Insurance Counseling: What Insurers and Policyholders Must Know

An insurer or insurance intermediary that wants to conduct business across multiple states must obtain a license in each jurisdiction where it will solicit, negotiate, or bind coverage, and insurance regulations counsel advising on a market entry strategy must evaluate the specific licensing requirements in each target jurisdiction and identify any reciprocity arrangements that allow approval in one state to accelerate review in others.

Insurance regulators impose risk-based capital requirements that require insurers to maintain surplus above a statutory minimum, and when an insurer's risk-based capital ratio falls below the required level, insurance transactions and regulatory counsel must evaluate whether the insurer can restore capital through retained earnings, reinsurance, or a capital contribution from its parent, and whether the applicable regulatory framework requires the insurer to file a capital restoration plan.

A policyholder that discovers an exclusion clause only after a loss has occurred has lost the opportunity to seek broader coverage or purchase supplemental coverage for the excluded risk, and insurance coverage review counsel reviewing a corporate insurance program must evaluate whether the policy's exclusions are consistent with industry standard forms or represent unusually narrow coverage.

A corporate insurance portfolio audit evaluates the adequacy, completeness, and cost-efficiency of the organization's insurance program, and insurance advisory counsel conducting a portfolio review must evaluate whether the organization's coverage limits are adequate for its current revenue, asset base, and liability exposure profile, and whether any gaps exist between the organization's risk exposures and its current policies.

A reinsurance agreement must clearly define the scope of the reinsurer's obligation to follow the fortunes of the ceding company and the claims cooperation rights that allow the reinsurer to participate in the management of significant losses, and insurance law counsel drafting a reinsurance treaty must evaluate whether the treaty's terms accurately reflect the economic risk transfer the parties intend, whether the loss reporting requirements are realistic given the ceding company's claims handling processes, and whether the treaty's dispute resolution provisions provide a workable mechanism for resolving disagreements about coverage.

A captive insurance company allows a parent organization to finance its retained risks through an insurance vehicle that provides access to the reinsurance market and may produce favorable tax treatment, and insurance counseling counsel advising on a captive formation must evaluate the domicile options available, whether the captive's program design satisfies the actuarial and capital requirements imposed by the chosen domicile regulator, and whether the arrangement will be respected as genuine insurance for federal income tax purposes.

A market conduct examination evaluates whether the insurer's underwriting, claims handling, and policyholder service practices comply with applicable state insurance laws, and insurance regulations counsel managing an examination must evaluate which documents fall within the scope of the examiner's statutory authority, whether any communications are protected by attorney-client privilege, and whether proactively identifying and correcting compliance deficiencies during the examination will reduce the risk of a formal enforcement action.

An insurer or insurance professional that receives a notice of intent to suspend or revoke its license must act quickly to preserve its right to an administrative hearing, and insurance litigation counsel defending a disciplinary action must evaluate whether the regulator's factual findings are supported by substantial evidence, whether the proposed penalty is proportionate to the violations alleged, and whether voluntary remediation offered before the hearing can persuade the regulator to accept a consent order rather than pursue license revocation.