Restructuring Mechanisms Working Group - NAIC
- 2023 0404 - NAIC - RESTRUCTURING MECHANISMS (E) WORKING GROUP - 124p
- O’Sullivan said that on the life side, the inquiry can be relatively narrow and that likely a due diligence, factual inquiry rather than a traditional legal opinion may not be needed.
- Superintendent Dwyer suggested that while it would be difficult to predict future guaranty fund coverage.
- d. NOLHGA, the NCGIF, and other entities also commented that all policyholders should be covered by the same state guaranty association both before and after the transaction so that they have the same degree of protection if one of the insurers becomes insolvent.
- Some commenters noted concerns regarding monitoring for undue strain on individual state guaranty associations.
- Comments were also received regarding the differences between transactions with direct writers versus those that were only between reinsurers.
- Marcotte stated that as noted earlier in the meeting, there were also comments on whether there was a need to obtain a legal opinion regarding the impacts to guaranty association coverage.
- Frasher noted that the comments from Northwestern Mutual, New York Life, and Western and Southern Financial noted potential strains on individual state guaranty associations.
- He stated concentrating the transactions in a few states was problematic because there are assessment caps that exist and there is a real threat of straining the system.
- Smith noted agreement with monitoring for strains in the system and with ensuring the guaranty association coverage is not affected by the transactions.
- Broccoli stated that with these transactions, its important to note that, the terms of the policy don't change at all.
- So the important review issue is the financial condition of the company that the policy is being transferred to has the ability to pay the claim throughout the life of the policy.
- Stolte questioned why any policyholder has any adverse impact.
- He also noted that materiality can be judged at different levels and can also be subjective.
- Frasher stated that both no worse off and no material adverse impact could be subjective. He stated that in
- Northwestern Mutual’s opinion, transferring policies to an entity with lower financial ratings after the transaction than before is certainly worse off and is certainly a material change.
- James Mills (Enstar) stated that there is a lot of interest around reinsurance with the reinsurance policy transfers, supplementing assumption, or loss portfolio reinsurance transfer.
- He noted that reinsurance transfers do not typically have the same guaranty fund concerns. He noted that the independent expert plays a significant role in determining materiality in the UK Part 7 process.