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Episode 9: New Jersey, AIRROC


As usual, I returned to New Jersey in October for the AIRROC Legacy Transactions and Networking event. This year I joined an esteemed panel to debate legal finality developments in the US.

In Episode 6 of A Rough Guide to Legacy I touched on the differences between LPTs and IBTs, with the latter providing legal finality in addition to the upfront economic finality achieved through a reinsurance solution.

Enthusiastic followers of the potential for legal finality and restructuring tools in the US insurance industry will be familiar with the Vermont and Rhode Island laws, as well as the division statutes that have recently been passed in certain other states. These provide the framework for restructuring and legal finality but until Oklahoma’s Insurance Business Transfers Act, there hasn’t perhaps been the all-encompassing legislation and momentum for companies to engage in the process of restructuring an insurance entity like we have in the UK and Europe.

The IBT Act was certainly a welcome development when it was announced in Tulsa in August last year but the challenges for the NAIC and the 50 state insurance regulators remain.

It would surely be helpful for the industry to put differences aside and to find common ground towards building an additional tool of dealing with old, and not so old, books of business, and to then initiate and build a successful track record in using these restructuring tools for the benefit of the whole industry.

Really though, the IBT solution offers more protection for policyholders than other finality mechanisms currently in use – more than LPTs and share sales, where neither require an independent expert’s view on reserves and solvency nor any form of court scrutiny.

There is no substitute for rolling-up our sleeves to get stuck in to resolve our issues and differences. The market will evolve here. The key question is, how long it will take?

Next week, I am looking forward to spending some time with my German and Maltese colleagues, travelling to our Hamburg and Malta offices respectively.