New reinsurance-related and arbitration developments from Carlton Fields
The United States and the European Union have agreed on the final wording of a Covered Agreement which covers several topics, including the provision of collateral by foreign reinsurers. We discuss the Covered Agreement and the initial responses to the agreement in a Special Focus article.
This post written by Rollie Goss.
See our disclaimer.
by Rob DiUbaldo
On January 23, 2017, Hawaii lawmakers introduced a bill to establish a pilot parametric disaster insurance program aimed at preventing potential liquidity gaps between federal assistance and total economic losses in the event of a serious natural disaster. Parametric or index-based insurance programs peg claims to specific characteristics of natural disasters rather than the usual insurance arrangement basing payouts on actual losses sustained. The bill lists one example of a metric to determine whether coverage under a parametric disaster program would be triggered—if the maximum wind speed of a hurricane as it passes through a specific part of the islands reaches a certain threshold, coverage attaches.
If passed, H.B. 791 would establish a three-year parametric disaster insurance pilot program and empower the state to research and purchase parametric disaster insurance. A parametric disaster insurance special fund would be financed with interest earned on the principal in the currently existing hurricane reserve trust fund, any money paid out under parametric disaster insurance policies, and any appropriations made by the state legislature. The bill further requires a report to the legislature on the pilot program due by December 1, 2019, and calls for the repeal of the program on June 30, 2020. A companion bill, S.B. 799, was introduced in the state senate on January 20, 2017.
This post written by Thaddeus Ewald .
See our disclaimer.
A New Hampshire court has approved the commutation, settlement, and release agreement between The Home Insurance Company (in Liquidation) and Providence Washington Insurance Company (PWIC), as successor to Unigard Mutual Insurance Company, which merged with Seaton Insurance Company.
Home entered liquidation in 2003, and the New Hampshire Insurance Commissioner was appointed as Liquidator. Prior to the merger of PWIC with Seaton, the Liquidator entered into a separate commutation agreement effective March of 2015 as to all PWIC business. The instant commutation agreement (approved in December 2016), provides for the commutation of all of Home’s ceded and assumed business to/from Seaton (pre-merger), as well as resolution of all of Seaton’s contribution claims against Home (which related to increased payments Seaton made to insureds common to both parties as the result of Home’s insolvency). A redacted copy of the commutation agreement, with economic terms removed, was filed with Home’s motion for approval. In re Liquidation of The Home Insurance Co., 217-2003-EQ-00106 (N.H. Sup. Ct. Dec. 12, 2016) (order approving commutation); Motion for Approval (Oct. 18, 2016).
This post written by Brooke L. French.
See our disclaimer.
As we previously reported in June 2016, the United States and the European Union were in discussions to enter into a Covered Agreement. The Dodd-Frank Act introduced Covered Agreements as a means for limited federal intrusion into the regulation of the business of insurance and reinsurance by the states. On January 13, 2017, the U.S. Department of Treasury and the Office of the U.S. Trade Representative announced that the negotiations between the United States and the European Union for a Covered Agreement were successfully completed. The text of the announcement can be found here.
Also, on January 13, 2017, the United States and the European Union released a joint statement announcing the successful negotiations. The statement noted that the Covered Agreement “will ensure ongoing robust insurance consumer protection and provide enhanced regulatory certainty for insurers and reinsurers operating in both the U.S. and the EU.”
The Covered Agreement covers three areas of prudential insurance oversight: 1) reinsurance; 2) group supervision; and 3) the exchange of insurance information between supervisors. The Covered Agreement contains detailed provisions, which are summarized below.
The final legal text of the Covered Agreement was provided to Congress on January 13, 2017, in accordance with the Dodd-Frank Act. According to the statement, the European Union will also follow the necessary steps to also sign and formally conclude the Agreement. If there are any surprises in this agreement it may be the extended length of time for the implementation of the collateral reform provisions and the lack of any explicit consideration of the Solvency II equivalence requirement.
This post written by Rollie Goss.
See our disclaimer.
by Rob DiUbaldo
The court handling the liquidation of Reliance Insurance Company has approved an application for the direct payment of reinsurance proceeds by United Insurance Company to Reliance’s insured, Hoechst Celanese Corporation, with respect to certain workers compensation and employers liability policies issued to Hoechst for the policy periods of 1989 and 1990. The court found that United had unequivocally assumed Reliance’s direct coverage obligations to Hoechst, that Hoechst had consented to this direct payment and released Reliance for all related claims, and that permitting such direct payment complied with the Section 534 of Article V of the Pennsylvania Insurance Department Act of 1921, the court’s own guidelines for enforcement of the Act, and the applicable reinsurance agreement.
In re Reliance Insurance Company, No. 1 REL 2001 (Pa. Comm. Ct. Nov. 22, 2016 )
This post written by Jason Brost.
See our disclaimer.