PriceWaterhouse Coopers has published an interesting report on a survey that it conducted relating to US run-off operations. The report covers various aspects of run-off operations and strategies. Especially combined with the recent Lloyd’s report on capitalization and operation of Lloyd’s run-off syndicates, which was the subject of a post on this blog on May 28, this makes interesting reading.
SPECIAL FOCUS: Captive wars – PART TWO
Other states are taking less substantial steps, only changing the regulatory requirements for their captives. The Vermont Insurance Department adopted a new captive regulation, effective April 1, 2007, which changes the reporting requirements for Vermont-domiciled captives that reinsure life insurance policies. Meanwhile, the Utah Department of Insurance has amendments to its captive rules under consideration, which would mainly address reporting and fee requirements. The New York Insurance Department has a separate web site area touting the advantages and benefits of a New York-domiciled captive.
SPECIAL FOCUS: Captive wars – PART ONE
This week we present a two-part posting on changes regarding captive insurer regulation. The competition is on among the states for hosting captives. The competition consists of simpler regulation and lower capital requirements. On May 10, the Governor of Montana was presented with a new captive bill for signature which reduces capital requirements for protected cell captives 50%, from $1 million to $500,000, with a captial requirement of $250,000 for protected cell captives with 10 or fewer homogenous cells. The capital requirement for captives that reinsure admitted insurers issuing policies is also to be reduced by 50%. Other regulatory simplification is included in the bill. An article about this bill appears in the May 21 issue of Business Insurance. Meanwhile, the Arizona Governor recently signed a new bill which lowers the capital requirements for Arizona-domiciled protected cell captive insurers from $1 million to $500,000, and makes many changes to simplify regulation and reduce the burdens of regulation. A summary of the Arizona bill is also available.
Lloyds issues guidance for run-off syndicates
Lloyds has issued a report providing minimum standards and guidance for the individual capital adequacy of syndicates in run-off. This report provides extensive guidance for the management of such syndicates, in order to assist them in achieving the capital standards.
COURT HOLDS DISPUTE OVER SETTLEMENT OF DISPUTES UNDER REINSURANCE ADMINISTRATION AGREEMENT ARBITRABLE
Trustmark Insurance and American General Assurance entered into a Reinsurance Administration Agreement with Transamerica Occidental Life Insurance, pursuant to which Transamerica provided administration services. Trustmark cancelled the Agreement, and a dispute arose as to Transamerica’s performance of the Agreement and whether it was entitled to further payments for services that it had provided pursuant to the Agreement. Trustmark and Transamerica reached a “settlement” of the dispute, which later fell apart. There was no written settlement agreement, and although the Agreement contained an arbitration provision, no party sought arbitration of the dispute under the Agreement.
Trustmark sued Transamerica, seeking to compel performance of the settlement agreement. Transamerica moved to compel arbitration. The District Court held that even though there was no written settlement agreement, the arbitration provision of the Reinsurance Administration Agreement covered any dispute “relating to” the parties’ performance of the Agreement, including Transamerica’s claim for further payments under the Agreement. The court therefore compelled arbitration of the substance of the dispute that was covered by the “settlement agreement.” Trustmark Insurance Co. v. Transamerica Occidental Life Insurance Co., Case No. 06-5561 (N.D.Ill. May 1, 2007).