Craig N. Landrum, Esq.
Watkins Ludlam Winter & Stennis, P.A.
633 North State Street (39202)
Post Office Box 427
Jackson, Mississippi 39205-0427
Dear Mr. Landrum:
This is in response to your letters requesting an opinion, on behalf of Hancock Holding Company, Gulfport, Mississippi ("Hancock"), that acting as a third party administrator ("TPA") for an insurance company is an activity that is permissible for a financial holding company ("FHC") under the Bank Holding Company Act ("BHC Act") (12 U.S.C. � 1841 et seq.). You have indicated that Hancock, a bank holding company that has made an effective election to become a FHC, proposes to invest in a company that acts as a TPA for licensed insurance companies that underwrite and sell credit life insurance.
A TPA provides to one or more insurance companies administrative and related services that support and assist the sale of insurance products by the insurance company. A TPA may provide some or all of the following services to an insurance company:
-
assisting the insurance company in designing its insurance programs (which would include policy and certificate development and issuance);
-
determining whether a prospective insured meets the insurance company's established underwriting guidelines;
-
collecting and processing insurance premiums;
-
processing, adjudicating, and paying claims on behalf of the insurance company;
-
investing excess cash and maintaining bank accounts for the insurance company;
-
establishing risk reserves for the insurance company;
-
advising on, and arranging for, reinsurance or stop-loss insurance for the insurance company;
-
preparing and filing tax returns and regulatory reports for the insurance company and providing other related services designed to ensure that the insurance company remains properly licensed and in compliance with applicable governmental regulations;
-
providing accounting and recordkeeping services to the insurance company in connection with its insurance activities; and
-
providing insurance product sales training to employees of the insurance company.
You have indicated that the company Hancock proposes to acquire engages in some, but not all, of these activities in its capacity as a TPA.
Section 4(k)(4)(B) of the BHC Act, as added by the Gramm-Leach-Bliley Act ("GLB Act"), defines "[i]nsuring, guaranteeing, or indemnifying against loss, harm, damage, illness, disability, or death, or providing and issuing annuities, and acting as principal, agent, or broker for purposes of the foregoing, in any State" as activities that are financial in nature and, thus, permissible activities for FHCs (12 U.S.C. � 1843(k)(4)(B)).
The activities listed above are directly related to the provision and sale of insurance by a third-party insurance company, and constitute an integral part of the regulated insurance activities of the third-party insurance company. Consequently, most States require a person performing one or more of these services for an insurance company to be licensed by, or registered with, the appropriate insurance authority of the State either as an insurance company or agent or as a TPA. For example, the Model Third Party Administrator Statute adopted by the National Association of Insurance Commissioners ("NAIC") requires a person to register as a TPA with the relevant State insurance authority if the person, in connection with the sale of life or health insurance policies or annuities, accepts insurance contracts for an insurer that meet the insurer's underwriting guidelines, assists an insurer in the overall planning and coordination of its insurance program, or collects premiums or adjusts claims for an insurer.1 As of April 2000, thirty-eight States required persons acting as a TPA for these or other types of insurance to obtain a license from, or register with, the insurance authority of the State.2
In light of these and all other facts of record, Board staff believes that the specific services listed above are encompassed within the insurance activities authorized by section 4(k)(4)(B) of the BHC Act when provided to or on behalf of an insurance company in connection with the sale or underwriting of insurance. Accordingly, a FHC may, under section 4(k)(4)(B) of the BHC Act, provide the services listed above to a third-party insurance company in connection with the sale and underwriting of insurance products by the third-party insurance company. This opinion addresses only the permissibility under the BHC Act of the activities listed above, and does not address other issues or the permissibility under the BHC Act of any other activities, or authorize Hancock to engage in any other activities. Any material change in the proposal may require this opinion to be reconsidered and should be communicated immediately to Board staff.
If you have any questions about this matter, please contact Kieran J. Fallon, Senior Counsel, (202) 452-5270, or Maya Y. Wilson, Attorney, (202) 452-3818, of the Board's Legal Division.
Sincerely,
(signed) J. Virgil Mattingly
J. Virgil Mattingly
General Counsel
|
Footnote
1. See NAIC Model Third Party Administrator Statute �� 1.A and 11 (1996) ("Model TPA Statute"). A person generally does not have to register as a TPA if the person is currently registered with the State as an insurer or as an insurance agent or broker. See Model TPA Statute at � 1.A.(3) and (4). Return to text
2. Similarly, the NAIC's Model Managing General Agents Act requires a person to register with the relevant State insurance authority if the person manages all or part of the business of an insurer or, subject to certain conditions, accepts or rejects policies for the insurer and either adjusts or pays claims for the insurer or negotiates reinsurance for the insurer. See NAIC Model Managing General Agents Act �� 2.C and 3 (1993). Return to text
|
|
