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New reinsurance-related and arbitration developments from Carlton Fields

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Accounting for Reinsurance

STATE REGULATORY RULINGS RELATING TO RISK POOLING TRUST AND TRIA

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The New York State Insurance Department’s Office of General Counsel issued an opinion concluding that a New York domestic insurer may enter into a reinsurance agreement with an Illinois-based risk pooling trust and obtain credit for that reinsurance so long as the New York insurer holds funds provided by the trust in accordance with certain New York insurance law requirements. OGC Op. No. 08-10-02.

The Montana State Auditor’s office issued an advisory memorandum explaining how certain provisions in the Terrorism Risk Insurance Program Reauthorization Extension Act of 2007 may require Montana insurers to submit a filing of the disclosure notices, policy language, and applicable rates. Advisory Memorandum.

This post written by Dan Crisp.

NAIC TO HOLD PUBLIC HEARING ON ACLI PROPOSALS FOR LIFE INSURER CAPTIAL AND SURPLUS RELIEF, INCLUDING REINSURANCE COLLATERAL PROPOSAL

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The National Association of Insurance Commissioner’s consideration of proposals made by the ACLI is progressing, according to a release from the NAIC. The NAIC Executive Committee and Plenary on a January 2, 2009 conference call considered the Working Group’s recommendation, and decided to expose the recommendation for public comment (with a January 23, 2009 comment deadline) in advance of a January 27, 2009 public hearing in Washington, DC. The Working Group recommended adopting five of the ACLI’s nine proposals, including the one relating to reinsurance collateral requirements. The reinsurance proposal is now the subject of a proposed guidance letter.

This post written by Rollie Goss.

SENATE COMMITTEE CONSIDERING BILL TO DENY DEDUCTIONS FOR CERTAIN REINSURANCE PREMIUMS

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The Committee on Finance of the United States Senate has made available for public comment a draft bill which would amend the Internal Revenue Code to disallow the deduction of excess non-taxed reinsurance premiums paid to affiliates with respect to United States risks. There is no published comment period. The Committee’s staff has prepared a “technical explanation” of the draft, which includes an analysis of the present tax rules for insurance companies and reinsurance as well as an analysis of the proposed changes to the tax code. In an October 8, 2008 post, we profiled a similar bill introduced in the House, H.R. 6969. Opposition to the proposed tax changes has been submitted by the CEA, the European insurance and reinsurance federation.

This post written by Rollie Goss.

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.