Maiden Holdings Ltd. is named in a class action investor lawsuit alleging that it failed to adequately address and reveal portfolio risks involving AmTrust Financial Services, its largest customer.

The complaint alleges that Maiden didn’t disclose material information, and the company is alleged to have misrepresented the quality and nature of its underwriting and risk management policies/practices, as well as the risks for its reinsurance portfolio.

Where AmTrust fits in: Maiden is alleged to have avoided the use of audits, independent reviews, analyses and other tactics at its disposal to make sure that its AmTrust Reinsurance Segment priced policies commensurate with the risk. The lawsuit alleges by not doing so, Maiden, and its investors by default, were exposed to a high risk of financial losses and reserve charges.

In November, Maiden disclosed 2018 third-quarter financial results that included a $308.8 million net loss versus a $63.6 million net loss the year before. The big factor behind the results: adverse prior-year loss development of $201.4 million in the AmTrust Reinsurance segment versus $61.1 million of adverse prior-year loss development for the same period in 2017.

In January, Maiden announced an amendment to its quota share agreement with AmTrust for the cut-off of the ongoing and unearned premium of AmTrust’s Small Commercial Business and U.S. Extended Warranty and Specialty Risk as of Dec. 31, 2018 (with the remainder of the Maiden Quota Share Agreement remaining in place). The amendment calls for Maiden returning approximately $700 million in gross unearned premium to AmTrust, which will net to approximately $480 million after consideration of ceding commission and brokerage.

AmTrust, whose finances and accounting practices have been under scrutiny in the recent past, completed a nearly $3 billion privatization plan at the end of November.

The class action lawsuit, filed in the U.S. District Court in New Jersey, is on behalf of Maiden investors who purchased securities between March 2014 and Nov. 9, 2018. It invites investors to join the lawsuit before an April 12, 2019 deadline.

A number of law offices are seeking investor plaintiffs to join the suit, including Bragar Eagel & Squire, P.C., The Schall Law Firm, Rosen Law Firm, and Bronstein, Gewirtz, & Grossman LLC. Each of the firms published press releases regarding the lawsuit.

Sources: Bragar Eagel & Squire, P.C., The Schall Law Firm, Rosen Law Firm, and Bronstein, Gewirtz, & Grossman, LLC.