An IFSC-based company is at the centre of a major international investigation over its involvement in transactions linked to Australia's biggest corporate collapse and the "improper" accounting treatment of a deal by the world's largest insurer, American International Group (AIG).

The company in question is Cologne Re, the Dublin division of the General Reinsurance group. Its ultimate owner is US conglomerate Berkshire Hathaway, which is controlled by the powerful billionaire, Warren Buffett.

According to US sources, Mr Buffett is likely to be questioned about the Irish business when he is interviewed later this month by the US Securities & Exchange Commission and New York attorney general, Eliot Spitzer. Mr Buffett, who is co-operating with the investigation, has said he was never briefed on the substance of the transactions in question.

Cologne Re is based in La Touche House, near Busáras. In addition to the US inquiries it faces, its operations are also being investigated by the Australian Prudential Regulation Authority and the Irish Financial Services Regulatory Authority (Ifsra).

The company is among hundreds of firms operating in the low-tax zone that has attracted the cream of the international finance industry into north Dublin.

Billed as a global centre of excellence, the IFSC is host to half of the world's 50 biggest banks and half of the top 20 insurance companies and 195 reinsurers.

Such firms sell insurance to insurers, enabling them to spread the risk from their exposure to large claims. A senior insurance source in Dublin, who knows the international industry well, said the Irish regulatory environment was deemed particularly friendly for reinsurers.

Total industry annual premiums written in Ireland are worth more than €10 billion. But big as this business is, it is one that carries on in relative privacy.

The international investigations that have cast fresh light into this obscure area also serve to underline the light-touch regulation style of Ifsra, which supervises the IFSC.

Ifsra's low-key approach to the issue contrasts with its international counterparts, whose aggressive approach is matched by a big appetite for publicity.

Like many other IFSC firms, Cologne Re has enjoyed a quiet existence in Dublin. Set up in 1990, the company had premium income of $240 million (€185 million) in 2003 and profits before dividends of $17 million.

Until very recently, it was virtually unknown outside the reinsurance market. No longer. Amid the widening investigation into global reinsurance, it is now clear that the activities of some of its staff in Dublin have been under international scrutiny for some time.

The investigations centre on complex contracts in 1998 and 2000 for a form of reinsurance known as finite risk reinsurance. Such contracts are typically designed to soften the impact of claims that may have to be paid over a long period.

At issue is whether certain contracts were used by some General Re clients to disguise their true financial position, strengthening it by negating the element of risk in the transaction.

If there was no risk, the money that passed into the insurer from the reinsurer should have been treated as debt.

US regulators told The Irish Times that many of the transactions in question were booked in Cologne Re's Dublin office, whose "alternative solutions group" is under particular scrutiny.

At issue is whether the deals booked in Dublin were used to improperly boost AIG's financial position. The affair has placed huge pressure on AIG, leading to the departure of its chief executive of 40 years, Maurice "Hank" Greenberg, and his resignation as chairman.

On Wednesday, the group said it had improperly accounted for a $500 million transaction with General Re.

The US investigators are hoping to hear General Re's side of the story from Mr Buffett when he is interviewed on Monday week.

While Ifsra has initiated a low-profile investigation into the Dublin operation, the nature and scope of its work is unclear. Equally unclear is the matter of when its investigation began.

Ifsra inspectors are known to have visited Cologne Re last Wednesday. It is understood that there were previous visits, but little else is known. The body says it is co-operating with international regulators.

The Ifsra made no public statement about its scrutiny of Cologne Re until after US regulators revealed this week that they were examining some of the company's affairs.

But its interest in the company was raised more than six months ago, when the Australian regulator barred two high-level Cologne Re executives in Dublin from working as senior managers or directors in the Australian insurance industry.

Two or three other executives in the Dublin office are still under investigation.

Ifsra made no public comment when it was notified of the disqualifications, but said this week that it was satisfied that Cologne Re took appropriate "corrective action" regarding the individuals. It has not explained what specific action was taken.

One of those disqualified is Cologne Re's chief property and casualty underwriter for international finite reinsurance, John Houldsworth.

The other is a senior marketer, Tore Ellingsen. According to Ifsra, they are appealing the disqualifications.

The Australian investigation has already found that a 1998 finite risk reinsurance transaction "improperly boosted" the profit and loss account for 1997/98 of FAI Ltd, an Australian insurer.

It was found that the arrangement was disguised as a number of traditional reinsurance transactions even though the risks to General Re's Australian operation were removed through "side letters" between the parties.

This deal was instrumental in the 2001 collapse of Australia's second-biggest insurer, HIH, which had acquired FAI for 300 million Australian dollars (€179.11 million) on the strength of a due diligence report which failed to identify that the company's net worth was minus Aus$300 million.

The regulator said Mr Ellingsen was "a primary architect of a reinsurance transaction with FAI that he knew had the purpose of misleading".

Mr Houldsworth "played a key role in negotiating a reinsurance transaction with FAI that he knew had the purpose of misleading".

The global nature of the transactions in question means that the Ifsra's performance will be measured, for the first time, against the response of its international cousins.