On July 28, 2021, Arkansas will implement its recent Insurance Business Transfer Act (“IBTA”). The purpose of the law is to provide insurance companies with a process for transferring blocks of business from any jurisdiction in the country to another insurance company located in Arkansas. This will allow carriers to increase their efficiency with regard to restructuring activities. Likewise, the new law is likely to attract more businesses to the state, as clearly defined rules help reduce uncertainty.
A successful transfer under IBTA results in novation of the transferred insurance (or reinsurance) contracts and makes the assuming insurer directly liable to the policyholder of the insurer transferring the business volume. In the event of a successful transfer under IBTA, the ceding insurer’s obligations towards its former policyholders are extinguished.
Of course, as with any law on insurance, and more particularly with regard to transfers of insurance activities, the main consideration is the protection of the interests of the insured. To this end, Arkansas’ new IBTA law provides for substantial oversight. All transfer requests must be reviewed by both the Insurance Commissioner and a court of general jurisdiction.
The new legislation also calls on the Arkansas Insurance Commissioner to enact rules and regulations for the implementation of IBTA; regulations such as these usually clarify the obligations inherent in the underlying law. Arkansas expects the regulations to be officially released at some point later this year.
A copy of the law is available here.