Penn Treaty American Corp. says it will be getting its long term care insurance reinsurance from Imagine International Reinsurance Ltd.[@@]
Penn Treaty obtained 100% quota share reinsurance from Centre Solutions Ltd., Hamilton, Bermuda, in 2002 in connection with efforts to assure state regulators that it had the resources necessary to back the LTC insurance policies it was selling.
The Centre arrangement included a notional experience account with a value that could vary dramatically with changes in interest rates. The fluctuations had a big effect on Penn Treaty’s net income.
The new arrangement with Imagine, Dublin, Ireland, fixes the value of the notional experience account at the value recorded May 23, Penn Treaty says.
Because the new Imagine arrangement is a traditional funds withheld agreement, it will not cause the same kind of income statement volatility that the Centre agreement caused, Penn Treaty says.
The new Imagine arrangement covers Penn Treaty LTC policies sold before 2002.
The Imagine agreement officially took effect June 30, Penn Treaty says.
In addition to shifting responsibility for pre-2002 LTC policies to Imagine, from Centre, Penn Treaty is taking back responsibility for LTC policies written between Jan. 1, 2002, and July 31, 2004, Penn Treaty says.
Penn Treaty says it will give more information about the old and new reinsurance arrangements Aug. 3, in a report that will be filed with the U.S. Securities and Exchange Commission.