Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

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Week's Best Posts

REINSURANCE GUARANTORS’ APPEAL DISMISSED FOR LACK OF APPELLATE JURISDICTION

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The Third Circuit has determined it lacked jurisdiction to hear the appeal of parties disputing their obligations in connection with certain reinsurance guarantees. In a breach of contract action, an insurer (Everest) alleged that certain guarantors failed to fulfill their obligations following the reinsurer’s (Founders) refusal to pay over $76 million to Everest under a reinsurance agreement. The guarantors filed counterclaims, in part seeking a declaration that no monies are due and owing under the guarantees because Everest unnecessarily reimbursed lenders for certain claims. In connection with a separate arbitration between Everest and Founders, an arbitral panel ordered Founders to post $70 million in favor of Everest as security. Founders failed to comply. Everest then moved for partial summary judgment in the lawsuit, seeking an order requiring the guarantors to satisfy Founders’s obligation to post security. Everest also moved to dismiss the counterclaims. The district court granted Everest’s motion for partial summary judgment and granted, in part, Everest’s motion to dismiss.

The appellate court found it lacked jurisdiction to hear the appeal on the one remaining counterclaim and on Everest's breach of contract claim, as there was no final order being appealed from, and because the district court’s award was merely one for the payment of money, and not an injunction (which would have accorded the guarantors the right to an interlocutory appeal). The appeal was dismissed. Everest Nat'l Ins. Co. v. Sutton, No. 08-4643 (3d Cir. Apr. 7, 2009).

This post written by Brian Perryman.

SPECIAL FOCUS: FEDERAL REGULATORY MODERNIZATION PROPOSALS

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There have been many proposals floated for the “modernization” of the regulation of various sectors of the financial services industry. What are the implications of such proposals for the reinsurance industry? In a SPECIAL FOCUS feature, Rollie Goss, blogmaster and chair of a Task Force formed by Carlton Fields to monitor federal regulatory proposals which may affect its clients, discusses generally the major proposals to date which may affect the reinsurance industry. Many of the proposals made to date remain in a fairly conceptual stage, but a few now are progressing to the stage of proposed Congressional bills. The documents discussed in this short paper include:

For additional Special Focus items, see the new sidebar box with quick links to selected Special Focus items.

This post written by Rollie Goss.

UPDATE ON ANALYSIS OF NAIC CONSIDERATION OF REINSURANCE REGULATORY MODERNIZATION AND COLLATERAL CHANGES

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On April 13, 2009 we posted about the actions of the NAIC, at its recent meetings, to move forward on the regulation of reinsurance, collateral for reinsurance agreements and the modification of credit for reinsurance rules. Our partner Tony Cicchetti has posted a more detailed analysis of the regulatory and collateral proposals on several occasions, and he has updated that analysis to provide a comprehensive view of these issues.

This post written by Tony Cicchetti.

JURY RETURNS DEFENSE VERDICT FOR AON RE, INC. IN SIX-YEAR BATTLE WITH RELIASTAR LIFE INSURANCE COMPANY

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Reliastar Life Insurance Company (“Reliastar”) sued Aon Re, Inc. (“Aon”) in state court, alleging, under various legal theories, that Aon misled Reliastar to believe that Reliastar continued to be reinsured through a reinsurance pool (“the Pool”), when in fact it had less coverage than it had been led to believe. Reliastar alleged that Aon, and an individual broker working with Aon, were Reliastar’s agents responsible for administering Reliastar’s reinsurance needs through the Pool, and fraudulently misrepresented the level and extent of reinsurance protecting Reliastar.

Aon’s defense was two-fold. First, it asserted that another broker exclusively handled Reliastar’s reinsurance placement, and thus Aon was not Reliastar’s agent relative to the conduct at issue in the suit, and thus Aon had no duty to ensure Reliastar had any particular reinsurance protection through the Pool. Second, Aon contended that Reliastar was an active participant in the administration of reinsurance through the Pool, and as such was fully aware that certain other Pool members had withdrawn from participation, leaving Reliastar with a greater share of the overall risk. After a lengthy trial, the jury returned a verdict in favor of Aon. Reliastar Life Insurance Company v. Aon Re, Inc., No. 3916-03 (N.J. Super. Ct. March 26, 2009). Details of the case are available in the Final Joint Pre-Trial Order.

This post written by John Pitblado.

NEW YORK DEPARTMENT OF INSURANCE PROPOSES MANDATORY CATASTROPHE RESERVES FOR P&C COMPANIES

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The New York Insurance Department has proposed Regulation 189 – Mandatory Catastrophe Reserves for Property/Casualty Insurance Companies. The rule proposal would require every authorized property/casualty insurer issuing a policy of insurance or contract of reinsurance covering losses resulting form a catastrophe to property located in New York, and receiving New York subject premiums, to establish a New York mandatory contingent catastrophe reserve, which shall only be used toward the payment of claims from qualifying losses. In developing this rule proposal, the Department reviewed the research of the NAIC – Catastrophe Insurance Working Group, Casualty Actuarial Society, and performed outreach to property/casualty insurers, consumer groups, and other interested parties. The Department has published the text of the proposed regulation, and the Notice of Proposed Rulemaking notes that comments will be accepted until 45 days after the publication of the Notice. The comment period closes May 26, 2009.

This post written by Karen Benson.