The Massachusetts Division of Insurance coverage has given the inexperienced gentle for the RiverStone Group, a participant in runoff insurance coverage administration on a world scale, to take over Electrical Insurance coverage. See Company Checklists article of February 13, 2024, “GE Exits Insurance: Selling Electric Insurance with Plymouth Rock Getting Renewal Rights.”
This determination comes after a listening to held on Could 15, 2024, signaling the tip of an analysis course of aimed toward safeguarding policyholders’ pursuits and guaranteeing the soundness of the insurance coverage sector.
The Deal Required Approval by the Division of Insurance coverage
In a deal valued at $333 million, RiverStone Worldwide Holdings Inc., a subsidiary based mostly in Delaware of RiverStone Worldwide Holdings Restricted, will buy all shares of Electrical Insurance coverage from its proprietor, GE Capital US Holdings. Electrical Insurance coverage, an insurer specializing in property and casualty located in Massachusetts, will keep its operations underneath current licenses because it transitions its enterprise right into a runoff underneath RiverStone’s supervision.
Following the rules set forth in Massachusetts Basic Legal guidelines Chapter 175 §206B(d)(1), the Division of Insurance coverage scrutinized the proposed acquisition to evaluate its results on competitors, monetary safety, and future operations inside the state’s insurance coverage market. The approval granted signifies that the Division has concluded that each one necessities have been met for this acquisition to maneuver ahead in compliance with Massachusetts insurance coverage legal guidelines.
The Corporations Concerned
The businesses concerned on this enterprise deal are Electrical Insurance coverage, a property and casualty insurer based mostly in Massachusetts, and RiverStone Group, a life runoff insurance coverage group identified for its experience in managing runoff portfolios. Electrical Insurance coverage has a historical past of offering insurance coverage merchandise in Massachusetts and is at present owned by GE Capital US Holdings. RiverStone Group has a monitor file of acquisitions and efficient runoff course of administration for insurance coverage firms throughout completely different areas.
The transaction between these two entities is structured as a inventory buy settlement. RiverStone Worldwide Holdings Inc., a Delaware-based subsidiary of RiverStone Worldwide Holdings Restricted, is ready to accumulate all shares of Electrical Insurance coverage from GE Capital US Holdings for an agreed-upon buy worth of $333 million. Sure changes, together with a dividend accredited by the Division of Insurance coverage on Could 6, 2024, shall be thought-about as a part of the deal.
RiverStone’s Submit-Acquisition Plans
The plans for Electrical Insurance coverage after the acquisition by RiverStone Worldwide Holdings Inc. have been outlined within the inventory buy settlement. RiverStone goals to handle Electrical’s enterprise in a way that handles policyholders’ claims successfully and pretty whereas complying with insurance policies and legal guidelines. Their experience in runoff portfolio administration is anticipated to be essential on this course of.
Along with managing Electrical’s current enterprise, RiverStone plans to make the most of its expertise and assets to discover alternatives within the U.S. Legacy and runoff insurance coverage market. It intends to establish and purchase runoff portfolios to increase its presence within the insurance coverage sector.
To make sure a easy transition, RiverStone intends to maintain Electrical Insurance coverage’s administration staff and a big variety of workers. This technique goals to keep up Electrical’s company data, uphold relationships with policyholders and regulators, and facilitate the combination of Electrical into the RiverStone Group.
The Public Listening to: Testimony and Assessment Course of
The Division of Insurance coverage performed a listening to on Could 15, 2024, as a part of the analysis course of for the proposed acquisition. In the course of the listening to, representatives from RiverStone, Electrical Insurance coverage, and the Division’s marketing consultant shared insights on how the transaction aligns with necessities and its potential results on policyholders and the insurance coverage market.
Michael R. Cain from RiverStone expressed assist for the acquisition by highlighting the corporate’s stability, operational methods, and dedication to upholding Electrical Insurance coverage’s enterprise integrity. He emphasised RiverStone’s experience in managing runoff portfolios thereby guaranteeing a transition for policyholders.
Nicholas Schulson, President and CEO of Electrical Insurance coverage, additionally endorsed the transaction by underscoring its benefits for policyholders, reminiscent of a runoff course of and RiverStone’s monetary solidity because the buying entity. Schulson exuded optimism about Electrical Insurance coverage’s future underneath RiverStone’s possession.
Mark Noller, a marketing consultant to the Division of Insurance coverage, offered a top level view of the Division’s Working Group’s evaluation course of and conclusions relating to the acquisition.
Noller said that the deliberate buy met the standards laid out in Massachusetts Basic Legal guidelines Chapter 175 §206B(d)(1), overlaying points like stability, market competitors, and the buying occasion’s administration competence.
In the course of the listening to, each side concerned within the deal additionally agreed to uphold commitments to the Division of Insurance coverage to safeguard policyholders’ pursuits. These commitments included sustaining a degree of capital and surplus for Electrical Insurance coverage, informing the Division about any proposed transactions with associates, and offering annual monetary statements and organizational charts to the Division.
The Division’s Analysis of the Acquisition
After a listening to and an in depth overview of the proof offered, the Division of Insurance coverage introduced its determination relating to RiverStone’s proposed acquisition of Electrical Insurance coverage. The choice was based mostly on complying with Massachusetts Basic Legal guidelines Chapter 175 §206B(d)(1) necessities that have been essential for shielding policyholders’ pursuits and guaranteeing insurance coverage market stability.
In its evaluation, the Division concluded that Electrical Insurance coverage would nonetheless meet the licensing necessities wanted to function in Massachusetts after the acquisition.
The Division additionally discovered that the deal wouldn’t considerably cut back competitors or result in a monopoly within the Massachusetts insurance coverage market as a result of RiverStone doesn’t oversee any insurers conducting enterprise within the state. They seemed into the soundness of the buying occasion and the way it might have an effect on policyholders, finally figuring out that RiverStone’s monetary standing was sturdy sufficient to assist the acquisition with out risking Electrical Insurance coverage’s stability or harming policyholders.
When evaluating the equity of the transaction phrases, the Division noticed that the acquisition worth resulted from negotiations between impartial third events. In addition they examined RiverStone’s plans for Electrical Insurance coverage. The Division discovered no indicators of unfairness towards policyholders of their proposed runoff course of and pursuit of latest alternatives.
The Division additionally assessed RiverStone’s administration staff’s competence, expertise, and integrity, concluding that they’d the {qualifications} to successfully run Electrical Insurance coverage post-acquisition. Moreover, they decided that the transaction wasn’t more likely to current any dangers or hurt to insurance coverage consumers.
The Division’s Resolution; Approval
After a overview and assembly all necessities, the Division of Insurance coverage granted approval for RiverStone’s acquisition of Electrical Insurance coverage. This determination allows the transaction to progress based mostly on the agreements made by the events throughout the evaluation part.
RiverStone’s plan to increase its runoff enterprise mannequin
The approval units the stage for RiverStone to reinforce its runoff enterprise method. Additionally, the approval of this deal has implications for the insurance coverage market in Massachusetts. Though the acquisition itself isn’t anticipated to closely influence competitors, contemplating Electrical Insurance coverage’s market share and RiverStone’s absence within the state, it does signify the rising curiosity of specialised runoff insurers within the U.S. Market. With extra legacy portfolios changing into out there for buy, companies like RiverStone might play a job in guaranteeing the orderly decision of such companies.
Wanting ahead, RiverStone has indicated its plans to discover alternatives within the U.S. Runoff insurance coverage sector. Michael R. Cain from RiverStone said that they intend to hunt out alternatives to accumulate legacy and runoff insurance coverage and reinsurance portfolios within the U.S. after buying Electrical Insurance coverage. The success of this deal might function a mannequin for transactions emphasizing regulatory scrutiny and requiring buying firms to reveal their monetary solidity, operational experience, and dedication to safeguarding policyholders.
