Archive for the ‘REINSURANCE TRANSACTIONS’ Category.
March 9, 2009, 5:16 am
Readers may obtain a fairly comprehensive view of the global reinsurance industry from reading three reports:
This post written by Rollie Goss.
March 4, 2009, 6:18 am
The most recent development in the saga of Ren Re’s finite reinsurance story is a civil enforcement action by the SEC alleging federal securities fraud against Ren Re’s founder and former CEO and Chairman, James Stanard. After a bench trial, the court entered a detailed set of findings and conclusions, concluding that the accounting for one of the reinsurance transactions at issue had been fraudulent. The court found Stanard liable for violations of the anti-fraud provisions of Securities Act Section 17(a) and Exchange Act Section 10(b). The court also determined that Stanard violated Exchange Act Rule 13(a)-14, Rule 13b2-1 (Falsification of Accounting Records), Rule 13b2-2, 13(b)(5) and found Stanard liable for aiding and abetting liability for the above violations.
The court entered a final judgment permanently enjoining Stanard from future violations of the federal securities laws but did not bar him from serving as an officer or director of a public company in the future. The court ordered Stanard to pay $100,000 as a civil penalty. SEC v. Standard, Merritt & Cash, Case No. 06-7736 (USDC S.D.N.Y. Jan. 27, 2009).
This post written by John Black.
February 22, 2009, 6:15 am
In the aftermath of the NAIC vote rejecting the requests of the American Council of Life Insurers for industry-wide capital and reserve relief, individual companies have applied to their domiciliary regulators for relief. Some state insurance departments have used permitted practice rules to allow companies temporary relief. For example, the Iowa Department, in Bulletin 09-01, has adopted a modified practice of accounting for deferred taxes which has provided relief to at least ten companies. The Ohio Department has adopted three bulletins, 2009-02, 2009-03 and 2009-04, which provide relief through three different accounting practices. These changes reportedly will provide relief to 20 companies. Connecticut and Indiana have also provided relief to companies domiciled in their state. It is unclear what the impact will be if states approve different and potentially conflicting practices.
This post written by Rollie Goss.
February 6, 2009, 4:00 pm
The New York Insurance Department has proposed a revision to Regulation No. 20 (121 NYCRR 125) – Credit for Reinsurance from Unauthorized Insurers. The Department has published a summary of the proposed amendment, and the Notice of Proposed Rule Making notes that comments will be accepted until 45 days after the publication of the Notice. We have confirmed with the Department that the comment period closes February 9, 2009. The amendment proposes to apply principle-based credit risk management standards to all licensed ceded insurers, and provides an alternative credit for reinsurance ceded to unauthorized reinsurers, which adjusts the credit that the ceding insurer may take on its financial statement based upon the financial strength of the unauthorized assuming reinsurer. The financial strength determination is based upon ratings by Standard & Poor’s, Moody’s Investor Services, Fitch Ratings, A.M. Best Company or any other rating agency recognized by the Securities Valuation Office of the NAIC.
This post written by Rollie Goss.
February 2, 2009, 6:18 am
AIG’s former vice-president of reinsurance has been sentenced in the criminal finite reinsurance prosecution to four years imprisonment, and fined $200,000. The court also has entered a Final Order of Forfeiture, in the amount of $5 million jointly and severally for all defendants. Gen Re has paid the $5 million amount in full. Perhaps more significantly, defendant Ferguson has appealed his conviction, and the government has appealed his sentence. The appeal means that the issue of the criminalization of the underlying disputed reinsurance contracting will be addressed by the Second Circuit.
This post written by Rollie Goss.
February 1, 2009, 10:28 am
On Tuesday, January 27, 2009, this author attended the NAIC Capital and Surplus Relief Working Group public hearing in Washington, D.C. The Working Group met to discuss its draft recommendations on nine insurance industry proposals offered by the ACLI designed to provide capital and surplus relief on life insurers’ December 31, 2008 statutory financial statements. One proposal offered by ACLI requested that regulators allow insurers to utilize the 2001 CSO Preferred Mortality Tables for contracts based on the 2001 CSO Mortality Table and issued prior to the January 1, 2007 effective date on which the Mortality Tables were set to become applicable. The Technical Group assigned to consider this proposal expressed concern that some companies may already be addressing the overly conservative reserves through a questionable reinsurance accounting practice. The Technical Group recommended that Insurance Commissioners consider requiring companies to demonstrate that they have not used such reinsurance accounting practices before allowing the company to utilize the new Mortality Tables. Another proposal related to collateral for reinsurance transactions. After spirited discussion among regulators, industry representatives, and consumer advocates, the Working Group formally approved each of its prior draft recommendations and forwarded its recommendations to the NAIC Plenary Body.
On Thursday, January 29, the NAIC Executive Committee held a teleconference vote on the proposals forwarded by the Capital and Surplus Relief Working Group. The Executive Committee, in a near unanimous vote, rejected the Working Group’s recommendations noting that neither the ACLI nor any insurance company provided sufficient information to justify enacting these proposals on an emergency basis.
The Executive Committee concluded that NAIC Working and Technical groups should continue to provide feedback and guidance during the current financial crisis. The Committee commented that companies should continue to work with their state regulators to maintain sufficient capital, and that the NAIC was open to considering these issues again in the future. Read the NAIC's release on the action..
This post written by John Black.
January 28, 2009, 6:18 am
In a March 8, 2007 post, we covered the district court dismissal of a securities fraud class action against MBIA as time-barred. The plaintiffs alleged that MBIA’s financial statements were materially misstated because MBIA had booked proceeds from a series of retroactive reinsurance agreements as income when these agreements were actually loans. The district court determined that the plaintiffs were on inquiry notice of the alleged fraud for more than two years prior to commencing the action and granted MBIA’s motion to dismiss. On appeal, the Second Circuit affirmed the dismissal of the case as time-barred, interpreted the dismissal to be without prejudice, and remanded the matter to the district court. Prior to the district court’s order of dismissal, the plaintiffs had sought leave to file an amended complaint. The circuit court’s ruling allows the plaintiffs to file their amended complaint, which likely will have to allege diversity jurisdiction and state law claims with a longer statute of limitation period. City of Pontiac General Employees’ Retirement System v. MBIA, Inc., Case No. 07-1117-cv (2d Cir. Nov. 12, 2008).
This post written by Dan Crisp.
January 26, 2009, 6:07 am
CIFG Holding, Ltd., the holding company for CIFG's financial guaranty subsidiaries, has reached an agreement to commute approximately $12 billion in troubled credit swaps and reinsure $13 billion of municipal bonds. The transactions were announced in a press release by CIFG and a news release from the New York Insurance Department. According to New York Superintendent Eric Dinallo, the result will be that the bonds are novated to Assured Guaranty Corp., with the municipal bonds going from junk bond to highest investment grade rating, leaving CIFG as a solvent bond insurer in a position to pay claims on its remaining policies. The consideration for the transactions include cash payment and equity consideration. The result is a change in the controlling shareholders of CIFG, with changes in senior management expected.
This post written by Rollie Goss.
January 14, 2009, 6:10 am
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.
January 12, 2009, 6:11 am
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.
