The New World of Run-off

Christopher Columbus - New world of run-off

Something new and important is coming to the $200 billion plus run-off market in the U.S.

Rhode island has approved new amendments (click to read) to insurance regulation 68 providing for “insurance business transfers” (IBT). The IBT will provide expanded options for the restructuring and management of commercial run-off business as well as potential opportunities to bring finality to legacy liabilities. Read More

The Amendments to Insurance Regulation 68 Amendments that are effective as of August 18, 2015 provide for “Insurance Business Transfers”, (IBT) which permit transfers of all or part of a portfolio of commercial run-off business to a RI Commercial Run-off Insurer resulting in a department approved and court sanctioned transfer of the transferred policies.  This is the first U.S. legislation providing for a court sanctioned transfer of commercial insurance and reinsurance business and creates for the first time a judicial and regulatory framework and marketplace for such transfers.

The IBT is modeled on the Part VII Transfer that has been widely accepted in the UK as a useful restructuring tool.  In the UK the Part VII Transfer is an increasingly popular restructuring tool in the discontinued insurance sector with several hundred internal and external transfers accomplished to date.  The transfer process has been used so frequently that it is being institutionalized within the UK framework of the insurance industry.

The IBT represents a means to bring finality to run-offs while also protecting policyholders and ensuring the integrity of the regulatory process.  In practice, these transactions will take a variety of forms as the IBT evolves in the US insurance market as an important restructuring tool.  The new regulations will invigorate and transform the US run-off market similar to what has occurred in the UK run-off market over the last several decades resulting from the introduction of similar run-off legislation.   We expect that the IBT will also become a widely accepted business practice in the US marketplace as it has strategic importance as a restructuring tool for insurance companies while also ensuring that the interests of policyholders are protected. Read More

Rhode Island also has Protected Cell Legislation that can be utilized in conjunction with Insurance Regulation 68 to facilitate structuring a transaction. Read More

In addition to the IBT, RI Insurance Regulation 68 also sets forth a procedure for commercial insurers and reinsurers in run-off, or no longer writing new business, to file a Commutation Plan that would provide for the payment of creditors’ claims, liquidate future exposure to those claims and terminate operations. Read More