It may not be possible to arrange a “pre-packaged receivership” that results in the immediate sale/transfer of the registered product business at the time of the insurer’s liquidation order, due to the nature of products in the marketplace at the time (including guarantees provided with Variable Products). There may be a need to restructure the registered product contracts and cease accepting premiums. Note that ceasing to accept premiums on variable annuities with living benefit guarantees and on variable life insurance policies present challenging issues that are of concern to the SEC (e.g., new premiums may be necessary to achieve the policy owner’s expected benefits under living benefit guarantees or to keep variable life policies in force).
Consideration also should be given to offering an exchange of the insurer’s registered product contract, or offering to buy back the insurer’s registered product contracts (e.g., offer more than the contract holder would get if they surrender but less than they would get if they died).
Determining how to proceed would depend upon the specific facts and circumstances of the company and its risk management policies, and the market at the time.
General guidance: The receiver should be in communication with the SEC staff and experienced legal counsel about any plans to restructure, transfer or exchange the insurer’s registered product contracts.