Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

You are here: Home / Archives for Reinsurance Regulation

Reinsurance Regulation

Delaware Commissioner approves acquisition of Royal Indemnity

by

The Delaware Insurance Commissioner has approved an application by Royal and Sun Alliance Insurance Group plc, a British insurance holding company, to sever its relationship with its US subsidiaries. The approval is subject to a number of conditions. The companies involved are Royal Indemnity Company, Security Insurance Company, Guaranty National Insurance Company, and Royal Surplus Lines Insurance Company. In the Matter of: The Proposed Acquisition of Royal Indemnity Company, Docket No. 313 (Del. Insur. Dept. Feb. 20, 2007).

REHABILITATED INSURERS PERMITTED TO DEFER PAYMENTS TO FAIR PLANS

by

The Rhode Island Supreme Court, in a de novo review, denied an appeal by the Rhode Island and Massachusetts Fair Access to Insurance Requirements (FAIR) Plans relating to a judgment authorizing the deferral of certain payments owed to them under State and Federal law. The Rhode Island and Massachusetts FAIR Plans are funds statutorily established for the purpose of providing basic property insurance to persons who would otherwise be unable to obtain it.

In 2003, the Rhode Island Superior Court placed Pawtucket Mutual Insurance Company (PMIC) and its subsidiary, Narragansett Bay Insurance Company (NBIC) into rehabilitation after finding that their financial condition was hazardous to their policyholders, creditors and/or the public. As a way to revitalize PMIC and NBIC, the Rehabilitator converted PMIC from a mutual company to a stock company. In order to facilitate the sale of the newly formed stock company, the Rehabilitator filed a petition to defer PMIC and NBIC payments of FAIR Plan assessments. The FAIR plans filed objections.

Relying on the broad statutory authority granted to the Rehabilitator to take steps necessary to revitalize an insurer, the court affirmed the decision to allow deferral of payments to the FAIR Plans. Marques v. Pawtucket Mutual Insurance Company, Case No. 2006-52-Appeal (R.I. Feb. 19, 2007).

Court Reverses Dismissal of Insurer’s Complaint Against Parent Corporation For Misappropriation of Net Operating Loss

by

The California Court of Appeal reversed a trial court’s judgment dismissing a subsidiary insurer’s complaint against its parent company. The subsidiary insurer, Fremont Indemnity, (by and through the Insurance Commissioner as its liquidator) sued Fremont General, the parent company, alleging the defendants misappropriated net operating losses of its predecessor in interest and misappropriated other assets of its former subsidiary. Fremont Indemnity also asserted a claim for conversion of the net operating losses, in addition to alleging improper distributions in violation of the California Insurance Code.

The defendants demurred to the complaint. In support of the demurrer, the defendants sought judicial notice of a letter that provided for the Insurance Commissioner to supervise and provide regulatory oversight of Fremont Indemnity. Defendants alleged that the letter allowed Fremont General to use the net operating losses in the manner alleged. They also argued the conversion claim failed because the unauthorized taking of an intangible property interest in not an actionable conversion.

The appellate court held that it was improper for the trial court to take judicial notice of the letter. Specifically, the court stated “[a]lthough the existence of a document may be judicially noticeable, the truth of statements contained in the document and its proper interpretation are not subject to judicial notice if those matters are reasonably disputable.” Additionally, the court concluded conversion is not restricted to tangible property and held a net operating loss and the owner’s alleged right of ownership and exclusive possession to this loss are sufficiently definite to support a conversion claim. Poizner v. Fremont General Corporation, No. BC320766 (Ct. App. Cal., Feb. 28, 2007).

State legislative update

by

Bills have been introduced in state legislatures with a wide variety of reinsurance-related topics:

  • cat reinsurance: Connecticut Bill No. 65 would establish a state catastrophe fund to offer reinsurance to the private market; Florida SB 2806 would provide additional reform in allowing the state to sell reinsurance in the state hurricane catastrophe fund;

  • cat funds: New York A 4011 would establish a state catastrophe fund;

  • captives: District of Columbia B16-0897 would authorize the use of special purpose financial captive insurance companies to facilitate risk securitization; Missouri HB 238 would add 50 sections to the state's captive insurance company act, including allowing the creation of special purpose life reinsurance companies (bill text; bill summary);

  • credit for reinsurance: New Hampshire new regulation Part Ins 601 would provide rules for allowing credit for reinsurance; and

  • health care reinsurance: Arkansas SB 769 would enact the Small Employer Health Reinsurance Program Act of 2007; South Dakota SB 129 would establish a state health reinsurance pool to spread the expenses of high-cost individuals.