Topic: Life Insurance & Annuities

Life Partners, et al. v. Arnold et al.; Texas Supreme Court confirms fractionalized life settlement interests sold to Texas investors are Investment Contracts

The ruling – On May 8, 2015, the Texas Supreme Court, in Life Partners, Inc., et al. v. Michael Arnold, et al., case number 14-1022, unanimously affirmed two Texas state appellate court decisions and concluded that fractionalized life settlement interests in the death benefits payable under in force, non-variable life insurance policies were securities required to be registered under the Texas Securities Act.

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New York Drops Principles Based Reserving Approach for Life Insurers

Benjamin Lawsky, Superintendent of the New York Department of Financial Services (the “Department”), sent a letter [PDF] to the National Association of Insurance Commissioners (“NAIC”) last week criticizing the NAIC’s plan to move forward with implementing the principles based reserving approach (“PBR Approach”) for life insurers.

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FIO Showing Increased Willingness to Intervene on Use of Captives to Finance Perceived Excess Reserves

In recent years, the use of captives to help life insurers finance perceived excess XXX and AXXX reserves has accelerated. The NAIC continues to monitor the emerging practice and has drawn considerable attention to the matter through its solicitation of opinions by various players in the industry as well as through the publication of white paper on the matter and actions by the Principle-Based Reserving Implementation (EX) Task Force at the NAIC’s Summer National Meeting. 

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NAIC Increases Focus on Use of Captives by Life Insurers

On August 24th, the Principle-Based Reserving Implementation (EX) Task Force (the “Task Force”) of the NAIC met at the NAIC Summer National Meeting. During the meeting, the Task Force set forth additional charges with respect to the use of captives by life insurers and determined that the NAIC needs to “further assess the solvency implications of life insurer-owned captive insurers and other alternative mechanisms in the context of [Principle-Based Reserving].”

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Senate Bill to Permit Transfer of Public Pension Programs to Life Insurers

This week, Utah Senator Orrin Hatch introduced Bill S. 1270, which, if enacted, would permit state and local governments to transfer their pensions programs to life insurers. The purpose of this bill is to strengthen government pension plans, since, due to the erosion of pension plan assets as a result of the financial crisis, there is generally perceived to be an enormous gap between the pension benefits required to be paid to workers and the funds available to make such payments. 

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Mutual Pharmaceutical v. Bartlett: The Supreme Court Reaffirms Preemption of State-Law Claims Against Generic Drug Manufacturers

The Supreme Court’s 5-4 ruling in Mutual Pharmaceutical Co. v. Bartlett, ___ U.S. ____ (June 24, 2013), offers welcome clarity to generic drug manufacturers: reaffirming that state tort claims against those manufacturers are preempted by the Hatch-Waxman Amendments to the Food, Drug and Cosmetic Act (“FDCA”), and by the Court’s landmark decision in Pliva v. Mensing, 113 S.Ct. 2567 (2011). 

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New York DFS Review of Private Equity Investments Delays Sun Life Transaction

Sun Life Financial Inc. announced on June 21, 2013 that it expects the review by the New York Department of Financial Services (DFS) of investments by private equity firms in reinsurers of annuities to delay past June 30, 2013 Sun Life’s sale of its U.S. annuity business to Delaware Life Holdings, LLC, a company owned by shareholders of Guggenheim Partners. Click here for a link to Sun Life’s press release. 

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The Seventh Circuit Rules That Life Insurers May Create Retained Asset Accounts to Pay Death Benefits, if the Policy Does Not Require Lump Sum Payments

In Phillips v. Prudential Insurance Co. of America, No. 11-3870 (7th Cir. May 6, 2013), the Seventh Circuit recently affirmed dismissal of a putative class action that challenged a life insurer’s use of “retained asset accounts” to make payment of the policy’s benefits. On behalf of a putative class, Zena Phillips sued Prudential, alleging that by not paying her policy benefits in a lump sum, it breached an insurance policy, its statutory duty of good faith, and its fiduciary duties. 

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