Press Release

May 3, 2018

Contact: Richard Loconte, 212-709-1691


Insurer Also Cited for Inaccurate Reporting to Regulators Looking into Reinsurance Arrangements with Company’s European Parent

Financial Services Superintendent Maria T. Vullo today announced that the Department of Financial Services (DFS) has fined William Penn Life Insurance Company $6.3 million for engaging in improper reinsurance transactions in an effort to minimize reserves backing life insurance policies issued by the company.  The civil penalty is part of a consent order that requires William Penn to obtain DFS’s prior approval for any reinsurance agreements for the next five years as well as amend existing reinsurance agreements to ensure they comply with New York’s Insurance Law and regulations.  William Penn must demonstrate to DFS’s satisfaction that it has taken necessary corrective actions within three months.

“Although reinsurance is an essential risk management tool, DFS will not permit insurers to engage in secret reinsurance transactions with affiliates for the purpose of evading New York’s reserve standards,” said Superintendent Vullo. “Protecting policyholders by verifying the fairness of an insurer’s financial transactions with affiliates and ensuring that insurers maintain adequate reserves to support policies are among the cornerstones of state insurance regulation.  No insurer has the right to shortcut that process and potentially put policyholders in jeopardy.”

DFS found that William Penn engaged in improper reinsurance transactions during a four-year period from 2014 through 2018 by implementing amendments to existing reinsurance treaties with its European parent company, Legal & General Assurance Society, Limited (LGAS), without receiving Department approval as required by New York Insurance Law.  DFS examiners looking into the amendments found that the arrangements were not economically reasonable and could disadvantage the company relative to its affiliate.  As a result, DFS disapproved the amendments and prohibited any new business from being added to the existing reinsurance treaties.

Subsequent to DFS’s disapproval of the amendments, William Penn entered into a reinsurance arrangement with a third-party reinsurer where the reinsurance provided to William Penn was conditioned upon the retrocession of that business back to LGAS and other affiliates of William Penn without Department approval and in violation of the Insurance Law.  William Penn failed to disclose the arrangement in required exhibits to its Annual Statement and then made materially inaccurate statements in response to the Department’s requests for information. Today’s consent order addresses these serious violations with a substantial civil penalty and remediation.

The consent order can be found here.