On October 16, 2020, the District Court of Oklahoma County approved Providence Washington Insurance Company (PWIC) to complete its Insurance Business Transfer (IBT) Plan, making it the first such transfer in the United States. As a result, all of PWIC’s transferred insurance contracts novated to Yosemite Insurance Co., an Oklahoma insurance company. Yosemite is directly liable to policyholders and ends PWIC’s promises under the contracts.
Under the National Council of Insurance Legislators (NCOIL) draft model from March, 2019, Section 3. H., “Insurance Business Transfer” means a transfer and novation in accordance with this act. 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. http://ncoil.org/wp-content/uploads/2019/02/IBT-Model-Law-Draft.
Modeled after Part VII of the United Kingdom’s Financial Services & Markets Act of 2000 transfer process, Oklahoma passed the IBT Act in November, 2018, providing a unique process for insurers to completely transfer blocks of insurance business to another insurance company, similar to an assumption reinsurance agreement. The Oklahoma Act applies to life, health, property and casualty insurers. According to the Oklahoma Insurance Department, the IBT provides the transferring and assuming companies with an efficient and straightforward transfer process while also providing the legal finality that had not yet been available in the United States.
The process includes notice to policyholders with an opportunity to object along with notice to reinsurers, if applicable, interested regulators, agents, and guaranty associations. There is a two-stage review and approval, by the Commissioner and District Court.
PWIC filed its IBT Plan with the Oklahoma Insurance Department in 2019. It was subsequently approved by Commissioner Mulready in late 2019, and then went before the District Court.
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