Life Reinsurer Gets Its Wish to Intervene
January 1, 2020 by Larry P. Schiffer
Life insurance policies issued in the past are often transferred in blocks to reinsurers on a 100% indemnity reinsurance basis. These transfers often include servicing agreements, where the assuming reinsurer takes responsibility for all policy services, including determining the cost-of-insurance. In the past several years, policyholders have brought putative class actions against life insurance companies claiming that the life insurance companies have been raising the cost-of-insurance improperly using factors not permitted by the policies thereby reducing the economic value of the investment portion of the life insurance policy.
In a recent case an interesting procedural question arose over whether the assuming reinsurer in a 100% indemnity reinsurance arrangement with a service agreement had the right to intervene in the putative class action cost-of-insurance case against the original policy issuing company.