The Third Circuit Court of Appeals recently reversed a district court’s dismissal of a complex securities fraud action brought against reinsurance company Maiden Holdings Ltd., concluding that discovery was incomplete and that genuine issues of fact remained with regard to the plaintiff’s Securities Exchange Act section 10(b) and SEC Rule 10b-5 claim.
Maiden is a publicly traded reinsurance company. As noted by the court in its decision, “Reinsurance is the business of insuring insurance companies.” Maiden is required to set “loss reserves” to pay future claims. One of Maiden’s largest clients, AmTrust Financial Services, suffered adverse developments in its business over a two-year period including increasing payment of claims to its customers. Maiden’s publicly filed Securities and Exchange Commission disclosure forms addressed its setting of loss reserves and provided certain details about how Maiden set its loss reserves. From 2017 to 2018, Maiden suffered unanticipated losses in its AmTrust business segment, and its loss reserves were inadequate. Maiden increased its loss reserves “and lost hundreds of millions of dollars as a result.” Thereafter, Boilermaker-Blacksmith National Pension Trust and Taishin International Bank, which represented a class of Maiden’s common stockholders, filed an action against Maiden and certain of its executives alleging violations of the Securities Exchange Act of 1934 “by making unlawfully misleading statements about its loss reserves.” Among other things, Boilermaker sought discovery from Maiden of information related to its setting of loss reserves and its loss ratios. After limited discovery, the district court granted Maiden’s motion for summary judgment, concluding that Maiden’s statements about its loss reserves were not misleading as a matter of law.
The Third Circuit reversed. It noted that Boilermaker’s securities fraud claim was based on the claim that Maiden unlawfully omitted “materially adverse historical loss ratios that conflicted with Maiden’s loss ratio estimates and loss reserve statements as reported in SEC disclosure forms.” The court concluded that there was sufficient evidence in the record to permit a reasonable fact finder to conclude that the omitted loss data was material. It also concluded that Boilermaker was entitled to additional discovery, including complete documentation addressing the historical loss ratios for the AmTrust business. The court vacated the district court’s order granting summary judgment and remanded the case to the district court to permit full discovery.
In re Maiden Holdings, Ltd. Securities Litigation, No. 24-1118 (3d. Cir. Aug. 20, 2025).
