"Control" Of Insurers: A Concept That Remains A Work In Progress

The concept of "control" of insurers received significant attention from state insurance regulators last year and will receive even more in 2023. We wrote a brief report in April 2022 following the New York Department of Financial Services' (NYDFS) publication of Circular Letter No. 5. That letter reminded the industry that neither acquiring less than 10% of the voting equity of an insurer nor limiting board representation to a single seat would guarantee a finding of no control (thus absolving investors of the need to obtain regulatory approval to acquire the minority interest and provide detailed biographical and financial information). As Circular Letter No. 5 stated, "[a] determination of 'control' under Insurance Law § 1501(a)(2) depends on all the facts and circumstances... [there is no] safe harbor for acquisitions below the 10% threshold, which may still result in a control determination."