On August 20, 2025, the United States Court of Appeals for the Third Circuit reinstated a class action asserting claims under the Securities Exchange Act of 1934 against a reinsurance company and certain of its executives. In re Maiden Holdings, Ltd. Sec. Litig., 'F.4th', 2025 WL 2406864 (3d Cir. 2025). Plaintiffs alleged the company made misrepresentations in connection with its disclosures regarding loss reserves. The Third Circuit vacated the district court's grant of summary judgment in defendants' favor, holding that there were genuine issues of material fact related to the company's loss reserve calculations and that additional discovery was necessary.
Plaintiffs' allegations centered on how the company determined estimated "loss ratios" in calculating loss reserves. These ratios represent the amount in claims paid out compared to the premiums received for a given year. Id. at *2. Because it can take time to resolve a claim, the loss ratio for a particular year can change over time, and "[t]racking historical loss ratios ... can help inform what loss ratio estimate ... should be used to set loss reserves." Id. The company disclosed that it analyzed a number of factors in order to determine its loss reserves, but also specifically stated that it assumed "past experience" was "an appropriate basis for predicting future events" and that "historic loss development and trend experience is assumed to be indicative of future loss development and trends." Id. The record reflected that the company's loss ratios connected with its largest client substantially increased from 2012 through 2017 for the years 2008 through 2012, such that its loss ratios ranged from 75% to 82% for those accident years. Id. However, the company consistently used loss ratios between 50% to 60% to calculate loss reserves. Id. Plaintiffs contended that the company was aware of the specific historical loss ratio trends for its largest client, and that these historical loss ratios constituted material adverse data that the company knew about but failed to disclose at the time it calculated and reported its aggregate loss reserves. Id. at *3.
After the lower court denied in part defendants' motion to dismiss, it held that discovery was necessary to test the theory that the company "should have disclosed the historical loss ratios" of its largest client because that information constituted "material, adverse historical data of which [the company] had actual knowledge." Id. The court...
