GTE REINSURANCE COMMUTATION PLAN GETS RHODE ISLAND GO-AHEAD

A Superior Court in Providence County, Rhode Island, has approved a commutation plan from GTE Reinsurance Co, which will now go to creditors for approval. Rhode Island's commutation law requires more than 50% of creditors and 75% of liability value to approve the commutation proposal. GTE Re, originally incorporated in Bermuda in 1976, reincorporated in Vermont in 1994. It was the captive arm of Verizon. It ceased functioning as a captive when it redomesticated to Rhode Island because related business in the captive was novated to a second entity that remains incorporated in Vermont, according to Rhode Island Superintendent of Insurance Joseph Torti. Rhode Island is developing a system similar to the UK's solvent scheme of arrangement, in an attempt to mitigate the administrative costs of a long-term run-off and to provide earlier certainty on the final pay-out. The statute was first enacted in Rhode Island in 2002, but the GTE move is the first significant test of the system, possibly for the first time allowing a solvent insurer in the US to liquidate its run-off obligations.