In the last decade, U.S. states have enacted laws that provide novel mechanisms for an insurer to transfer policy liabilities to another entity without the need for individual policyholder consents. Two distinct statutory regimes have emerged to facilitate such transactions: insurance business transfer (“IBT”) and corporate division laws. State adoptions of such laws have accelerated in recent years.
IBT laws are meant to approximate the effect of UK and European insurance portfolio transfer legislation that is now widely used in those jurisdictions. The Part VII1 process in the UK involves significant engagement with the relevant insurance regulatory authorities and a court approval process together with various protections for policyholders. This is a rigorous process that can often take months and in some cases over a year before it is complete, but in many cases a reinsurance or loss portfolio agreement is put in place to accelerate the economics of the transaction in the meantime. U.S. IBT laws, beginning in Vermont in 2014 and subsequently broadened in other states, allow an insurer to transfer legal liability of some or all business underwritten to another insurer. Some of these IBT laws seem to have been drawn heavily from such UK/European legislation, but in our view in certain instances the IBT legislation has not always been “translated” correctly, and in any event there are important differences between UK/European insurance regulation and U.S. state regulation that mean you cannot simply “cut and paste” the European/UK laws and have them be effective in the United States.
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