On July 17th, 2013, the Financial Condition (E) Committee (the “Committee”) of the NAIC held a conference call resulting in the adoption of the Captives & SPV White Paper (the “White Paper”) in the form of its June 6th, 2013 draft which was adopted by the Captive and Special Purpose Vehicle Use (E) Subgroup (the “Subgroup”). We had originally reported on the adoption of the White Paper by the Subgroup here.

While not specifically set forth in the White Paper, the July 17th call charged the Financial Analysis Working Group (“FAWG”) with conducting a peer review analysis on the practices of special purpose vehicle and captive transactions within the life insurance industry. The charge was determined through what the NAIC calls “Commissioner-level discussions,” and FAWG will be tasked with soliciting both general and company-specific concerns regarding current practices and reaction to the White Paper.

The formal adoption of the White Paper by the Committee represents an effort by the NAIC to understand and improve practices employed by many life insurers to address “reserve redundancies” while at the same time avoiding accusations that such insurers are gaming the system. As we have previously discussed here, the adopted White Paper differed from its predecessor in several noteworthy ways, including by eliminating references to a “shadow insurance industry” and by acknowledging that captives should be afforded a higher level of confidentiality since they do not issue policies to the public.

Click here for an article by three Edwards Wildman lawyers published in Best’s Review (March, 2013).

To see a copy of the draft in substantially similar form to what was adopted by the Committee, click here.