Enstar makes first US insurance business transfer deal

Last modified October 16, 2020. Published October 16, 2020.
Hamilton, Bermuda (Mfdii, Wiki Commons)

Hamilton, Bermuda (Mfdii, Wiki Commons)

Group said on Thursday that it made the first insurance business transfer deal in the U.S. after receiving approval from the Oklahoma County District Court, an action that marks a milestone for a process that insurers had been pushing to see authorized in the States.

Bermuda-based Enstar said that the transfer was between a pair of its divisions, Providence Washington Insurance Company and Yosemite Insurance Company. 

An IBT involves the direct transfer of liabilities between insurance companies, and while such transactions are new in the U.S., Enstar said that they are “common in many parts of the world[.]”

The company was able to use the deal structure for the first time in the U.S. thanks to an Oklahoma law passed in 2018, called the Oklahoma Insurance Business Transfer Act, which is based off a U.K. statute called the Financial Services and Markets Act of 2000. The law allows IBTs but requires court approval.

The deal, the Oklahoma Insurance Department said on Thursday, “will transfer substantially all the insurance and reinsurance business underwritten by PWIC to Yosemite Insurance Company, an insurance company in Oklahoma.”

The IBT, the department added, “will include the liabilities associated with those policies as well as $38.5 million from PWIC to Yosemite as consideration for assuming those liabilities.”

PWIC and Yosemite initially sought court approval last November before receiving it on Thursday, court records show. According to a court document, the IBT involves the transfer of roughly $69.7 million in liabilities from PWIC to Yosemite, with the equivalent figure being moved over on the asset sides of the subsidiaries’ balance sheets. The IBT also calls for the transfer of about $51.4 million in gross reserves, the court document also shows.

Oklahoma Insurance Commissioner Glen Mulready noted the historical significance of the IBT.

“Completing the first IBT in the United States is a huge milestone for Oklahoma and the Oklahoma Insurance Department,” Mulready said. “This is a big step forward in transforming and invigorating the run-off market. We look forward to completing additional IBTs in the coming months.”

Enstar (US) Inc.'s Robert Redpath similarly touted the development.

“We are honored to be the first company to complete an IBT in Oklahoma,” Redpath said. “This transaction is beneficial to all parties involved and we are passionate about the benefits it will bring to the insurance industry.”

In advocating for the use of IBTs, the Oklahoma Insurance Department said, “This cutting–edge mechanism focuses on the protection of consumers while allowing insurance companies to strategically deploy assets to their areas of focus.”

PWIC, whose direct business is now in run-off form, formerly wrote lines including auto, homeowners, liability pertaining to asbestos, commercial multi-peril and workers compensation, a court document shows. The insurer was acquired in Enstar in 2010, while Yosemite was acquired in 2018, according to the document.

The IBT calls for Yosemite to take over the direct business; business from the Seaton Insurance Company, which Enstar combined with PWIC in 2015 after acquiring it in 2010; and several reinsurance portfolios that it previously took over from other entities, according to a court filing, .