Insurance Transactional

The global financial landscape has shifted, and the fundamentals of the insurance industry have been irrevocably altered. The reliability of rating agency methodologies is being questioned, as are existing rules and assumptions regarding collateralization and counterparty risk. Established risk transfer mechanisms, such as credit default swaps, are under intense scrutiny by federal and state regulators, and balance sheets have eroded across the board. With the federal government poised to take ownership interests in some of the U.S.'s major carriers, it is clear that it is no longer "business as usual" in the insurance industry. Legal knowledge, experience and substantive depth in the insurance space have never been at a higher premium.

Chadbourne’s insurance transactional group offers an experienced multidisciplinary legal team directed at serving the transactional, regulatory and counseling needs of the global insurance and reinsurance industries. Our experience has been acquired over many years of advising on traditional and non-traditional transactions in the insurance and reinsurance space, including:

• Stock and mutual mergers, acquisitions, divestitures, joint ventures, reorganizations, rehabilitations and liquidations of insurers under federal and state law
• Formation and capitalization of domestic and offshore insurance companies
• Public and private debt and equity financings
• Complex insurance company investment transactions

We have structured and implemented innovative alternative market arrangements involving insurance-related derivatives, sidecars and other forms of risk securitization and financing for the life and property-casualty industries, and have advised industrial, financial and professional companies on their commercial insurance and self-insurance programs.

We represent life, property and casualty, financial guaranty insurance and reinsurance companies, insurance brokers and intermediaries, investment advisors, hedge funds, private equity firms, investment and commercial banks, accounting and consulting firms, state and national governments, non-profit and quasi-governmental organizations and industrial companies with insurance interests.

Our practice includes the following services:

• Insurance company formation and governance
• Captives and self-insurance
• Non-traditional risk transfer and securitizations
• Insurance/reinsurance product development
• Capital markets transactions and financings
• Mergers and acquisitions
• Regulatory compliance and representation
• Life settlement and premium finance programs
• Insurer reorganization and insolvency
• Insurance transaction taxation
• ERISA and benefits
• D&O program design and counseling
• Business practice compliance and governmental investigations

Insurance Company Formation and Governance

The formation of an insurance company or other regulated insurance entity requires an awareness of an array of legal, financial and practical issues. Our lawyers have extensive experience in structuring, forming, licensing and counseling various types of life, health and property and casualty insurance companies both in the U.S. and overseas, as well as other insurance-related enterprises such as insurance agencies, brokers, reinsurance intermediaries, managing general agents, third-party administrators and consulting organizations. In connection with risk transfer and securitization products, we have developed skill in structuring and deploying offshore special purpose vehicles as well as licensed offshore insurance entities. We also have helped clients address corporate governance matters including those dictated by U.S. and foreign insurance regulations as well as Sarbanes-Oxley and related SEC rules and exchange listing requirements.

Captives and Self-Insurance

Chadbourne lawyers have been at the forefront of the self-insurance and alternative risk movement since the 1970s. We have structured, formed and counseled numerous offshore and domestic single-parent and group captives, “rent-a-captives,” segregated cell companies, sponsored captives, risk retention groups and purchasing groups, and have advised many corporate parents on issues relating to their insurance subsidiaries and affiliates. One of our lawyers drafted Vermont's captive insurance law in 1981 and advised the government of the U.S. Virgin Islands in the drafting of their exempt companies and exempt international insurers acts. Our work in the captive area has also included the design and implementation of reciprocals and pooling arrangements as well as reinsurance programs to protect them. When the commercial insurance markets fail to satisfy the coverage demands of their corporate insureds, Chadbourne lawyers are adept at crafting alternative risk transfer solutions to meet our clients' needs.

Non-Traditional Risk Transfer and Securitizations

The capital markets are playing an ever increasing role as a source of capacity for the financing and assumption of insurance-related risk. Insurance risk, such as catastrophe risk or mortality risk, is now being viewed as an investment risk in the same way as credit risk or interest rate risk. This risk can be packaged as a risk mitigation tool for insurers and reinsurers or as an investment opportunity for institutional investors. Chadbourne lawyers have advised in the structuring and implementation of transactions that shift insurance risks to the capital markets and allow capital market investors to participate in the risks as a form of investment. Our lawyers also have advised clients in developing insurance and/or derivative alternatives to transfer specialized weather, crop, commodity and financial-market risks.

The convergence of the insurance and financial markets has contributed to the use of insurance products in traditional capital markets transactions. It is now common for insurance companies to utilize insurance products to participate in transactions and assume risks that, until recently, had been the exclusive domain of investment banks, commercial banks, merchant banks and venture capitalists. The broad capabilities of our lawyers in allied practice areas make Chadbourne qualified to assist our clients in the evolution of this area of the insurance and reinsurance industries.

Insurance/Reinsurance Product Development

As the commercial and alternative insurance market landscapes have become more specialized and interconnected, Chadbourne lawyers have become adept at advising our clients in the development of new insurance products, for sale both to retail property/casualty and life/annuity consumers as well as among commercial insurers and other financial services entities. Our services in this area include contract design and drafting, tax and regulatory consultation, and interface with our clients' non-legal advisers in the product design arena. The broad range of products in which we have been involved include customized covers for specialized retail or institutional markets, “drop down” and “clash” reinsurance covers, wind-only catastrophe products for coastal residential properties, group annuities and tailored quota share arrangements for property insurance. Often, a particular product under development requires us to address the fine line between insurance and non-insurance characterization for regulatory and financial statement purposes, in such areas as industry loss warranty reinsurance versus an industry loss swap, or weather or commodity protection products that can take the form of an insurance product or a derivative product, depending upon the particular client needs and circumstances. Our work in this area has also included design of back-to-back "transformer" products to transfer traditional insurance or reinsurance risk to non-insurance risk bearers via the capital markets. In addition to designing and drafting the product documentation, our regulatory lawyers have assisted our clients in obtaining required approval or exemption of such products from concerned state regulators.

Capital Markets Transactions and Financings

Insurers and reinsurers seek access to the debt and equity markets to raise capital for asset growth, business development, significant corporate transactions and for risk transfer. We are very familiar with the various corporate finance strategies available to insurance and financial services companies, and the related regulatory and financial issues. Chadbourne has represented insurance holding companies and insurers, as well as underwriters and financial advisors, in traditional public, Rule 144A and private offerings of common stock, preferred stock, warrants, debt securities, surplus notes, guaranteed investment contracts and funding agreement programs. We have also advised clients in the creation, structuring, and debt and equity financing of insurance sidecars domiciled in Bermuda and other offshore jurisdictions.

We have extensive securities law capabilities in connection with merger and acquisition transactions, spin-offs, tender offers, exchange offers and proxy and consent solicitations.

Mergers and Acquisitions

Our lawyers appreciate the unique aspects of an insurance company’s operations and the corresponding insurance regulatory, securities, taxation and accounting regimes that are implicated in insurance industry acquisitions and dispositions.

Our practice covers the full range of M&A services, including public and private company mergers and stock and asset acquisition and divestiture transactions, mutual company mergers, demutualizations, joint ventures, private equity and venture capital investments, leveraged buyouts, spin-offs, recapitalizations, unsolicited takeovers and takeover defenses and issuer and third-party tender offers. We have represented insurers in connection with acquisitions of books of business through renewal rights, take-outs and other transactions and the purchase and sale of shell companies. We have also addressed the wording of reinsurance treaties and administrative and transitional fronting arrangements relating to sale transactions.

We believe that industry-specific and regulatory knowledge is critical in effectively representing participants in these transactions. Our understanding of the insurance holding company systems regulation and related affiliation issues allows us to properly address unique issues applicable to investments in insurance companies. Our knowledge in insurance regulatory matters allows us to provide a more comprehensive representation of insurers and other financial institutions in these transactions.

Regulatory Compliance and Representation

Regulation affects an insurance company’s operations at every level as the business of insurance in the U.S. is primarily regulated by the individual states. As a result, effective legal representation of a U.S. insurer requires an appreciation of the regulatory aspects of a particular transaction and the ability to navigate the multi-jurisdictional web of insurance regulation. Our lawyers, including a former general counsel of the New York State Insurance Department, have extensive knowledge and experience in nearly all aspects of insurance regulation, as well as the impact of statutory accounting and rating implications on the insurance industry. We have advised clients on a broad range of regulatory matters including insurance holding company systems regulation, credit for reinsurance requirements, market conduct compliance, invested asset regulation, overall solvency standards, risk-based and other capital requirements, as well as the regulation of captive insurers, financial guarantee insurers and insurance intermediaries, such as producers, third-party administrators, managing general agents and reinsurance intermediaries.

We are also routinely called on to consider the application of traditional insurance laws to innovative and non-traditional insurance and other financial transactions. For example, we are often asked to consider whether certain capital market, derivative and other financial products and strategies constitute the conduct of insurance. We have also advised on the potential effect of insurance company insolvency proceedings on new insurance products and structures.

Life Settlement and Premium Finance Programs

Chadbourne has advised clients on a wide range of life settlement, viatical and other life insurance related transactions including premium finance programs. Lawyers in our life settlement and insurance products practice have been in the forefront of the burgeoning life settlements industry. As this industry has continued to gain credibility and respectability in the financial markets, our lawyers have represented originators, brokers, large international investment banks and investors in connection with structuring, negotiating and executing unique and complex domestic and international life settlement transactions and premium finance programs. In addition, we have represented our life settlement clients in a number of complex and challenging business disputes, both in and out of the courtroom.

Insurer Reorganization and Insolvency

Our lawyers have had significant representations in most of the major U.S. and international insurance insolvencies, representing not only debtor and creditor interests, but also receivers and liquidators. We currently represent reinsurers in various U.S. liquidations and rehabilitations and also represent liquidators of foreign insurers in proceedings under Chapter 15 of the U.S. Bankruptcy Code. We also have substantial experience in representing carriers who have issued surety bonds for the account of non-insurance entities that have subsequently filed for bankruptcy. We represent counterparties of various financial guaranty insurance companies in the unwinding of their credit default swap exposures. We are also representing the liquidator of a reinsurer of financial guaranty insurers that also sold credit default swaps to bank counterparties.

Insurance Transaction Taxation

We have advised insurance industry clients, investment banks, and commercial insureds in virtually all areas of tax law to devise structures that are creative and efficient, taking into account both business and non-tax legal issues in a wide variety of insurer or insurance-related transactions. We have advised on structuring and negotiating the tax aspects of insurance company acquisitions and dispositions, both taxable and tax-free, and identifying and resolving complex tax issues that arise in these transactions in a manner that accomplishes tax, accounting and business objectives. We have also advised on the creation and structuring of offshore insurance companies, including issues regarding transfers of assets and operating rules with respect to income and investments designed to minimize U.S. taxation exposure. Our tax group also routinely analyzes the tax implications of transactions such as demutualizations, asset purchases and sales, coinsurance and assumption reinsurance transactions, and public offerings of debt and equity.

ERISA and Benefits

Our employee benefits lawyers have advised on a wide range of transactional and compliance related issues affecting insurance companies. We have negotiated ERISA and insurance related provisions in capital markets, financing and mergers and acquisitions transactions; designed pension, 401(k), profit sharing, health, disability, life and other employee benefit plans and related insurance and third-party administration; advised on all aspects of employee benefits laws, including ERISA, the Internal Revenue Code, COBRA, HIPAA, the Mental Health Parity Act and other laws; advised on ERISA’s fiduciary requirements, including reporting and disclosure, bonding, claims administration, plan asset and prohibited transaction requirements; and advised clients on plan investments and plan terminations.

D&O Program Design and Counseling

Our lawyers have advised and counseled industrial, financial and professional companies in the design and implementation of their directors’ and officers’ insurance programs, and provided interpretive coverage analysis prefatory to filing claims with carriers. In the design phase, we coordinate D&O programs with the clients' broader corporate governance structure to ensure seamless and comprehensive protection for the company, its management and its board. Our lawyers also have significant experience in defending companies and their directors and officers in litigation in which their D&O programs provide coverage.

Business Practice Compliance and Governmental Investigations

Chadbourne lawyers have advised our insurance industry clients with respect to “best practices” and regulatory compliance, including Sarbanes-Oxley. We work hand in hand with Chadbourne’s securities enforcement and litigation practice, which encompasses domestic and international representation in civil and criminal securities-related matters. A number of Chadbourne lawyers have prosecutorial backgrounds at state and federal levels. For example, through its insurance and reinsurance and securities regulatory enforcement practices, Chadbourne has been closely involved in ongoing investigations by the U.S. Securities and Exchange Commission and the New York Attorney General’s office into the use of “non-traditional” or “finite” insurance products. We have represented standing and special committees in situations ranging from the review of going private and other transactions presenting potential conflicts of interest to internal investigations of possible wrongdoing, have counseled insurers, reinsurers, intermediaries and other clients regarding state insurance licensing and regulatory laws, and have handled a significant internal investigation into contingent commissions.