On August 11, 2022, the US National Association of Insurance Commissioners' ("NAIC") Executive (EX) Committee adopted a request from the Restructuring Mechanisms (E) Working Group ("RM Working Group") to reopen the Property & Casualty Insurance Guaranty Association Model Act (#540) ("Model Act #540") for amendment to ensure that policyholders will retain guaranty fund coverage following an insurance business transfer ("IBT") or corporate division ("CD"). For more background on IBTs and CDs, see "Insurance Business Transfers and Corporate Divisions Gather Steam" in the Mayer Brown Global Insurance Industry Year in Review 2021 publication.
The reopening of Model Act #540 is part of the NAIC's broader initiative to consider expansion of the US regulatory framework with respect to IBTs and CDs. In 2019, the NAIC commissioned the RM Working Group to explore best practices and consumer protection standards for IBTs and CDs by drawing on knowledge and experience from the well-developed UK Part VII Transfer regime, as well as the few US states that currently have IBT or CD legislation.
This past year the RM Working Group issued a white paper exploring the IBT and CD landscape in both the United States and the United Kingdom and commissioned the Restructuring Mechanisms (E) Subgroup ("RM Subgroup") to establish recommendations with respect to states' adoption of IBT and CD legislation. On May 4, 2022, the RM Subgroup met virtually to discuss a draft of its "Foundational Principles" document, which contains a number of best practices for US IBT and CD transactions.
Neither the RM Working Group nor the RM Subgroup met during the NAIC 2022 Summer National Meeting. We understand that both the draft white paper prepared by the RM Working Group and the draft Foundational Principles document prepared by the RM Subgroup received a significant number of comments, which are being reviewed and considered further by the RM Working Group and the RM Subgroup. There are no publicly announced next steps at this time with respect to those two documents or the work of the RM Working Group and RM Subgroup.
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