CNO Financial Group says two subsidiaries are breaking off a long-term care insurance reinsurance relationship with Beechwood Re.
The Carmel, Indiana-based financial holding company said in August that it was auditing about $116 million of trust investments supporting the long-term care insurance reinsurance arrangements in August. CNO acted after learning that Beechwood, which is based in the Cayman Islands, had invested some of the assets in vehicles that might have had connections with Platinum Partners L.P., a New York City-based firm that has faced a U.S. Securities and Exchange Commission investigation.
CNO believes the audit showed that a "significant portion of these assets bear some connection to Platinum or to parties that have had past or present associations with Platinum," the company said in a document filed Thursday with the SEC. "CNO has serious concerns regarding [Beechwood Re's] conflicts of interest and whether the assets related to Platinum were acquired in appropriate arm's-length transactions."
The New York Department of Financial Services and the Indiana Department of Insurance agree that the audit raised concerns, and they have told the two CNO subsidiaries involved, Bankers Conseco Life Insurance Co. and Washington National Insurance Co., to move the assets into trusts that meet regulatory requirements, CNO said.
The subsidiaries have told Beechwood Re they are ending the long-term care insurance reinsurance arrangements, sought more information about the reinsurance arrangement trusts through an arbitration proceeding, and asked the trust company managing the trusts to put the assets involved in custodial accounts, CNO said.
CNO said it also is suing current and former principals of Beechwood Re.
"At this time, there is no evidence suggesting that policyholder obligations have not been met," CNO said. "In connection with its termination of the reinsurance agreements, CNO will resume responsibility for all aspects of policyholder administration of the recaptured business."
