NU Online News Service, Dec. 17, 11:36 a.m. – Penn Treaty American Corp., Allentown, Pa., a struggling long-term care insurer, says it is negotiating a deal that could reinsure 100% of its in-force LTC insurance policies.

The deal could help Penn Treaty jump back into the market, by reducing the amount of statutory capital the company needs to back obligations to policyholders, the company says.

Penn Treaty, a company that helped create the modern LTC insurance market in the 1960s and 1970s, always generated strong policy sales. But it stopped selling LTC policies in some states in the spring, after state insurance regulators questioned whether it had enough capital to back its policies.

Penn Treaty agreed to a voluntary suspension of new LTC policy sales in all states from Sept. 11 to Dec. 15. The company has been working with Pennsylvania insurance regulators to come up with a “corrective action plan.”

Penn Treaty now says it is addressing the concerns of the regulators by executing a non-binding letter of intent with a “major reinsurer.”

The name of the reinsurer was not immediately available, but Penn Treaty says the deal would provide reinsurance for 100% of LTC insurance policies written by the Penn Treaty Network America and American Network Insurance Company subsidiaries.

The reinsurer would get warrants giving it the right to buy shares of Penn Treaty stock. Penn Treaty would use proceeds from the sale of the warrants to increase its pool of cash and boost the statutory capital levels of its subsidiaries, the company says.

The reinsurance deal is subject to approval by Pennsylvania insurance regulators.

Penn Treaty says it will continue to suspend sales of LTC insurance in its home state and other states while it is completing the reinsurance deal and working with state insurance regulators.