NY to tighten rules on PE insurance deals

New York’s top insurance and banking regulator Benjamin Lawksy proposed new rules on Friday that aim to place more regulatory scrutiny on private equity firms and other groups purchasing insurance companies.

Lawsky, who heads New York’s Department of Financial Services (DFS), wants insurance company acquisitions to include heightened transparency, disclosure, and financial standards. Specifically, the proposals call for more information on an acquirers’ “corporate structure, control persons, and other information regarding its operations”, according to a DFS statement.

Regulators would also be allowed to force buyout firms to pump more capital into an acquired insurance company “if determined necessary” or obligate the acquirer to create an additional backstop trust account to protect policyholders. 

DFS is also seeking the right to veto any material changes to an acquired insurance company’s plan of operations (including investments, dividends, or reinsurance transactions) within five years of the purchase.

The proposals are largely modeled on the requirements the DFS set out last year for three annuity company purchases made by Guggenheim, Apollo and Harbinger.

Over the past year Lawsky has set his sights on private equity insurance deals, arguing the industry is too focused on short-term returns to meet the long-term needs of retirees.

“We're seeking to strike an appropriate balance that keeps markets open to new entrants, while at the same time putting in place necessary safeguards,” Lawsky said in the statement.