A federal judge has dismissed a proposed shareholder class action lawsuit charging that MBIA Inc. defrauded investors by using sham reinsurance transactions to mask a $170 million bond loss in 1998.

U.S. District Judge Louis L. Stanton ruled Tuesday that the suit is barred by the two-year statute of limitations in the Sarbanes-Oxley Act.

Armonk, N.Y.-based financial guarantee insurer MBIA agreed last month to pay $75 million to settle U.S. Securities & Exchange Commission fraud charges related to the 1998 reinsurance deals. The retroactive reinsurance—placed with AXA Re Finance S.A., Munich Reinsurance Co. and Converium Re—allowed MBIA to avoid taking a $170 million loss on bonds issued by a bankrupt affiliate of Allegheny Health, Education and Research Foundation of Pittsburgh. In side agreements, MBIA promised to repay the reinsurers by transferring future bond business, and regulators charged that MBIA should have accounted for the deals as loans rather than as reinsurance.

[1] Business insurance: Judge rejects class action against MBIA