New York
22 March 2017
Reporter: Mark Dugdale
Second Circuit dismisses ‘shadow insurance’ claims
The US Court of Appeals for the Second Circuit has parried two attacks against the captive reinsurance transactions of life insurance companies, ruling that the plaintiff insureds lacked the standing to bring their complaints.

Metropolitan Life Insurance Company and AXA Equitable Life Insurance were taken to federal court in New York by several insureds after the Department of Financial Services issued its controversial report on life insurers’ failure to disclose captive reinsurance transactions in 2013.

In their separate cases, the insureds claimed that Metropolitan Life and AXA Equitable misrepresented their financial strength by not properly disclosing their captive reinsurance transactions.

The life insurers’ undisclosed use of “shadow insurance” caused them injury, the plaintiff insureds argued.

They attempted to gain class-action status so they could represent insureds throughout the US, but the US District Court for the Southern District of New York dismissed their complaints due to a lack of standing under Article III of the Constitution.

Ruling in favour of Metropolitan Life and AXA Equitable at the end of February, the Second Circuit said: “The mere fact that an insurer may make a misleading representation does not require or even lead to the necessary conclusion that the misleading representation is material or even likely to cause harm.”

Commenting on the litigation, Dentons lawyers Sandra Hauser and Carter White said: “The order is a strong signal from the Second Circuit that plaintiffs who fail to demonstrate concrete, non-speculative injury lack Article III standing to sue, and also dashes future putative plaintiffs' hopes of leveraging New York's insurance laws to support lawsuits by policyholders who are not personally affected by the conduct they challenge.”

More regulation news
The latest news from Captive Insurance Times
Join Our Newsletter

Sign up today and never
miss the latest news or an issue again

Subscribe now
UK to implement ILS regime this autumn
27 June 2017 | London | Reporter: Becky Butcher
London’s insurance-linked securities regulation is now being finalised by the UK Government ready for implementation this autumn, according to a letter sent from HM Treasury to the London Market Group’s Nicolas Aubert
Texas governor signs off captive bill updates
19 June 2017 | Austin | Reporter: Becky Butcher
Texas governor Greg Abbott has signed the state’s new captive bill into law
New FHLB legislation could see captives return
16 June 2017 | Washington DC | Reporter: Becky Butcher
US legislators have introduced a new bill to allow captive insurance companies that were members of a Federal Home Loan Bank (FHLB) prior to 12 September 2014 to return to the fold
SIIA asks Treasury to look at Notice 2016-66
15 June 2017 | Washington DC | Reporter: Becky Butcher
The Self-Insurance Institute of America (SIIA) has asked the US Treasury to include Notice 2016-66 in the President Donald Trump-ordered review of US tax rules
Financial CHOICE Act passes House
09 June 2017 | Washington DC | Reporter: Mark Dugdale
The Financial CHOICE Act, the legislation that proposes to repeal and replace the Dodd-Frank Act, has passed the House of Representatives
US-EU covered agreement moves closer to implementation
08 June 2017 | | Reporter: Mark Dugdale
The European Council has authorised the signing of the US-EU covered agreement on insurance and reinsurance, paving the way for its passage on one side of the Atlantic, at least
Insurers and reinsurers struggle with SFCR in Ireland
07 June 2017 | Dublin | Reporter: Mark Dugdale
The first round of solvency and financial condition reports filed in Ireland under Solvency II show that Irish insurers and reinsurers struggled with the system of governance disclosure requirement, according to Deloitte