While private equity firms and other alternative buyers, such as hedge funds and asset managers, have been investing in all sectors of the insurance industry, they have been particularly interested in the life insurance sector, and especially the annuity subsector. Life annuities provide appealing returns to alternative investors to grow their asset base while, at the same time, provide a low-volatility, non-correlated risk to their investment portfolios.
There are numerous M&A opportunities for alternative buyers in the insurance industry, but there are also numerous challenges, including concerns voiced by a number of US insurance regulators. Among other things, concern has been expressed about perceived risks to policyholders associated with private equity/hedge fund ownership or control of insurance company assets.
This enhanced scrutiny of such acquisitions could have a negative effect on the attractiveness of insurance M&A deals to alternative buyers. The enhanced policyholder safeguards could significantly change the economics of the transactions and the uncertainty of obtaining regulatory approval could be a significant negative factor when a seller reviews a bid. Furthermore, in the absence of specific guidelines for regulators to follow in evaluating acquisitions by alternative buyers, sellers may be uncomfortable with the risk of regulatory approval, thus making offers by such firms less attractive.
Please join Eddie Best and Lawrence Hamilton, as they discuss the latest M&A developments and some of the most pressing regulatory challenges. The topics to be addressed include the New York Department of Financial Services’ proposed amendments to Regulation 52 and recent developments from the NAIC’s Private Equity Issues (E) Working Group, which meets on August 17 to discuss whether the NAIC should pursue changes to the NAIC’s Model Insurance Holding Company System Regulatory Act.
For more information surrounding this topic, please see the following Mayer Brown publications:
Second Quarter 2014 Global Corporate Insurance & Regulatory Bulletin
Global Insurance M&A Outlook
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