Class action targets James River over reinsurance controls
Class action targets James River over reinsurance controls | Insurance Business America
Reinsurance
Class action targets James River over reinsurance controls
Investors urged to seek the role of lead plaintiff
Reinsurance
By
Kenneth Araullo
Faruqi & Faruqi, LLP is investigating potential claims against James River Group Holdings over lack of effective internal controls over reinsurance.
In a news release, the firm reminded investors of the January 12, 2024 deadline to apply for the role of lead plaintiff in a federal securities class action filed against the company.
The complaint alleges that James River and its executives violated federal securities laws. The allegations include making false or misleading statements and failing to disclose specific details about the company’s financial operations. The key points of the complaint include:
James River’s ineffective internal controls over the recognition of restatement premiums for reinsurance
The resultant overstatement of the company’s net income
The likelihood of the company needing to restate its financial results
The allegedly misleading nature of the defendants’ statements about James River’s business, operations, and prospects
On November 7, 2023, James River announced its financial results for the third quarter of 2023, revealing an error in accounting for reinstatement premium in its excess & surplus lines segment in the financial statements for the second quarter of 2023. This error led to significant overstatements of net income, as well as understatements of ceded written premium, and overstatements of net written and earned premiums, it was alleged.
Additionally, the company identified a material weakness in its internal control over financial reporting, specifically related to the review and recognition of reinstatement premiums for reinsurance.
Following this announcement, James River’s share price dropped by $0.99, or 7%, closing at $13.15 on November 8, 2023, amid unusually heavy trading volume. The lawsuit claims that investors suffered damages due to the company’s actions and the subsequent market reaction.
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