230 R.I. Code R. 230-RICR-20-45-6.4

Current through November 7, 2024

Section 230-RICR-20-45-6.4 - Insurance Business Transfers

A. Insurance Business Transfer Plans

1. The policies or contracts that are the subject of an Insurance Business Transfer must have a natural expiration which occurred more than sixty (60) months prior to the filing of the Insurance Business Transfer Plan and be in a closed book of business or a reasonably specified groups of policies.

2. The amount of commercial liabilities transferred must be less than or equal to the amount of assets transferred to the newly formed or reactivated company. This requirement does not supersede any other requirements that exist pursuant to statutes and regulations governing the capital and surplus and financial solvency of insurers.

3. Any Assuming Company that wishes to apply to the Court for an order approving an Insurance Business Transfer Plan must first submit that Plan for review and consideration of approval by the Department.

4. Pursuant to R.I. Gen. Laws §27-64, one or more property & casualty run off agreements, loss portfolio transfers and/or Insurance Business Transfers may be transferred to a commercial run-off insurer that is a protected cell company as protected cells.

5. If the transferred business is intended to be transferred into a protected cell, the requirements of R.I. Gen. Laws § 27-64-4 with respect to a plan of operation must be included in the Insurance Business Transfer Plan. In such a case the Insurance Business Transfer Plan will constitute the plan of operation required by R.I. Gen. Laws § 27-64-4.

B. Application Procedure

1. The Insurance Business Transfer Plan must be submitted by the Assuming Company for review by the Department and must contain all operative provisions delineated in § 6.4 of this Part. At a minimum, the following items must be included in the Insurance Business Transfer Plan or an explanation provided as to why the particular provision is not included. This may be supplemented by other information deemed necessary by the Department.

a. The identities of the Transferring Company and the Assuming Company and their respective controlling parties, if any;

b. Summary of the Insurance Business Transfer Plan, including the Business Transfer Agreement, if any

c. Identification and description of business to be transferred;

d. Most recent audited financial statements and annual reports of the Transferring Company filed with its domiciliary regulator;

e. If the Assuming Company has a present intention of filing a commutation plan, a summary of the operative provisions of that commutation plan;

f. The most recent actuarial report and opinion that quantifies the liabilities in the business to be transferred to the Assuming Company under the policies or reinsurance agreements;

g. Pro-forma financial statements demonstrating the projected solvency of the Assuming Company;

h. Officers' certificates of the Transferring Company and the Assuming Company attesting that each has obtained all required internal approvals and authorizations regarding the Insurance Business Transfer Plan and completed all necessary and appropriate actions relating thereto;

i. Plan Administration, including the form of notice to be provided under the Insurance Business Transfer Plan to any policyholder or reinsured of the Transferring Company whose policies or contracts are to be transferred and to any reinsurers of any such polices or contracts;

j. Full description as to how such notice shall be provided. Depending upon the facts and circumstances as presented to the Department in advance of sending out notice, electronic notice may be used to satisfy the requirements of R.I. Gen. Laws 27-14.5-3;

k. Description of any guarantees or additional reinsurance that will cover the transferred business;

l. Description of any reinsurance arrangements that would pass to the Assuming Company under the Insurance Business Transfer Plan;

m. If the transferred business is intended to be transferred into a protected cell, the requirements of R.I. Gen. Laws § 27-64-4 with respect to a plan of operation shall be included in the Insurance Business Transfer Plan;

n. A statement describing the Assuming Company's proposed investment policies and any contemplated third-party claims management and administration arrangements;

o. Approval of the Insurance Business Transfer Plan obtained from the Transferring Company's domiciliary regulator; and

p. An expert report providing an opinion on the proposed transaction and providing, at a minimum, the following:

(1) A statement of the expert's professional qualifications and (where appropriate) descriptions of the experience that fits him or her for the role;

(2) Whether the expert has, or has had, direct or indirect interest in the transferring or assuming companies or any entities within their respective holding companies and details of any such interest;

(3) The scope of the report;

(4) The purpose of the Insurance Business Transfer Plan;

(5) A summary of the terms of the Insurance Business Transfer Plan in so far as they are relevant to the report;

(6) Documents, reports and other material information the expert has considered in preparing the report and whether any information requested was not provided;

(7) The extent to which the expert has relied on information provided by and the judgment of others;

(8) The people on whom the expert has relied and why, in his opinion, such reliance is reasonable;

(9) The expert's opinion of the likely effects of the Insurance Business Transfer Plan on policyholders, distinguishing between:

(a) transferring policyholders and claimants;

(b) policyholders and claimants of the Transferring Company whose contracts will not be transferred; and

(c) policyholders and claimants of the Assuming Company;

(10) For each opinion that the expert expresses in the report the facts and circumstances supporting the opinion; and

(11) Consideration as to whether the security position of policyholders or reinsureds of the Transferring Company are materially adversely affected by the transfer.

2. The Department shall have sixty (60) days from the date of receipt of the Insurance Business Transfer Plan to review the Plan. The Department may extend the sixty (60) day review period for an additional thirty (30) business days. The standards for the Department's review will include, but not be limited to:

a. An actuarial review of the ceding company's reserves for the book of business being transferred to the assuming company to determine the reserve adequacy of that book of business.

b. An actuarial analysis to determine the feasibility that the assuming company's assets are sufficient to achieve a solvent run-off of all known and anticipated liabilities.

c. An analysis of the assuming company's invested assets to determine that the quality of its investment portfolio is appropriate for a company in run-off.

d. An analysis of the assuming company's corporate governance structure to ensure that there is proper board and management oversight and expertise to manage the assumed book of business.

e. Any other examination and/or analysis procedures that the Superintendent of Insurance deems appropriate in order to monitor the financial solvency of the assuming company.

3. If the Department's review determines that the Insurance Business Transfer Plan as submitted does not meet the standards of R.I. Gen. Laws § 27-14.5-1 et seq. or this Regulation, the Department shall notify the Assuming Company and specify any modifications, supplements, or amendments and any additional information or documentation with respect to the Plan that must be provided to the Department before the Department will consider whether the Plan may proceed with the Court filing.

4. The Assuming Company will have sixty (60) days from the date the Department notifies it pursuant to § 6.4(C)(3) of this Part, to file an amended Insurance Business Transfer Plan providing the modifications, supplements, or amendments and additional information or documentation as requested by the Department. If the Assuming Company does not make an amended filing within that time period, or requests and receives an extension of that time period from the Department, the Insurance Business Transfer filing will terminate and a subsequent filing by the Assuming Company will be considered a new filing which will require compliance with all provisions of this Regulation as if the prior filing had never been made.

5. The Department's review period in § 6.4(C)(2) of this Part will begin anew when the modification, supplement, amendment or additional information is received.

6. The Department may engage Independent Consultants, at the Assuming Company's expense, as set forth in § 6.8(C) of this Part, to assist the Department in its review of the Insurance Business Transfer Plan.

7. Once the Department is satisfied that the Plan is in a format that would allow it to proceed with the Court filing, the Department will send electronic notice to all persons who have requested notice of insurance issues indicating that the Plan has been filed and is available for review upon request. Any person wishing to comment at this stage shall file comments with the Department within thirty (30) days as indicated in the notice. Failure to file comments with the Department does not preclude any person from filing comments with the Court nor shall such failure reflect in any way on comments or objections filed with the Court.

8. The Department will consider the comments provided to the Department before the Department will determine whether it will allow the Plan to proceed with the Court filing.

9. If it determines that the Plan may proceed with the Court filing, the Department will confirm that fact in writing to the Assuming Company.

C. Application to the Court for Approval of the Insurance Business Transfer Plan

1. Within ninety (90) days after notice from the Department that the Assuming Company may proceed, the Assuming Company shall apply to the Court for approval of the Insurance Business Transfer Plan. Upon written request by the Assuming Company, the Department may extend the period for an additional thirty (30) days. The Assuming Company will provide the Department with any additional information it may request to support the request for an extension.

2. The application shall be in the form of a Petition for Implementation of the Insurance Business Transfer Plan in the Providence County Superior Court and will include the Insurance Business Transfer Plan and any evidence which the parties to the proposed transfer intend to submit to the Court for the approval hearing.

3. The Department will be a party to the proceedings and will be served with copies of all filings pursuant to the Superior Court Rules of Practice. The Department's position in this litigation shall not be limited by its initial review of the Plan pursuant to § 6.4(C) of this Part.

4. Following filing of the Petition, the Assuming Company will file a motion for a scheduling order setting a hearing on the Petition.

5. Within fifteen (15) days after receipt of the scheduling order, the Assuming Company shall cause notice to be provided in accordance with the notice provisions of R.I. Gen. Laws § 27-14.5-3. Depending upon the facts and circumstances as presented in advance of sending out notice, electronic notice or other alternative may be used to satisfy the requirements of R.I. Gen. Laws § 27-14.5-3

6. The notice to policyholders shall comply with R.I. Gen. Laws § 27-14.5-3, and will include the date and time of the approval hearing and instructions on how to submit comments on or raise objections to the Insurance Business Transfer Plan. The comment period shall be at least sixty (60) days following the date of distribution of the notice. All comments and objections will be filed with the Court and distributed by the Assuming Company within ten (10) days of receipt to all persons who have made an appearance with regard to the Petition. The notice shall state or provide:

a. The date the transfer and novation of the policyholder's contract of insurance is proposed to take place;

b. The name, address and telephone number of the assuming and transferring companies;

c. That the policyholder may comment on or object to the transfer and novation;

d. The procedures and time limit for submitting comment or objections to the transfer and novation;

e. A summary of any effect that the transfer and novation will have on the policyholder's rights;

f. A statement that the assuming company is authorized, as provided in § 6.4 of this Part, to assume that business;

g. Contact information for the Department where the policyholder may obtain further information;

h. Information on how an electronic copy of the Insurance Business Transfer Plan may be accessed.

7. Any person (either in person or by their legal representative) who considers himself or herself to be adversely affected can make a representation to the Court at the Approval Hearing. Any person participating in the Approval Hearing shall bear his or her own costs and attorney's fees.

D. Approval of the Insurance Business Transfer Plan

1. After the comment period has ended the Insurance Business Transfer Plan shall be presented by the Assuming Company for approval by the Court. The Assuming Company shall inform the Court of the reasons why it petitions the Court to find no material adverse impact to policyholders, reinsureds or claimants on the transferred policies.

2. At any time before the Court issues the Order approving the Insurance Business Transfer Plan, the Assuming Company may apply to the Court for a non-material amendment to the Insurance Business Transfer Plan, subject to the Department's approval;

3. At any time before the Court issues the Order approving the Insurance Business Transfer Plan, the Assuming Company may withdraw the Insurance Business Transfer Plan without prejudice.

4. If the Court finds that the Insurance Business Transfer Plan should be approved, the Court by its order may make provisions as it deems fit on the following issues:

a. Approval of the Insurance Business Transfer Plan;

b. A finding that there is no material adverse impact to policyholders, reinsureds or claimants on the transferred policies;

c. Implementation of a statutory novation with respect to all policyholders or reinsureds and their respective policies and reinsurance agreements under the Insurance Business Transfer Plan. The novation shall provide that the Transferring Company shall have no further rights, obligations, or liabilities with respect to such policies and reinsurance agreements, and that the Assuming Company shall have all such rights, obligations, and liabilities as if it, instead of the Transferring Company, were the original party to such policies and reinsurance agreements;

d. Release of the Transferring Company from any and all rights, obligations or liabilities under the transferred policies or reinsurance agreements;

e. The transfer of property or liabilities, including but not limited to reinsurance of transferred policies and contracts, whether or not the transferring party otherwise has the capacity to effect the transfer in question or whether such transfer would not otherwise be capable of being transferred or assigned. If the order makes any such provision for the transfer of property or liabilities, then such property is transferred to and vests in, and such liabilities are transferred to and become liabilities of the transferee as a result of the order; and

f. Such other provisions with respect to incidental, consequential and supplementary matters as are necessary to assure the Insurance Business Transfer Plan is fully and effectively carried out.

5. If the Court finds that the Insurance Business Transfer Plan should be disapproved, the Court by its order may make provisions as it deems fit on the following issues:

a. Dismissal of the Petition, or

b. Whether the Assuming Company is given leave to file an amended Insurance Business Transfer Plan.

6. Nothing in § 6.4 of this Part in any way effects the appellate rights of any party.

230 R.I. Code R. 230-RICR-20-45-6.4