Reinsurance Regulation

COURT OVERTURNS DENIAL OF REQUEST FOR REINSURANCE-RELATED RECORDS FOR JURISDICTIONAL REASONS

May 7, 2012 by Carlton Fields

The Commonwealth Court of Pennsylvania issued an opinion vacating Pennsylvania’s Office of Open Records’ denial of a request for documents under the state’s Right-to-Know Law. Plaintiff sought records related to Reinsurance Offset Guidelines from the Pennsylvania Department of Insurance and Reliance Insurance Company, which has been in liquidation since 2001. The OOR denied the request on the basis that the documents were “internal, pre-decisional deliberations.” The court vacated the denial because the OOR did not have jurisdiction to hear this matter as Reliance’s Statutory Liquidator. The court further explained that the Pennsylvania Insurance Department, when aiding the Statutory Liquidator, and Reliance are acting pursuant to a judicial order and under the supervision of the Commonwealth Court. Because the court had appointed the state Insurance Commissioner as Statutory Liquidator, it retained general supervision over the Statutory Liquidator and the insolvent estate. Thus, all complaints regarding how the insolvency is being administered must be directed to the court, and any records can only be obtained through court order. Greenberger v. Pennsylvania Ins. Dept., No. 931 C.D. 2011 (Pa. Commw. Ct. Mar. 7, 2012).

This post written by John Black.

See our disclaimer.

COURT ENTERS FINAL ORDER APPROVING SETTLEMENT BETWEEN AIG AND MEMBERS OF NATIONAL WORKERS COMPENSATION REINSURANCE POOL

May 3, 2012 by Carlton Fields

A federal district court entered a final order and judgment approving a class action settlement in an action brought against AIG by certain members of the National Workers Compensation Reinsurance Pool (“NWCRP”). Class plaintiffs alleged that AIG had underreported workers compensation premium for the purpose of reducing its share of the workers compensation market and, consequently, increasing the residual market costs of other Pool members. The settlement provides for a $450 million payment to be allocated among class members according to market share. Liberty Mutual and two of its affiliates, Safeco and Ohio Casualty, objected to the settlement but their objections were overruled. American Int’l Group, Inc. v. ACE INA Holdings, Inc., Case No. 07-02898 (USDC N.D. Ill. Feb. 28, 2012).

This post written by Ben Seessel.

See our disclaimer.

“RIGHT TO KNOW” LAW INAPPLICABLE TO RECORDS SOUGHT IN INSURER’S LIQUIDATION PROCEEDINGS

April 10, 2012 by Carlton Fields

A court vacated an order of the Pennsylvania Office of Open Records that denied a request for documents in the possession of the department of insurance related to the drafting of the reinsurance offset guidelines of a liquidating insurer. The OOR had found that the documents were exempt from disclosure as “internal predecisional deliberations” in the possession of the department, which was serving as the insurer’s statutory liquidator. On appeal, while the court tended to agree with the OOR’s reasoning, it found that the state disclosure law was “inapplicable to rehabilitation or liquidation proceedings because [the records] are solely within the control of the court under the Insurance Act.” As a result, the court held that it, and not the OOR, had jurisdiction over the documents relating to the drafting of the guidelines. Greenberger v. Pennsylvania Insurance Department, Case No. 931 C.D. 2011 (Pa. Commw. Ct. March 7, 2012).

This post written by Michael Wolgin.

See our disclaimer.

NEW NAIC SUBGROUP BEGINS STUDY OF USE OF CAPTIVES AND SPECIAL PURPOSE VEHICLES

April 2, 2012 by Carlton Fields

In November 2011, the NAIC Executive Committee charged the Financial Condition (E) Committee with studying insurers’ use of captives and special purpose vehicles to transfer third-party insurance risk in relation to existing state laws and regulations and establish regulatory requirements, including revising or creating NAIC model laws, to address concerns identified in the study. To that end, the Financial Condition (E) Committee created the “Captives & SPV Use Subgroup” with representatives from the Financial Analysis (E) Working Group, the Life Actuarial (A) Task Force, and the Reinsurance (E) Task Force. The Subgroup held its inaugural conference call on January 27, 2012, in which it issued a survey to state insurance regulators with respect to commercial insurers domiciled in their respective states that transfer risk to captives or SPVs. The survey sought comment on various issues, including the basics of each state’s laws impacting captives or SPVs, the types of products permitted to be transferred, the business purpose behind such transfers, solvency standards, credit for reinsurance, and other topics designed to provide perspective on the general legal and business environment surrounding the use of captives and SPVs. Thirty-one states responded to the survey by the February 20, 2012 deadline, and the results were discussed at the NAIC Spring National Meeting held in early March. The Subgroup plans on developing another survey targeted to companies, the results of which will be kept confidential with the exception of an aggregate summary that will be circulated for comment. Conference calls are scheduled every two-to-three weeks going forward through the Summer National Meeting in August 2012, with the goal of drafting a proposal or a white paper addressing the Subgroup’s charge. This group has a web page on the NAIC’s internet site.

This post written by Michael Wolgin.

See our disclaimer.

STATE NONADMITTED AND REINSURANCE REFORM 2012 LEGISLATIVE UPDATE

March 20, 2012 by Carlton Fields

In connection with the Nonadmitted and Reinsurance Reform Act of 2010 of the Dodd-Frank Act (the “NRRA”), the legislatures of Wisconsin (SB 378), Colorado (HB 1215), Wyoming (HB 15), and Hawaii (SB 2168) have introduced bills to establish requirements that are consistent with the federal law for surplus lines insurers doing business in each of these states. Although California has not yet enacted similar legislation, the California Senate has introduced a bill (SB 716) declaring “the intent of the Legislature to reconcile California surplus lines and reinsurance law with the recent changes to federal law to minimize any possibly adverse effects of preemption” by the NRRA.

While Wisconsin’s and Colorado’s bills do not reference the surplus lines proposals approved by the National Conference of Insurance Legislators and National Association of Insurance Commissioners (SLIMPACT and NIMA, respectively), Hawaii’s bill is expressly modeled after SLIMPACT, stating the legislature’s intent to become the tenth state to enact SLIMPACT legislation. Upon passage of SLIMPACT by ten states, the compact would be effectuated for tax clearinghouse and rulemaking purposes. Additionally, Wyoming and Hawaii already participate in multi-state cooperatives under NIMA for the purpose of collecting surplus lines insurance premium taxes and fees and distributing those taxes and fees to the proper states.

On a related note, the Oklahoma House (HB 2458) and Senate (SB 1617) have introduced bills amending Oklahoma’s surplus lines legislation enacted last year to, among other things, specify that the insurance commissioner “is not compelled” to join NIMA or any other multistate premium-tax sharing agreement. We will report on whether these bills are passed into law in a later post.

This post written by Michael Wolgin.

See our disclaimer.