Newsof CNO Financial GroupInc.'s termination of long-term care reinsurance agreementswith Beechwood ReLtd. has not been lost on at least one other entity that cededbusiness to an affiliate of the Cayman Islands reinsurer.
Areview of life reinsurance relationships data reveals that was party to agreements with the Ohio-domiciled , amajority owned subsidiary of Motorists Mutual Insurance Co., and the SouthCarolina-domiciled Atlantic CoastLife Insurance Co.
"Weare well aware of the acts and actions relative to CNO and Beechwood Re,"a spokesman for MotoristsInsurance Group said. "Motorists Life continues to monitor theagreement with Beechwood Re. We will always do what's best for the protectionof the interests of our policyholders and agents and we will continue to takeactions to protect their interests as needed."
MotoristsLife entered a 100% coinsurance agreement in December 2015 with BeechwoodBermuda regarding approximately $106.1 million of in-force annuities, accordingto Schedule S, Part 4 of its most recent annual statement. The amount held in trust agreementsassociated with the relationship as of Dec. 31, 2015, was $60.4 million, thefiling said.
"Thegoal of this reinsurance agreement is to transfer the spread compression,disintermediation risk and any other interest rate risks to the reinsurer forour poorest-performing annuities," the company said in the management'sdiscussion and analysis section of the annual statement. "In addition, therisk transfer qualified us for the small company tax deduction."
Aspokesman for the Ohio Department of Insurance did not offer comment when askedabout the relationship.
Insuranceregulators in New York and Indiana had directed CNO's andWashington National InsuranceCo. to remedy a situation wherein a significant portion of theinvestments supporting coinsurance agreements with Beechwood Re allegedly didnot comply with the applicable regulatory requirements. The agreements tookeffect in October 2013 and covered most of the CNO units' older in-force booksof long-term care business. They claimed reserve credits of approximately $514million and reported a combined $552.8 million in funds held in trustagreements associated with the Beechwood Re relationships, according to areview of disclosures in their annual statements.
ForAtlantic Coast Life, coinsurance agreements with Beechwood Bermuda took effectmonths after control of the company had been sold in June 2015 to an entity majority ownedby Advantage Capital HoldingsLLC.
Theagreements provided a 50% quota share of the risks related to new and existinglife and annuity policies, including the multiyear guaranteed annuity productline that Atlantic Coast Life has recently introduced, according to its2015 annualstatement. The company said that all assets in support of theagreements would be maintained on a funds-withheld basis. It reported $131million of life in force under the agreements as of Dec. 31, 2015, and it tooka reserve credit of $59.2 million as a result during the year. There were nofunds held in trust agreements associated with the relationship, but AtlanticCoast Life reported $58.7 million in funds deposited by and withheld from thereinsurer as of Dec. 31, 2015, according to Schedule S, Part 4 of the annualstatement. Beechwood Bermuda also purchased $5 million of a surplus note withoutstanding carrying value of $8.75 million during the first half of 2016.
Aspokeswoman for the South Carolina Department of Insurance emphasized that theAtlantic Coast Life relationship with Beechwood has "nothing to dowith" the CNO agreements, but said that the regulator "does and willcontinue to take every action necessary to protect South Carolina consumers andpolicyholders."
AtlanticCoast Life officials had not offered comment on the relationship.
ABeechwood Re spokesman also did not comment on the company's otherrelationships. But in an August statement that responded to press reports aboutalleged ties to Platinum Partners, a hedge fund that is reportedly subject toat least two federal investigations, the Beechwood companies emphasized thatthey maintained a strong balance sheet to continue to support clients'reinsurance accounts and guarantees and that their exposure to the embattledfund was minimal. The statement said that "the vast majority" oftheir portfolio consisted of highly liquid securities.
TheBeechwood companies provide life and annuity reinsurance to domestic andinternational cedants as well guaranteed investment products to non-U.S.high-net-worth investors. Their reinsurance business targets in-force blocksand ongoing quota-shares of fixed and indexed annuities as well as in-forceblocks of long-term care and long-term disability policies.