Reinsurance Regulation

COURT ORDERS THE REHABILITATION PROCEEDING OF INSURER TERMINATED

March 26, 2009 by Carlton Fields

Hudson, the Superintendent of the Ohio Department of Insurance, in her capacity as Rehabilitator of Colonial Insurance Company (“Colonial”), brought an application for an order, which was subsequently granted, terminating the rehabilitation proceeding of Colonial, authorizing the transfer of funds to the Ohio Department of Commerce, discharging and releasing the Rehabilitator, authorizing the final accounting, authorizing the closing of the estate and the dissolving of the corporate entity, approving the destruction of certain books and records, approving abandonment of physical assets, authorizing the closing of Colonial bank accounts, and authorizing related actions to close the estate or carry out the court’s orders. Hudson v. Colonial Ins. Co., Case No. 03 CVC 01 00597 (Ohio Super. Ct. Dec. 22, 2008).

This post written by Dan Crisp.

STATE INSURER LIQUIDATION ACT PREEMPTS FEDERAL REMOVAL STATUTE

March 24, 2009 by Carlton Fields

The Florida Department of Financial Services (“FDFS”) filed a claim in state court against General Reinsurance Corporation (“Gen Re”) after discovering that in the course of Aries Insurance Company’s (“Aries”) receivership, Aries made improper preferential transfers to Gen Re within six months of the rehabilitation date. Alleging diversity jurisdiction, Gen Re removed the action to Florida district court. FDFS moved to remand the claim to state court pursuant to the McCarran-Ferguson Act. The district court first determined that, under the Florida Insurers Rehabilitation and Liquidation Act (the “Liquidation Act”), the assets at issue are subject to the exclusive jurisdiction of the Leon County Circuit Court. Granting the motion to remand, the district court stated that the federal removal statute does not specifically relate to the business of insurance, found that the Liquidation Act provision vesting exclusive jurisdiction in the state court served to regulate the business of insurance, cited similar findings by other courts regarding such jurisdictional provisions, and concluded that the McCarran-Ferguson Act applies causing the Liquidation Act to preempt the federal removal statute. Fla. Dep’t. of Fin. Servs. v. Gen. Reins. Corp., Case No. 08-443 (USDC N.D. Fla. Feb. 2, 2009).

This post written by Dan Crisp.

STATE AND FEDERAL LEGISLATIVE UPDATE

March 19, 2009 by Carlton Fields

Following are selected bills introduced in legislatures relevant to reinsurance, plus one that was introduced last year and has now been adopted.

Captive insurance: Hawaii HB 718 (medical malpractice captive insurance); Missouri SB 269 (text and summary) (amendments to captive insurer statutes); South Carolina S 323 (captive insurer amendments);

Cat risks: US S 505 (establish a National Catastrophe Risks Consortium and a National Homeowner’s Insurance Stabilization Program); Florida HB 437 (creating a state hurricane cat fund as a part of the State Board of Administration); Missouri HB 367 (text and summary) (creation of state cat fund for earthquake damage); Texas SB 1379 (establishment, funding and operation of a state cat fund);

Financial issues: Hawaii (adopting effective February 2009, changes to requirements for the disclosure of material transactions – pre-adoption text the subject of a prior post); South Carolina S 202 (amending the definition of “admitted assets”);

Medical insurance: Texas HB 1578 (establishment of a medical reinsurance system).

This post written by Rollie Goss.

FURTHER DEVELOPMENTS IN STATE CAPITAL AND SURPLUS RELIEF FOR LIFE INSURERS

March 18, 2009 by Carlton Fields

We have been following requests for relief by life insurance companies with respect to capital and reserve requirements in the current difficult economic situation. Following the NAIC’s rejection of proposals by the ACLI, individual insurers began to apply for relief to their domiciliary regulators, and two more state departments have published positions with respect to such issues. The Delaware Insurance Department has adopted two regulations (1212 and 1215) by Emergency Orders, which address the valuation of life insurance policies and the recognition of preferred mortality tables for use in determining minimum reserve liabilities. The Illinois Division of Insurance has promulgated Company Bulletin 2009-02, which rejects blanket relief, but which states that the Division would consider relief on a company-by-company basis. Posted to the Division’s web site are letters to eight companies relating to such requests. The first such letter, approving a request from Allstate Life Insurance Company relating to the accounting and valuation methodology for market value adjusted annuities, may be viewed here.

Of more industry-wide interest, the NAIC has posted a detailed chart which purports to summarize various permitted and prescribed practices, taken from annual statements submitted by various companies.

This post written by Rollie Goss.

STOP-LOSS POLICY PREMIUMS SUBJECT TO MISSOURI’S DIRECT PREMIUM TAX

March 12, 2009 by Carlton Fields

American National Life Insurance Company of Texas (“American National”) sells stop-loss insurance policies in Missouri, and a dispute developed as to whether premiums for such coverage were subject to the state’s direct premium tax. American National paid the tax under protest and filed a claim for refund, which was denied by the Department of Revenue, which was affirmed in an administrative hearing. The Missouri Supreme Court reviewed the decision because the case involved the construction of state revenue laws. American National argued that the stop-loss policies are reinsurance and not subject to the direct premium tax. The court looked to Black’s Law Dictionary and other sources and concluded that a tax on “direct premiums received” is a tax imposed upon consideration paid by an insured to an insurer for a contract of insurance. The court rejected American National’s reinsurance argument, affirming the decisions below. American National Life Insurance Co. of Texas v. Director of Revenue, Case No. SC89064 (Mo. Nov. 4, 2008).

This post written by Dan Crisp.