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Table of Contents
I. Review of M&A Activity in 2015 1
A. Market Trends – North America 1 1. By the Numbers 1 2. In-Bound Investment from Asia 1 3. The Life and Health Insurance Sector 2 a. Life Insurance Carriers 2 b. Group and Voluntary Benefits 3 4. The Non-Life/P&C Sector 4
a. Market Trends and
Primary Drivers of Activity 4
b. M&A Activity Involving Reinsurance Companies 4
c. Other Notable Transactions 5
5. Other Potential Drivers of
Future Activity 5 a. Regulatory Changes 5 b. Changes in Technology 6
B. Market Trends – Europe 6 1. The Return to Large Deal-Making 6 2. International Interest and
Innovation at Lloyd’s 8 3. Consolidation of Intermediaries 9 4. Future M&A Trends and
Drivers in Europe 9
II. Developments in Corporate Governance
and Shareholder Activism 11 A. AIG Situation 11 B. Shareholder Proposals in 2015 12 C. Proxy Access 13 D. Say-on-Pay and Director Elections 14
III. Insurance-Linked Securities 15 A. Overview 15 B. ILS Market Update 15 C. Section 4(a)(2) Private Placements 17 D. Cat Bond Lite Platforms 18 E. ILS Fund Activity 18 F. Hedge Fund Re 20 G. U.K. ILS Legislation 20 H. Marketing ILS to
E.U. Investors — AIFMD 21 I. ILS Participation at Lloyd’s 22 J. Other U.K. Developments 23
1. Lloyd’s Insurance Index 23 2. Bank of England Study 23 3. Update on Mariah Re 24
K. Excess Reserve Financings 24
1. Summary of Deal Activity 25 a. AXXX Market Remains Open 25
b. Will Non-Recourse
Transactions Remain the Structure of Choice? 25
c. Choice of Domicile for
Captives and Limited
Purpose Subsidiaries 25
d. Canada 26
2. Structures Utilized for Excess
Reserve Financing 26 a. Limited Purpose Subsidiaries 26 b. Credit-Linked Notes and
Collateral Notes vs. Letters
of Credit 26 c. Funding Sources Beyond Banks 26 d. Alternative Approach to Funding 27
3. Regulatory Environment 27 a. NAIC 27
b. New York 27
L. Embedded Value Securitization 28
IV. V.
Developments and Trends in Longevity, Pension Close-outs and De-risking Transactions
Capital Markets
A. Equity Offerings
B. Surplus Notes
C. Debt
D. Funding Agreement-Backed Notes E. Solvency II Impact on Subordinated
Notes and Preference Shares of
Insurance Groups F. SEC Disclosures 1. Investments
2. Compliance and Regulatory Matters 3. Reserves
4. Acquisitions and Dispositions
5. Captive Subsidiaries
Principal Regulatory Developments Affecting Insurance Companies
I.
J. K.
L.
Tax
A. B.
C. D. E.
F.
New York Developments 47
VI.
2016 Forecasting 48 Solvency II Developments 48 1. Equivalence 49 2. Switzerland 49 3. Bermuda and Japan 49 4. The U.S. and Other Countries
Granted Provisional Equivalence 50 5. Group Supervision 51 New U.K. Regulatory Framework
on Holding Approved
Persons Accountable 51
A. B.
C. D. E.
F. G.
H.
Overview 35 Influences of Federal and International Standards on Insurance Regulation 35 Covered Agreement 36 Financial Sector Assessment Program 37 Developments Related to Group Capital 37
1. SIFIs and Federal Reserve Board
Capital Standards 37
2. IAIS and FSB 38
3. NAIC Group Capital Calculation 39
Systemically Important Insurance Groups 39 1. SIFIs and FSOC Transparency 39 2. New G-SII List 40 Other Federal Developments 40
1. 2.
The Senior Managers and
Certification Regime 51 The Senior Insurance
Managers Regime 52
53
1. 2. 3.
Policyholder Protection Act 40 NARAB II 40 DOL Re-Proposed Fiduciary Rule 41 a. Re-Proposed Fiduciary Definition 41 b. Best Interest Contract Exemption 42 c. Impact of Amendment to
PTE 84-24 42 d. Expected Publication Date for
the Final Fiduciary Rules 42 Other U.S. Regulatory Developments 42
1. 2.
3.
Cybersecurity 42 a. NAIC Developments 42 b. U.S. Congressional Developments 43 c. New York Developments 43 Life Insurance Developments 43
Annex A - Glossary of Relevant Regulatory Bodies 61
a. b.
Principle-Based Reserving 43 Captive Update 44 i. XXX/AXXX Framework,
AG 48 and XXX/AXXX
Model Regulation 44 ii. Accreditation 45 iii. Variable Annuities 45
Model Law Adoption 45 a. ORSA 46 b. Holding Company Act 46 c. Corporate Governance
Model Act 46 d. Model Audit Rule Revisions 47
29
31
31 31 31 32
32 33 33 33 33 34 34
35
1. 2.
3. 4.
NYDFS Opens the Door to Compromise on PBR 47 Significant Legislative Changes for
New York Domestic Life Insurers 47
a. Independent Board
Member Requirements 47
b. Amendment of Dividend Test 47
Amendments to New York’s
“Doing Business” Laws 47 Personnel Changes 48
VII.
U.S. Insurance Federal Excise Tax 53 Insurance Defined for Federal
Tax Purposes 53 2015 Inversion Developments 54 PFIC Exception for Offshore Insurers 55 Implementation of BEPS Recommendations in the U.K. 56 1. Introduction 56 2. OECD BEPS Project 57
a. Definition of
Permanent Establishment 57
b. Country-by-Country Reporting 58
c. Common Reporting Standard 58
3. Corporate Tax Strategy 59 Solvency II Compliant Tier 1 and
Tier 2 Capital – Clarification of
U.K. Tax Treatment 60
Developments and Trends in Insurance Transactions and Regulation 2015 Year in Review