transactions over an extended period of time," the regulator said. Zurich Australia "regrets without reservation these circumstances," the company said in a statement.

The Australian Securities & Investments Commission, the nation's securities regulator, is also investigating Zurich Australia, which has added notes to its financial accounts for the years 2000 to 2004 to correct errors. The company reported a A$37.1 million profit in 2000. It would have posted a A$24 million loss without the reinsurance benefit.