Tag Archives: insurance business transfer

New U.S.-based insurance restructuring mechanism approved

Oklahoma has now made good on its promise to become the leading domicile for a new U.S.-based insurance restructuring mechanism—the Insurance Business Transfer (IBT). In late November 2019, the Oklahoma Insurance Department approved the IBT application (or IBT Plan) of Providence Washington Insurance Company to transfer policies to Yosemite Insurance Company – both companies are part of Enstar Group.

With Commissioner Mulready’s approval, the IBT Plan was sent to the District Court of Oklahoma County with a request for its approval. Despite court delays resulting from the COVID-19 pandemic, on October 15, 2020, the District Court of Oklahoma issued its order of approval and implementation for the first-ever U.S. IBT, allowing for the novation of insurance policies to an assuming insurer without policyholder consent. Enstar worked diligently to push this “intracompany” business transfer forward and has now set the stage for future transfers in this space.

In this article, Milliman consultant Stephen DiCenso, who served as the Independent Expert on this transaction, discusses the benefits to restructuring mechanisms such as the IBT.

Actuaries will be key in the role of Independent Expert for legacy liabilities

In 2018, Oklahoma became the center of discussion of the U.S. run-off insurance market. Oklahoma’s Insurance Business Transfer Act created a buzz as the U.S. market now gets even closer to its first ever deal to transfer and novate insurance policies from a transferring insurer to an assuming insurer without policyholder consent by way of an insurance business transfer (IBT). This legislation gives insurers and reinsurers of U.S. risks much needed finality with respect to obligations for liabilities.

An essential voice in this process is the Independent Expert (IE), whose role has traditionally been filled by an actuary in venues outside the United States. The Independent Expert provides insight and perspective on the fairness of the transaction to the regulators and courts that must ultimately approve the transfers. Policyholder protection is the most important consideration in the IBT and the role of the IE is critical in protecting the interests of the policyholders from both the assuming and transferring companies.

Under the Oklahoma IBT law, the companies involved in transferring and assuming the business must jointly provide a list of IEs, from which one is selected by the Insurance Commissioner. The IE ultimately works for the state court and is relied upon to assess the terms of proposed transfers with specific focus on protecting the interests of the policyholders involved.

In this article, Milliman’s Stephen DiCenso and Tom Ryan provide background on this new opportunity for all companies with legacy liabilities and discuss why actuaries will be at the center of that process.




Milliman actuary named first ever U.S.-based Independent Expert after Oklahoma passes Insurance Business Transfer Act

Milliman today announced that Stephen DiCenso, FCAS, MAAA, has been appointed as the country’s first Independent Expert (IE) following the passage of Oklahoma’s Insurance Business Transfer Act. Effective as of November 1, 2018, the Insurance Business Transfer Act is the broadest legislation of its kind to-date in the United States.

An insurance business transfer (IBT), which is subject to state insurance regulatory and court-sanctioned review and approval, allows insurers with run-off business to transfer that business to another entity without obtaining shareholder consent. IBTs create considerable flexibility and financial security, and can help eliminate uncertainty, reduce administrative expense, simplify regulation, and free up capital for more profitable enterprises. Oklahoma’s IBT legislation applies to life, health, and property-casualty liabilities, and is open to both run-off and active books of business.

Modeled after an approach that has been successful in Europe, U.S. actuaries are ideally suited to serve in the role of IE, as they possess the education and training needed to ensure policyholders involved in these IBTs are protected and treated fairly.

“I am proud of my work as coauthor of the Insurance Business Transfer (IBT) Act, while a member of the Oklahoma House of Representatives. Now as the Oklahoma Insurance Commissioner, I am committed to an efficient and transparent approval process,” stated Commissioner Glen Mulready.

“I’m honored to serve as the country’s first Independent Expert following Oklahoma’s success in creating a market for insurance business transfers,” said DiCenso, a principal and consulting actuary with Milliman. “The U.S. runoff market is estimated to be $350 billion for non-life insurance, and could reach $1 trillion when factoring in life insurance and long-term care. There are major financial implications for U.S.-based insurers of all types.”

To learn more about Oklahoma’s IBT Act and the role of the IE, click here.