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2016 Sidley Global Insurance Review OFFICES BEIJING DALLAS LOS ANGELES SINGAPORE Suite 608, Tower C2 2001 Ross Avenue 555 West Fifth Street Level 31 Oriental Plaza Suite 3600 Los Angeles, California 90013 Six Battery Road No. 1 East Chang An Avenue Dallas, Texas 75201 +1 213 896 6000 Singapore 049909 Dong Cheng District +1 214 981 3300 +65 6230 3900 Beijing 100738, China NEW YORK +86 10 5905 5588 GENEVA 787 Seventh Avenue SYDNEY Rue du Pré-de-la-Bichette 1 New York, New York 10019 Level 10, 7 Macquarie Place BOSTON 1202 Geneva, Switzerland +1 212 839 5300 Sydney NSW 2000, Australia 60 State Street +41 22 308 00 00 +61 2 8214 2200 36th Floor PALO ALTO Boston, Massachusetts 02109 HONG KONG 1001 Page Mill Road TOKYO +1 617 223 0300 39/F, Two Int’l Finance Centre Building 1 Sidley Austin Nishikawa Central, Hong Kong Palo Alto, California 94304 Foreign Law Joint Enterprise BRUSSELS +852 2509 7888 +1 650 565 7000 Marunouchi Building 23F NEO Building 4-1, Marunouchi 2-chome Rue Montoyer 51 HOUSTON SAN FRANCISCO Chiyoda-Ku, Tokyo 100-6323, Japan Montoyerstraat 1000 Louisiana Street 555 California Street +81 3 3218 5900 B-1000 Brussels, Belgium Suite 6000 Suite 2000 +32 2 504 6400 Houston, Texas 77002 San Francisco, California 94104 WASHINGTON, D.C. March 2016 +1 713 495 4500 +1 415 772 1200 CENTURY CITY 1501 K Street N.W. Washington, D.C. 20005 1999 Avenue of the Stars LONDON SHANGHAI +1 202 736 8000 SIDLEY GLOBAL Los Angeles, California 90067 Woolgate Exchange Suite 2009 +1 310 595 9500 25 Basinghall Street 5 Corporate Avenue London, EC2V 5HA, United Kingdom 150 Hubin Road INSURANCE REVIEW CHICAGO +44 20 7360 3600 Shanghai 200021, China One South Dearborn +86 21 2322 9322 Chicago, Illinois 60603 +1 312 853 7000 sidley.com AMERICA • ASIA PACIFIC • EUROPE Attorney Advertising - For purposes of compliance with New York State Bar rules, our headquarters are Sidley Austin LLP, 787 Seventh Avenue, New York, NY 10019, 212 839 5300; One South Dearborn, Chicago, IL 60603, 312 853 7000; and 1501 K Street, N.W., Washington, D.C. 20005, 202 736 8000. Sidley and Sidley Austin refer to Sidley Austin LLP and affiliated partnerships as explained at www.sidley.com/disclaimer. Prior results do not guarantee a similar outcome. MN-2550-2/16 SIDLEY GLOBAL INSURANCE REVIEW SIDLEY GLOBAL INSURANCE REVIEW March 2016 The insurance industry has a global reach. Insurers and reinsurers are critically important to the world economy. They assume and transfer all manner of risk across the globe, and serve as an enormous investor base for the world’s capital markets and beyond. Risk is increasingly shared globally among traditional and new market entrants. Risk generated in one part of the world is distributed immediately across multiple continents to other market participants, whether they be other insurers, reinsurers, private equity sponsors or capital market investors. The insurance industry is constantly evolving, and requires regulatory regimes and market participants to adapt on a frequent basis. Regulatory issues arising in one market may influence the way in which similar regulatory concerns are addressed in other markets. To understand the insurance industry, one must have a solid understanding of global developments. We prepared this publication as a tool to assist readers in obtaining such understanding. We realize that no one publication could provide adequate coverage to each and every recent global development without becoming cumbersome. Accordingly, this publication attempts to provide an overview of major legal and market developments in the global insurance industry arising over the past year. We have focused on developments in the United States, United Kingdom, European Union, Asia and other markets with intense insurance activity, such as Bermuda. This review has been produced by the Insurance and Financial Services group of Sidley Austin LLP. Sidley is one of the world’s premier law firms, with 1,900 lawyers across 19 offices in North America, Europe, Asia and Australia. Sidley is one of only a few internationally recognized law firms to have a substantial, multidisciplinary practice devoted to the insurance industry. We have more than 90 lawyers devoted to providing both transactional and dispute resolution services to the insurance industry throughout the world. Our Insurance and Financial Services group has an intimate knowledge of, and appreciation for, the insurance industry and its unique issues and challenges. Regular clients include many of the largest insurance and reinsurance companies, their investors and capital providers, brokers, banks, investment banking firms and regulatory agencies for which we provide regulatory, corporate, capital markets, securities, mergers and acquisitions, private equity, insurance-linked securities, derivatives, tax, reinsurance dispute, class action defense, insolvency and other transactional and litigation services. We hope you enjoy this edition of the Sidley Global Insurance Review. Attorney Advertising – For purposes of compliance with New York State Bar rules, our headquarters are Sidley Austin LLP, 787 Seventh Avenue, New York, NY 10019, 212.839.5300; One South Dearborn, Chicago, IL 60603, 312.853.7000; and 1501 K Street, N.W., Washington, D.C. 20005, 202.736.8000. Sidley Austin refers to Sidley Austin LLP and affiliated partnerships as explained at www.sidley.com/disclaimer. Prior results do not guarantee a similar outcome. This Global Insurance Review has been prepared by Sidley Austin LLP for informational purposes only and does not constitute legal advice. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Readers should not act upon this without seeking professional counsel. © 2016 Sidley Austin LLP and Affiliated Partnerships (the “firm”). All rights reserved. The firm claims a copyright in all proprietary and copyrightable text in this report. i SIDLEY GLOBAL INSURANCE REVIEW TABLE OF CONTENTS I. The Global Mergers and Acquisitions Market ....................................................1 A. North American Market ......................................................................1 1. Introduction .................................................................................. 1 2. Health Mega-Mergers .......................................................................... 1 3. Asian Acquirers ............................................................................... 1 a. Chinese Acquirers .......................................................................... 1 b. Japanese Acquirers .......................................................................... 2 4. Continued Consolidation Among P&C Reinsurers .................................................... 2 5. Other Notable Activity .......................................................................... 2 a. LTC Market ................................................................................ 3 b. Other Life Activity. 3 c. Continued Canadian P&C Consolidation ......................................................... 3 6. Outlook for 2016 .............................................................................. 3 B. European and Asian Markets ..................................................................4 1. Europe ...................................................................................... 4 2. Asia Pacific ................................................................................... 5 II. The Global Alternative Risk Transfer Market ....................................................5 A. Life & Annuity Market ........................................................................5 1. The State of the Reserve Financing Market .......................................................... 5 a. PBR Adoption Update ....................................................................... 5 b. Adoption of AG 48 .......................................................................... 5 c. Adoption of RBC. 6 d. Significant Proposals ......................................................................... 6 i. Credit for Reinsurance ..................................................................... 6 ii. Accreditation ............................................................................ 7 iii. Variable Annuity Captives .................................................................. 7 2. Transactions .................................................................................. 7 a. Regulation XXX/Regulation AXXX Transactions .................................................... 7 b. Embedded Value/Closed-Block Transactions ...................................................... 7 3. Market Outlook ............................................................................... 8 B. P&C Market ................................................................................8 1. Catastrophe Bonds. 8 2. Traditional Reinsurers in the ILS Market. 9 3. Investment Manager Activity ..................................................................... 9 4. Outlook Ahead ............................................................................... 10 C. Traditional Capital Markets ...................................................................10 III. The Global Longevity Market ..................................................................10 A. Transaction Structures .......................................................................11 1. Buy-Outs .................................................................................... 11 2. Buy-Ins
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