The complexity of the insurance sector no longer causes many private equity firms to shy away from insurance industry entities as acquisition targets in carrying out a private equity firm's investment strategies. However, PE firms getting in on the action should be aware of present and evolving regulatory requirements imposed on insurance company investments. The National Association of Insurance Commissioners' "Private Equity Issues (E) Working Group" has recently proposed for comment enhanced regulatory scrutiny of private equity investment in the insurance sector, of which PE firms considering merger and acquisition activity in this market should be aware. Insurers interested in the opportunity for capital investment by PE firms should also be aware of the Working Group's proposals. The comment period expires January 30, 2014.
M&A Activity in the Insurance Industry
Activity in insurance industry M&A was robust in 2011 and 2012. PE firms alone made over 100 acquisitions in this sector in those years. While insurance M&A activity in 2013 did not continue that active pace, market followers project a significant increase in insurance sector M&A in 2014. [More ...]
Developments in the M&A Regulatory Environment
The regulatory requirements imposed on insurance companies and insurance company holding systems can make insurance sector investment challenging even when an acquiring firm understands the regulatory regime imposed on such transactions and the subsequent insurance holding company system that is created. At a minimum, regulatory requirements extend the timeline for closing transactions constituting an insurance company's change of control due to the approval requirements of the insurer's state of domicile. [More ...]
NAIC Private Equity Issues (E) Working Group
Recently, the NAIC's Private Equity Issues (E) Working Group has proposed additional scrutiny on transactions involving PE investment in the insurance sector (primarily with respect to investment in life insurers). The proposed "best practices" result from concern that the business model of private equity investment- to achieve a positive return on its investment - may not be aligned with the interests of policyholders. [More ...]
The Working Group's Proposals Subject to Comment
The following provides a brief outline of the Working Group's proposed "possible best practices" applicable to PE investment in the insurance sector. The full text of the proposals can be found here. Comments are due to Dan Daveline, NAIC Assistant Director-Financial Regulatory Services, by January 30, 2014. [More ...]
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For More Information
For strategic and specific advice or assistance in commenting on the Working Group's proposals, managing the regulatory process for an acquisition within the insurance industry or complying with any of the regulatory requirements imposed by domiciliary state insurance departments, please contact: