On July 28, 2021, Arkansas will implement its recently enacted Insurance Business Transfer Act (“IBTA”). The purpose of the law is to provide insurance carriers a process for the transfer of blocks of business from any jurisdiction in the country to another insurance company located in Arkansas. This will allow carriers increased efficiency with respect to restructuring activities. Similarly, the new law is likely to attract increased business in to the state, as clearly defined rules help to reduce uncertainty.
A successful transfer under the IBTA results in a novation of the transferred insurance (or reinsurance) contracts and makes the assuming insurer directly liable to the policyholder of the insurer transferring the book of business. Upon successful transfer under the IBTA, the transferring insurer’s obligations to its former policyholders are extinguished.
Of course, as with any insurance law, and specifically with respect to insurance business transfers, the primary consideration is protection of policyholders’ interests. To that end, Arkansas’s new IBTA law provides for substantial oversight. All applications for transfer must be reviewed by both the insurance commissioner and a court of general jurisdiction.
The new legislation also calls for the Arkansas insurance commissioner to promulgate rules and regulations for the implementation of the IBTA; regulations such as these generally give increased clarity with respect to the obligations inherent in the underlying law. Arkansas expects the regulations to be formally issued at some point later this year.
A copy of the law can be found here.