OKLAHOMA CITY – The district court of Oklahoma County approved Providence Washington Insurance Co. (PWIC) to complete its Insurance Business Transfer (IBT) Plan, state Insurance Commissioner Glen Mulready announced.
With this approval by the court, the Plan will transfer substantially all the insurance and reinsurance business underwritten by PWIC to Yosemite Insurance Co., an insurance company in Oklahoma, Mulready said. The transfer will include the liabilities associated with those policies as well as $38.5 million from PWIC to Yosemite as consideration for assuming those liabilities, he said. Both PWIC and Yosemite are wholly owned subsidiaries of Enstar Group Limited.
The process began last year when PWIC filed its IBT Plan with the Oklahoma Insurance Department. The IBT Plan includes extensive financial documents, the independent expert’s report and a proposed procedure for how the transaction will be communicated to policyholders and other interested parties. The Plan was reviewed by an independent expert, the Commissioner and department staff. The Commissioner approved the IBT Plan and authorized PWIC to petition the district court for approval.
“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.”
Runoff insurance is a provision in a claims-made policy stating that the insurer remains liable for claims caused by wrongful acts that took place under an expired or canceled policy, for a certain time period.
Take, for example, a policy written with a January 1, 2015-2016, term and a five-year runoff provision, said Liz Heigle, communications director for the Insurance Department. Coverage will apply under the runoff provision to all claims caused by wrongful acts committed during the January 1, 2015- 2016, policy period that are made against the insured and reported to the insurer during the five-year period immediately after expiration of the policy).
The acquired company buys a runoff provision that covers claims associated with wrongful acts that took place prior to the acquisition but are made against the acquired company after it has been acquired, Ms. Heigle explained.
“We are honored to be the first company to complete an IBT in Oklahoma,” said Robert Redpath of Enstar (US) Inc. “This transaction is beneficial to all parties involved and we are passionate about the benefits it will bring to the insurance industry.”
Oklahoma’s IBT law became effective in November 2018 and is the most expansive such law in the country, Mulready said. The Oklahoma process closely mirrors Part VII Transfers of the Financial Services & Markets Act of 2000 in the United Kingdom, which has resulted in more than 300 successful transfers during the past 20 years. “This cutting-edge mechanism focuses on the protection of consumers while allowing insurance companies to strategically deploy assets to their areas of focus,” Mulready said.