b'Mergers & Acquisitions | Life Sector | North America and BermudaLong-Term Care and DisabilityAgainst this backdrop, there have been relatively few Insurance Transactions large M&A transactions announced in the LTC space in the last few years. Both LTC insurers and potential Long-term care insurance (LTC) continues to be abuyers of blocks of LTC business, however, continue challenging line of business for the industry. Into explore potential transactions. Potential transac-January 2020, A.M. Best issued a report noting thattion structures could include use of insurance continued poor performance from inadequatebusiness transfer and/or division statutes. pricing is a significant issue for US LTC insurers and reinsurers, owing to low interest rates, improvingWith respect to disability insurance, Unum Group mortality, rising morbidity and policyholder utiliza- announced that three of its insurance company tion assumptions. A.M. Best noted that LTC losssubsidiaries entered into an agreement to reinsure a ratios continue to climb, with individual claims paidsubstantial portion of its disability business (IDI), having now exceeded individual premiums everybacked by approximately $7.1 billion in reserves, to a year since 2016, placing continued pressure on manysubsidiary of Global Atlantic through a coinsurance carriers capital and earnings. arrangement. Unum reports that it expects to release approximately $600 million of capital back-To address these challenges, the Nationaling the block. As part of the transaction, a subsidiary Association of Insurance Commissioners (NAIC)of Unum will provide a 12-year volatility cover for the formed a task force to attempt to develop solu- active life cohort, which represents approximately tions related to the LTC market, including5% of the total statutory reserves of the IDI block developing a nationwide approach to premiumreinsured by Global Atlantics subsidiary. At the end rate increase requests, stabilizing existing pre- of the coverage period, Global Atlantic will retain mium rates, developing benefit coverage choicesthe risk for the remaining incidence and claims risk as an alternative to premium rate increases andon the block. establishing a new liability and lapse reserve tables. The NAIC has also announced plans toOutlook for 2021publish a white paper on establishing a regulatory framework to facility insurers ability to separate2021 seems poised for further M&A activity in the their LTC business from their other lines of busi- life and annuity space. In particular, we expect to ness. The NAICs efforts are ongoing. see additional collaborations between life and annuity insurers and asset managers. g16 GLOBAL INSURANCE INDUSTRY|YEAR IN REVIEW 2020'