What happened: A Lloyd's syndicate alleges Great American misrepresented the quality of an IP-backed lending insurance program and seeks to tear up two reinsurance contracts
Who's involved: AEGIS London (Lloyd's Syndicate No. 1225) and Great American Insurance Company, a subsidiary of American Financial Group
What's at stake: Millions of dollars in reinsurance billings under two variable quota share contracts covering policies issued between 2021 and 2024
Why it matters: The case tests what happens when a cedent's appointed agent allegedly controls both the underwriting and the flow of information to reinsurers
Where it stands: Filed October 29, 2026 in the US District Court for the Southern District of New York
The loans were supposed to be backed by valuable intellectual property. The borrowing companies were supposed to be creditworthy. The underwriting was supposed to be diligent.
None of that was true, a Lloyd's syndicate now alleges, and it wants out of two reinsurance contracts with one of the biggest names in US specialty insurance.
AEGIS London - Lloyd's Syndicate No. 1225 - filed a petition to compel arbitration and complaint against Great American Insurance Company and Great American E&S Insurance Company in the US District Court for the Southern District of New York on October 29. Great American is a subsidiary of publicly traded American Financial Group (NYSE: AFG).
At the center of the dispute is a lending insurance program run by an agent appointed by Great American. Under the program, Great American E&S issued lender collateral residual value (LCRV) policies - a specialized product designed to protect lenders if borrowers defaulted and the pledged assets, including intellectual property, were not worth enough to repay multi-million-dollar loans. UMB Bank arranged the loans and served as trustee for the investors who funded them.
The filing alleges that between October and November 2021, Great American's agents made representations to AEGIS London about the types of loans being insured, the value of the collateral, the strength of the underwriting, and the absence of losses in the program. AEGIS London signed on to the first reinsurance contract in December 2021 on the strength of those representations, according to the complaint.
Similar representations allegedly continued through 2022 and into mid-2023, leading AEGIS London to sign a second contract in June 2023.
Then came the turn. In November 2022, according to the filing, Great American E&S issued a policy that did not conform to either the representations made to AEGIS London or the terms of the 2021 reinsurance contract.
Great American allegedly passed this "non-conforming policy" to the contract through a quarterly reporting schedule in February 2023 - without disclosing the circumstances of its issuance or that it was inconsistent with Great American's prior representations and the reinsurance contract. The complaint alleges Great American knew all of this and said nothing until June 29, 2023.
AEGIS London signed the second contract that very day.
The complaint's sharpest language is reserved for the underwriting. The agent's evaluation of the borrowing companies' finances and creditworthiness was "grossly incomplete and inaccurate," the filing states. The collateral "had far too little commercial value to repay the millions of dollars that the noteholders were lending to them."
Underwriting submissions allegedly "underplayed the borrowing companies' problems and omitted key facts," and the complaint contends "no reasonable person would conclude" the agent had conducted a "meaningful, diligent, and independent evaluation."
Great American itself allegedly "abdicated its underwriting responsibilities." A "simple internet search," the filing claims, would have revealed many of the submissions were "inaccurate or misleading."
AEGIS London sent a rescission notice on August 7, 2026, offering to return the net premiums it had received under both contracts. Great American rejected the rescission.
Both contracts contain arbitration clauses covering "any dispute" arising from their "interpretation, performance or breach." But the filing alleges Great American is "not willing to arbitrate the parties' dispute at this time" and would prefer to delay. AEGIS London formally demanded arbitration the same day it filed suit.
The complaint brings five counts: rescission of the 2023 contract under the reinsurance duty of utmost good faith - the principle, known in reinsurance as uberrimae fidei, that an insurer passing risk to a reinsurer must disclose all material facts about that risk up front; breach of contract on both the 2021 and 2023 agreements; and court declarations that AEGIS London owes nothing under either deal.
The lawsuit is not the only front. Great American E&S has separately sued Arthur J. Gallagher & Co. - which acquired the program's managing general agent in 2022 - in the same court, accusing the brokerage of failing to properly underwrite and monitor the program. A federal judge denied Gallagher's motion to throw the case out earlier this year.
For reinsurers writing program business through delegated authority arrangements, the case is a sharp illustration of the exposure that builds when an appointed agent controls both the underwriting and the flow of information back to the capital behind it.
The allegations have not been tested, and no court has ruled on the merits.
