Arkansas Administrative Code › Agency 003 - DEPARTMENT OF COMMERCE › Division 22 - Insurance Department › Rule 003.22.21-005 - Insurance Business Transfers

Current through Register Vol. 49, No. 6, June, 2024
Section
			 1.
Authority
This rule is issued pursuant to Act 1018 of 2021, "An Act to
				Establish the Arkansas Business Transfer Act," codified at Ark. Code Ann.
				§ 23-69-501 et seq.
Section
			 2.
Purpose
The purpose of this rule is to implement the Arkansas Insurance
				Business Transfer Act ("the Act") to provide standards and procedures for the
				transfer and novation of insurance policies from a transferring insurer to an
				assuming insurer through a transaction known as an "insurance business
				transfer." The Act permits an insurer to take a book of insurance policies and
				completely transfer all risks, obligations and liabilities to another company.
				This mechanism can provide legal and economic finality to legacy insurance
				risks and improve the use of capital and management resources by permitting
				another company with expertise in run-off business to assume the discontinued
				lines of business that are the subject of the transfer.
Such a transaction does not require the affirmative consent of
				policyholders or reinsured if the transfer and novation is conducted in
				accordance with the Act. However, even with the absence of affirmative consent,
				the interests of policyholders, claimants, and reinsureds is always a primary
				consideration when this type of transaction is pursued. Procedural safeguards
				found in the Act and this Rule exist to avoid any adverse material impact on
				those interests.
Section 3.
Applicability and Scope
This rule applies to all proposed transactions pursued under
				the Arkansas Insurance Business Transfer Act in which a transfer is sought of
				some or all insurance obligations, risks, or both, of existing or in-force
				contracts for insurance or reinsurance by a transferring insurer to one or more
				assuming insurers. Application of this rule does not limit or restrict other
				valid means of effecting a transfer or novation.
Section 4.
Definitions
As used in this rule:
(1) "Affiliate" has the meaning ascribed to
			 such term in Ark. Code Ann. §
									23-63-503.
(2) "Applicant" means a transferring insurer
			 or reinsurer applying under Ark. Code Ann. § 23-69-506.
(3) "Assuming insurer" means an insurer
			 domiciled in Arkansas that assumes or seeks to assume policies from a
			 transferring insurer pursuant to this act. An assuming insurer may be a company
			 established pursuant to Ark. Code Ann. §§
									23-63-1601, et seq.,
			 regarding captive insurers.
(4)
			 "Court" means the Pulaski County Circuit Court. All proceedings brought under
			 the Insurance Business Transfer Act have proper and exclusive venue in the
			 Pulaski County Circuit Court.
(5)
			 "Department" means the Arkansas Insurance Department.
(6) "Commissioner" means the Arkansas
			 Insurance Commissioner.
(7)
			 "Implementation order" means an order issued by the Pulaski County Circuit
			 Court under Ark. Code Ann. § 23-69-506.
(8) "Insurance business transfer" means a
			 transfer and novation in accordance with the Act or this rule. Insurance
			 business transfers will transfer insurance obligations or risks, or both, of
			 existing or in-force contracts of insurance or reinsurance from a transferring
			 insurer to an assuming insurer. Once approved pursuant to this act, the
			 insurance business transfer will effect a novation of the transferred contracts
			 of insurance or reinsurance with the result that the assuming insurer becomes
			 directly liable to the policyholders of the transferring insurer and the
			 transferring insurer's insurance obligations or risks, or both, under the
			 contracts are extinguished.
(9)
			 "Insurance business transfer plan" or "Plan" means the plan submitted to the
			 Department to accomplish the transfer and novation pursuant to an insurance
			 business transfer, including any associated transfer of assets and rights from
			 or on behalf of the transferring insurer to the assuming insurer.
(10) "Independent expert" means an impartial
			 person who has no financial interest in either the assuming insurer or
			 transferring insurer, has not been employed by or acted as an officer,
			 director, consultant or other independent contractor for either the assuming
			 insurer or transferring insurer within the past twelve (12) months, is not
			 appointed by the Commissioner to assist in any capacity in any proceeding and
			 is receiving no compensation in connection with the transaction governed by
			 this Act other than a fee based on a fixed or hourly basis that is not
			 contingent on the approval or consummation of an insurance business transfer
			 and provides proof of insurance coverage that is satisfactory to the
			 Commissioner.
(11) "Insurer" means
			 an insurance or surety company, including a reinsurance company, and shall be
			 deemed to include a corporation, company, partnership, association, society,
			 order, individual or aggregation of individuals engaging in or proposing or
			 attempting to engage in any kind of insurance or surety business, including the
			 exchanging of reciprocal or inter-insurance contracts between individuals,
			 partnerships and corporations.
(12)
			 "Notice" means provision of notification pursuant to Ark. Code Ann. §
			 23-69-505 within fifteen (15) days of an event triggering a notice requirement
			 under the Act.
(13) "Policy" means
			 a policy, contract or certificate of insurance or a contract of reinsurance
			 pursuant to which the insurer agrees to assume an obligation or risk, or both,
			 of the policyholder or to make payments on behalf of, or to, the policyholder
			 or its beneficiaries, and shall include property, casualty, life, health and
			 any other line of insurance the Commissioner finds is suitable for an insurance
			 business transfer.
(14)
			 "Policyholder" means an insured or a reinsured under a policy that is part of
			 the subject business.
(15) "Subject
			 business" means the policy or policies that are the subject of the
			 Plan.
(16) "Transfer and novation"
			 means the transfer of insurance obligations or risks, or both, of existing or
			 in-force policies from a transferring insurer to an assuming insurer, and is
			 intended to effect a novation of the transferred policies with the result that
			 the assuming insurer becomes directly liable to the policyholders of the
			 transferring insurer on the transferred policies and the transferring insurer's
			 insurance obligations or risks, or both, under the transferred policies are
			 extinguished.
(17) "Transferring
			 insurer" means an insurer or reinsurer that transfers and novates or seeks to
			 transfer and novate obligations or risks, or both, under one or more policies
			 to an assuming insurer pursuant to a Plan.