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New reinsurance-related and arbitration developments from Carlton Fields

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Reinsurance Regulation

WEBINAR ON THE REINSURANCE IMPLICATIONS OF THE DODD-FRANK ACT

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The staff of Reinsurance Focus and Carlton Fields’s Reinsurance Industry Group are producing a webinar on the reinsurance implications of the Dodd-Frank Act (the financial regulatory reform act signed by President Obama last week) which is complimentary for Reinsurance Focus subscribers. The webinar will occur this Thursday, July 29 at 3:00pm Eastern time. Subscribers should go to the Subscribers Only area – Webinars – for further information. E-mail the blogmaster, Rollie Goss, if you are a subscriber but have misplaced your Subscriber Only area access password.

This post written by Rollie Goss.

Protected: Webinars

ANOTHER NAME AT LLOYDS’ MOUNTS AN UNSUCCESSFUL ENFORCEABILITY CHALLENGE TO A JUDGMENT AGAINST HIM

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The Second Circuit has affirmed the dismissal of another of a rash of lawsuits by Names at Lloyd’s challenging the enforceability of judgments obtained against them by Lloyd’s in the United Kingdom. The plaintiff Richard A. Tropp, a Name at Lloyd’s, brought a suit in federal district court to declare that a judgment obtained against him by Lloyd’s was unenforceable, as well as for an accounting from Lloyd’s. Tropp invested $160,000 of his retirement savings in the market but, due to its collapse, became liable to Lloyd’s on a $900,000 judgment entered by a UK court. Lloyd’s moved to dismiss for improper venue, since Tropp agreed in the “Choice Clause” of his contract with Lloyd’s to litigate all disputes in England, and for failure to state a claim. Tropp’s primary argument was that this forum selection clause is unenforceable because UK law deprived him of any remedy. The district court rejected this, because a “close reading” of the UK litigation revealed Tropp was not denied any remedy, but “simply was not victorious on the merits of his claims.” The UK courts provided due process. Tropp v. Corporation of Lloyd’s, Case No. 07 Civ. 414 (USDC S.D.N.Y. Mar. 26, 2008).

In a summary order, the Second Circuit affirmed, principally reasoning that, although Tropp was unsuccessful in his attempts to assert defenses and counterclaims against Lloyd’s in the UK courts, “his experiences do not cause us to revisit our holding that the Lloyd’s forum selection clauses (of which this is one) are valid because UK remedies are available.” Tropp v. Corporation of Lloyd’s, No. 08-2332 (2d Cir. July 19, 2010).

This post written by Brian Perryman.

FEDERAL LEGISLATIVE UPDATE – NEW IRAN SANCTIONS COVER INSURERS AND REINSURERS

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H.R. 2194, the Comprehensive Iran Sanctions, Accountability and Divestment Act of 2010 (“CISADA”) (bill text and bill summary) was passed by Congress on June 24, 2010 and signed into law by President Obama on July 1, 2010. An earlier iteration of the bill, the Iran Refined Petroleum Sanctions Act of 2009, was reported in our posting of December 22, 2009.

CISADA strengthens existing trade sanctions, authorizes new ones and supports the US’s multilateral diplomatic strategy to address Iran’s nuclear program. Among other things, CISADA amends and expands the Iran Sanctions Act of 1996 (“ISA”) to impose enhanced sanctions against Iran, which to an extent covers insurers and reinsurers, unless otherwise excepted by the new legislation.

CISADA, as it expressly applies to insurance and reinsurance, requires the President to impose three or more mandatory sanctions against a person that knowingly sells, leases, or provides to Iran goods, services, technology, information or support with a fair market value exceeding $1 million, or $5 million or more over a 12-month period, that could directly and significantly contribute to the enhancement of Iran’s ability to import refined petroleum products. CISADA defines the phrase “goods, services technology, information or support” to include underwriting or entering into a contract to provide insurance or reinsurance for the sale, lease, or provision of such goods, services technology, information, or support.

CISADA, however, includes an exception for underwriters and insurance providers exercising due diligence. In order to avoid sanction, the President must determine that the underwriter or insurance provider has exercised due diligence in establishing and enforcing official policies, procedures, and controls to ensure that it does not underwrite or enter into a contract to provide insurance or reinsurance for the sale, lease or provision of goods, services, technology, information or support that is prohibited by CISADA.

On a related note, while the California Insurance Commissioner continues to call for divestment of insurance company investments in multinational companies that do business in Iran, insurers licensed to do business in California are questioning the authority of the Commissioner. CISADA expressly authorizes state and local governments to provide for divestment of its assets from, or prohibit the investment of their assets in, companies with investment activities in Iran’s energy sector. Such authorization, however, does not appear to cover insurance-related divestment measures of the type being taken by the California Insurance Commissioner; although, CISADA does not contain any express language that would appear to preempt measures like the one being taken by California.

This post written by Karen Benson.

SPECIAL FOCUS: DODD-FRANK REGULATORY MODERNIZATION ACT

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On July 15, 2010, the Senate passed the Dodd-Frank Act (“DFA”), the financial regulatory modernization act that has been in the process of development and consideration by the Congress for over a year. Rollie Goss presents a Special Focus analysis of the potential impact of the DFA on the insurance and reinsurance industries and markets.

Carlton Fields will present a free webinar for Reinsurance Focus subscribers and Carlton Fields clients on the DFA’s potential impact on the insurance and reinsurance industries and markets. The webinar also will cover the potential impact of the DFA on actions by New York, Florida and potentially other states with respect to the requirement of collateral for reinsurance transactions, and the NAIC’s proposals for the regulation of reinsurance. Webinar login information will be sent to Reinsurance Focus subscribers by e-mail. To subscribe and participate in this webinar, go to our subscription page.

This post written by Rollie Goss.

UNITED KINGDOM’S CHANCELLOR OF THE EXCHEQUER ANNOUNCES MAJOR REGULATORY REFORM

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The United Kingdom’s Chancellor of the Exchequer has announced the abolition of the Financial Services Authority in its current form. In a June 16 speech, George Osborne stated the coalition government will legislate to create a new “Prudential Regulatory Authority,” to be operated as a subsidiary of the Bank of England. The Prudential Regulatory Authority will be solely responsible for the day-to-day “prudential” supervision of financial institutions. Details are available in Chancellor Osborne’s speech, the Treasury’s summary of that speech, and in a FSA press release welcoming the change.

This post written by Brian Perryman.