Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

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Reinsurance Regulation

CONVICTED FORMER EXECUTIVE OF GEN RE SENTENCED TO TWO YEARS IN PRISON IN FINITE REINSURANCE PROSECUTION

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The Court hearing the criminal finite reinsurance case reported on previously has sentenced a former Gen Re executive to 2 years in prison, followed by 2 years of supervised probation, and a $200,000 fine. This sentence is substantially below federal sentencing guidelines. The Court had entered a ruling on loss calculation, victim enhancement and restitution, finding that 36 levels of enhancement are appropriate under federal sentencing guidelines, but not ordering restitution, despite finding that more than 250 investors had sustained losses aggregating $544-597 million. A sentence imposed in accordance with such a finding might be a life sentence for many, if not all, of the convicted executives. The convicted executives have submitted Supplemental Sentencing memoranda. The supplemental sentencing memorandum submitted by the recently sentenced defendant may be read here.

This post written by Rollie Goss.

SEC SETTLES FINITE REINSURANCE ALLEGATIONS WITH ZURICH AND CONVERIUM

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Continuing a series of consent agreements, the Securities and Exchange Commission has resolved claims relating to the writing of finite reinsurance, entering into agreed Cease-and-Desist Orders with Zurich Financial Services and SCOR Holding (Switzerland) Ltd., f/k/a Converium Holding AG. The Orders detail the reinsurance transactions and side agreements that underlie the SEC’s allegations. The SEC released information about the agreements in a press release and a Litigation Release. In remediation, Zurich has agreed to pay a $25 million penalty and $1 in disgorgement. In re Zurich Financial Services, Admin. Pro. File no. 3-13306 (Dec. 11, 2008); In re SCOR Holding (Switzerland) Ltd., f/k/a Converium Holding AG, Admin. Pro. File no. 3-13307 (Dec. 11, 2008).

This post written by Rollie Goss.

NAIC CONSIDERING LIFE INSURANCE RESERVE AND REQUIRED CAPITAL CHANGES DUE TO MARKET TURMOIL

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The American Council of Life Insurers (ACLI) has submitted a proposal to the NAIC for immediate reforms to reserve and required capital standards for life insurance companies. One of the suggestions is to “facilitate Commissioners’ use of their existing discretionary authority under the Model Law and Regulation on Credit for Reinsurance to provide immediate relief to ceding insurers.” The ACLI proposes that the changes that it is suggesting take effect December 31, 2008, for the current calendar year. More information is available in a press release issued by the ACLI, a short summary of the proposals prepared by the ACLI and the ACLI’s letter to the NAIC, which categorizes the proposals as affecting the areas of life insurance, variable annuities, reinsurance, investments and accounting. The NAIC has assigned this proposal to the Capital and Surplus Relief (EX) Working Group of the Executive Committee. The Working Group is accepting comments on the ACLI’s proposal to the close of business December 26, 2008. Responses and comments from various areas of the NAIC are available. The NAIC also has created a “Grid of Information Relative to Each ACLI Request,” which may be of interest to those wishing to explore these suggestions.

This post written by Rollie Goss.

HAWAII DEPARTMENT PROPOSES AMENDMENTS TO ITS DISCLOSURE OF MATERIAL TRANSACTIONS REGULATION

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The Hawaii Insurance Department has proposed two amendments to its Disclosure of Material Transactions regulation in chapter 16-170, Hawaii Administrative Rules. The amendments include a definition of “material transaction” as used in chapter 16-170 and requiring material new ceded reinsurance agreements affecting in force life insurance business as specified in section 16-170-3 to be subject to the reporting requirements of section 16-170-1.

This post written by Dan Crisp.

NAIC ADOPTS REINSURANCE REGULATORY MODERNIZATION FRAMEWORK PROPOSAL

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This past weekend, at its Winter Meeting, the NAIC adopted the Reinsurance Regulatory Modernization Framework proposal that has been under consideration for some time. The Florida and New York Insurance Departments, which had adopted their own proposals, announced that they would either withdraw or modify their newly-adopted proposals to be consistent with the NAIC's action. For further details, view a press release from the NAIC or a Carlton Fields Memorandum outlining the relevant issues. A prior version of this Memorandum was posted on this blog previously, and the changes resulting from the NAIC's recent action are highlighted in red for easy identification.

This post written by Rollie Goss.