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.
