In No. 220 (June 1, 2017) I discussed the enactment of a Connecticut law allowing a Connecticut-domiciled insurance company to divide itself into two or more insurance companies. I explained why I think the law violates the constitutional rights of insurance policyholders. In No. 262 (April 16, 2018) I discussed the Georgia legislature's adoption of similar legislation. To access those two posts, click on the links in this paragraph. Here I provide updates on recent developments in both states.
Connecticut Developments
On April 17, 2018, in a Form A filing, Hopmeadow Acquisition and several related entities sought the approval of Connecticut Insurance Commissioner Katherine L. Wade for the proposed acquisition of control of Hartford Life Insurance Company and three affiliated companies. On May 17, Timothy Curry, who Commissioner Wade appointed as hearing officer, held a public hearing on the proposal. On May 24, Curry concluded in a 19-page proposed final decision that the "Proposed Acquisition is not likely to be hazardous or prejudicial to those buying insurance," and he recommended that Commissioner Wade issue an order approving the proposed acquisition. On the same day, Commissioner Wade issued a two-page order approving the proposed acquisition.
Georgia Developments
In April 2018 a reader sent me a news story that reported on the Georgia legislature's approval of House Bill 754, which is similar to the Connecticut legislation. Here is one sentence of the news story:
Prior to posting No. 262, I wrote to Georgia Insurance Commissioner Ralph T. Hudgens. I sent him No. 220 about the Connecticut division law, said I was planning to post an item about HB 754, and asked for a statement from him to be included in the item. An insurance department spokesman said it was not an insurance department bill. He also said the department did not oppose the bill. However, I did not receive a statement from Commissioner Hudgens.
After learning of Governor Deal's veto of HB 754, I tried again to obtain a statement from Commissioner Hudgens. The department spokesman said there will be no such statement.
The Sponsors
In No. 262 I said two lead sponsors of HB 754 were Representative Jason Shaw (R-Lakeland) and Senator P. K. Martin IV (R-Lawrenceville). Shaw is a member of the House insurance committee and owns an insurance agency. Martin is a member of the Senate insurance and labor committee and is an insurance agent. They were quoted in the news story from which I first learned of HB 754, and I showed the quotes. Shaw and Martin did not return my calls.
After learning of Governor Deal's veto of HB 754, I tried again to reach Shaw and Martin, but they did not return my calls. My primary reason for trying to reach them was to learn the identity of the insurance company or companies behind HB 754.
General Observations
In Nos. 220 and 262 I explained in some detail my objections to company division laws. In a nutshell, I have two major objections. First, such laws allow insurance companies to transfer their obligations to other insurance companies without the consent of the affected policyholders, and therefore the laws violate the constitutional rights of those policyholders. Second, the laws place on the insurance commissioner the burden of proving that the plan adversely affects policyholders, and requires the commissioner to approve the plan if he or she is unable to meet that burden of proof. At the very least, I think the burden should be on the companies to prove that the plan does not adversely affect the policyholders.
I think Connecticut Insurance Commissioner Wade's approval of the transfer of Hartford's policyholders—without their consent—to a private equity firm is a major defeat for those policyholders. I also think Georgia Governor Deal's veto of HB 754 is a minor victory for the policyholders of whatever company was responsible for the introduction and legislative passage of the bill.
Available Material
The packages I offered in Nos. 220 and 262 are still available. Now I offer a complimentary 21-page PDF consisting of the Connecticut insurance commissioner's order approving the Hopmeadow-Hartford proposal (2 pages) and the Connecticut hearing officer's recommendation that the proposal be approved (19 pages). Email jmbelth@gmail.com and ask for the June 2018 package about company division laws.
Connecticut Developments
On April 17, 2018, in a Form A filing, Hopmeadow Acquisition and several related entities sought the approval of Connecticut Insurance Commissioner Katherine L. Wade for the proposed acquisition of control of Hartford Life Insurance Company and three affiliated companies. On May 17, Timothy Curry, who Commissioner Wade appointed as hearing officer, held a public hearing on the proposal. On May 24, Curry concluded in a 19-page proposed final decision that the "Proposed Acquisition is not likely to be hazardous or prejudicial to those buying insurance," and he recommended that Commissioner Wade issue an order approving the proposed acquisition. On the same day, Commissioner Wade issued a two-page order approving the proposed acquisition.
Georgia Developments
In April 2018 a reader sent me a news story that reported on the Georgia legislature's approval of House Bill 754, which is similar to the Connecticut legislation. Here is one sentence of the news story:
Georgia legislation that lets insurers divide and opens a path for run-off transactions involving legacy books of business will become law by 1 July, even if Governor Nathan Deal fails to sign the measure.In May 2018, through an alert from the Federation of Regulatory Counsel, I was surprised to learn that Governor Deal vetoed HB 754. Here is his veto message:
House Bill 754 would allow insurers domiciled in Georgia to divide into two or more insurers. Any plan of division must be submitted to and approved by the Commissioner of Insurance, giving the Commissioner broad discretion to decide on a case by case basis if the company meets the requirements to divide. If a company was deemed acceptable by the Commissioner to divide and one of the resulting insurers stopped turning a profit, issues could arise as to how to distribute the liability. I am unaware of the need for the division process provided for in HB 754 and am unconvinced that the appropriate safeguards are provided for in the proposed legislation. For the foregoing reasons, I VETO HB 754.Commissioner Hudgens
Prior to posting No. 262, I wrote to Georgia Insurance Commissioner Ralph T. Hudgens. I sent him No. 220 about the Connecticut division law, said I was planning to post an item about HB 754, and asked for a statement from him to be included in the item. An insurance department spokesman said it was not an insurance department bill. He also said the department did not oppose the bill. However, I did not receive a statement from Commissioner Hudgens.
After learning of Governor Deal's veto of HB 754, I tried again to obtain a statement from Commissioner Hudgens. The department spokesman said there will be no such statement.
The Sponsors
In No. 262 I said two lead sponsors of HB 754 were Representative Jason Shaw (R-Lakeland) and Senator P. K. Martin IV (R-Lawrenceville). Shaw is a member of the House insurance committee and owns an insurance agency. Martin is a member of the Senate insurance and labor committee and is an insurance agent. They were quoted in the news story from which I first learned of HB 754, and I showed the quotes. Shaw and Martin did not return my calls.
After learning of Governor Deal's veto of HB 754, I tried again to reach Shaw and Martin, but they did not return my calls. My primary reason for trying to reach them was to learn the identity of the insurance company or companies behind HB 754.
General Observations
In Nos. 220 and 262 I explained in some detail my objections to company division laws. In a nutshell, I have two major objections. First, such laws allow insurance companies to transfer their obligations to other insurance companies without the consent of the affected policyholders, and therefore the laws violate the constitutional rights of those policyholders. Second, the laws place on the insurance commissioner the burden of proving that the plan adversely affects policyholders, and requires the commissioner to approve the plan if he or she is unable to meet that burden of proof. At the very least, I think the burden should be on the companies to prove that the plan does not adversely affect the policyholders.
I think Connecticut Insurance Commissioner Wade's approval of the transfer of Hartford's policyholders—without their consent—to a private equity firm is a major defeat for those policyholders. I also think Georgia Governor Deal's veto of HB 754 is a minor victory for the policyholders of whatever company was responsible for the introduction and legislative passage of the bill.
Available Material
The packages I offered in Nos. 220 and 262 are still available. Now I offer a complimentary 21-page PDF consisting of the Connecticut insurance commissioner's order approving the Hopmeadow-Hartford proposal (2 pages) and the Connecticut hearing officer's recommendation that the proposal be approved (19 pages). Email jmbelth@gmail.com and ask for the June 2018 package about company division laws.
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Email: jmbelth@gmail.com
Blog: www.josephmbelth.com