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On August 11, 2022, the Executive Committee (EX) of the U.S. National Association of Insurance Commissioners (“NAIC”) adopted a request from the Restructuring Mechanisms (E) Working Group (“Working Group RM”) to reopen the Model Law of the Property and Casualty Insurance Guarantee Association (#540) (“Model Law #540”) for amendment to ensure that policyholders retain guarantee fund coverage following an insurance business transfer (“IBT”) or corporate division (“CD”). For more information on IBTs and CDs, see “Insurance Business Transfers and Corporate Splits Gain Strength” in the Mayer Brown Global Insurance Industry Year in Review 2021.
The reopening of Model Law #540 is part of the NAIC’s broader initiative to consider expanding the US regulatory framework regarding IBTs and CDs. In 2019, the NAIC commissioned the RM Task Force to explore best practice and consumer protection standards for IBTs and CDs drawing on knowledge and experience of the well-developed UK Part VII transfer regime as well as of the few US states that currently have IBT. or DC legislation.
Last year, the RM Working Group issued a white paper exploring the IBT and DC landscape in both the United States and the United Kingdom and tasked the Restructuring Mechanisms (E) Subgroup (“RM Subgroup”) to establish recommendations regarding the states’ adoption of IBT and CD legislation. On May 4, 2022, the RM Subgroup met virtually to discuss a draft of their “Founding Principlesdocument, which contains a series of best practices for US CD and IBT transactions.
Neither the RM Working Group nor the RM Subgroup met during the NAIC 2022 National Summer Meeting. We understand that both the draft white paper prepared by the RM Working Group and the draft Core Principles document prepared by The RM Subgroup received a significant number of comments, which are being further reviewed and considered by the RM Working Group and the RM Subgroup. There are no publicly announced next steps at this time regarding those two documents or the work of the RM Working Group and the RM Subgroup.
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