New reinsurance-related and arbitration developments from Carlton Fields
Both the E.U. and the Trump Administration have now indicated that they will sign the Covered Agreement negotiated by the Obama Administration. How and when will the various provisions of this Agreement be implemented? In a Special Focus article we discuss implementation issues and possible consequences for the non-E.U./U.S. market.
This post written by Rollie Goss.
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On June 15 and 22, 2017, respectively, the Governors of Texas and Wisconsin approved new laws permitting domestic surplus lines insurers in those states (i.e., insurers domiciled in Texas and Wisconsin) to conduct business within those states. Texas and Wisconsin join a growing list of states, including Arizona, Arkansas, Delaware, Illinois, Louisiana, Missouri, North Dakota, New Hampshire, New Jersey, and Oklahoma, that have passed similar legislation. Previously, a surplus lines carrier would be admitted in one state and be eligible to sell surplus lines coverage only in the other 49 states. This model is gradually changing. Domestic surplus lines insurers in states with laws similar to Texas and Wisconsin are now authorized to issue domestic coverage provided that they satisfy certain eligibility requirements, including minimum capital and surplus requirements. Domestic surplus lines carriers may still not issue coverage in admitted markets. The Texas law is effective January 1, 2018, and the Wisconsin law was effective on June 22, 2017. Texas H.B. No. 2492; Wisconsin 2017 S.B. No. 77.
This post written by Michael Wolgin.
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The U.S. Department of the Treasury and the U.S. Trade Representative have ended the speculation about the fate of the Covered Agreement negotiated by the Obama Administration with the European Union by announcing their intention to sign the agreement. The Covered Agreement covers prudential measures regarding insurance and reinsurance, including the issue of the requirement for collateral for ceding insurers to claim financial statement credit for reinsurance provided by non-U.S. reinsurers and what may be a functional substitute for a declaration of equivalence of the U.S. insurance/reinsurance market for purposes of Solvency II. The announcement states that “the Administration also plans to issue a U.S. policy statement on implementation.” It will be interesting to see whether the implementation statement addresses the substance of any of the criticisms of the Covered Agreement. The Covered Agreement has been approved by the E.U. Council, although the European Parliament may be asked to approve it as well.
This post written by Rollie Goss.
See our disclaimer.
On May 4, 2017 Montana enacted a new law that will remove the requirement that reciprocal captive insurers have 25 or more persons domiciled in Montana. The law also permits captive insurers to go into dormancy. The certificate of dormancy is subject to expiration at the end of a five-year period and includes a $1,000 annual dormancy tax and a requirement to maintain paid-in capital and surplus of not less than $25,000. Previously, a captive that no longer desired to operate would terminate its license and pay no insurance premium tax after termination. The law also removes the requirements of examinations and investigations of companies existing under a certificate of dormancy. The law went into effect upon its approval on May 4, 2017. 2017 Montana S.B. 245.
This post written by Michael Wolgin.
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The question presented to the Court was “whether federal law has opened the door for state law to ‘reverse preempt’ the diversity jurisdiction statute.” The McCarran-Ferguson Act was enacted by Congress to prevent federal laws from interfering with state insurance regulation. The Liquidator sought to expand the existing McCarran-Ferguson “reverse preemption” framework to prevent the Defendant from exercising their right of removal pursuant to 28 U.S.C. § 1441. The Court determined that application of the Kentucky Insurers Rehabilitation and Liquidation Law (“IRLL”) had exclusive jurisdiction over the matter, which “would directly conflict with federal law” and “therefore, the IRLL jurisdiction provision must be preempted by the federal removal and diversity subject matter jurisdiction statute.”
Having established subject-matter jurisdiction necessary to adjudicate the dispute, the Court declined to abstain from exercising its jurisdiction under the Colorado River doctrine, as the Liquidator included a demand for common law contract damages, and there was no longer a parallel state proceeding. The Court requested additional briefing on the issue of whether the FAA can apply in light of the parties’ “Governing Law” agreement that restricted the Court to the law of Kentucky.
H. Brian Maynard, Liquidator of Kentucky Health Cooperative, Inc. v. CGI Technologies and Solutions, Inc., 3:16-cv-00037 (USDC E.D. Ky. Jan 3, 2017)
This post written by Nora A. Valenza-Frost.
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