Rhode Island Legislature Contemplating Clarification to State’s Legacy Transfer Program

In 2015, the Rhode Island Department of Business Regulation (“DBR”) implemented the state’s Insurance Business Transfer Act (“IBT”) (“Regulation 68”), which permits insurers to transfer commercial ‘legacy business’ (subject to certain limitations) to a Rhode Island domestic insurer by way of novation, subject to court approval. Regulation 68 also permits the commutation of that business. However, a question arose as to whether commutation was a requirement that needed to be part of the initial IBT proposal. The Department of Business Regulation (“DBR”) believed that interpretation was incorrect and clearly not the intent.

Nevertheless, to remove any suggested ambiguity, on May 4, 2018, House Bill RI 8163 was introduced to provide clarity and make it clear that commutation is not an IBT requirement, and that commutation could happen at a later date, if at all. RI 8163 also clarifies that the transfer can be to a protected cell entity, which was also DBR’s original intent.

On June 19, 2018, the House passed RI 8163 and it is now before the Senate. Rhode Island’s legislative session could end as early as today (June 22, 2018), but no later than June 30, 2018. We will post an update at the end of the legislative session.