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Mergers and acquisitions remain a popular choice for insurance businesses looking to grow and diversify. Yet, buying or selling an insurance agency can be all-consuming. Too often, however, regulatory compliance takes a backseat to financial considerations during the due diligence process. This can result in issues that delay or derail a sale or that prevent new owners from realizing a prompt return on their investment.
Regulatory Compliance and Due Diligence
ReSource Pro offers in-depth compliance reviews for the various regulatory bodies that oversee the insurance industry in each state. This solution saves huge amounts of time – especially when working with regulators that do not maintain a national database of information.
We provide a detailed, written report that identifies problem areas and offers actionable strategies to address them. If desired, clients can delegate the specific tasks needed to bring an individual or business entity back into full compliance to our teams of experts.
Finally, you can delegate routine compliance tasks like license renewals, annual returns, foreign entity tax filings, and surplus lines tax filings to our experts during the M&A process. That frees your team to focus on the deal while having peace of mind that you’re meeting your regulatory obligations
Continuity of Service for Policyholders
Whether buying a book of business or an entire agency or brokerage that will operate under a new tax identification number, new owners need to ensure that they are prepared to service existing policies and write additional ones.
A business entity’s licenses are tied to its tax identification number. If new owners do not control that FEIN, they cannot use, renew, or surrender any licenses associated with it. That means the new entity must have the appropriate insurance licenses in place when they assume control of the business. It will also need the appropriate carrier contracts and appointments. If individuals transition to the new entity, their affiliations and appointments will also need to be updated.
Lastly, the new insurance business may need to register as a foreign entity with the Secretary of State’s Offices. This may be a prerequisite to agency licensing in some states. Registering with the SOS triggers its own series of compliance requirements, including annual/biennial returns and franchise/foreign entity tax filings. Businesses may also need to obtain approval to use DBAs in the jurisdiction.
Smoother Producer Lift-Out
With valuations continuing to rise, insurance businesses looking to capitalize on new market opportunities are increasingly turning to producer lift-outs. By hiring away top talent, a competitor can realize a far greater return on investment than with conventional M&A activity.
ReSource Pro offers a suite of services that help newly hired superstars get to work faster. These include closing licensing gaps or eliminating redundancies, updating affiliations and appointments, and updating director and officer information with state regulators.
If the new hire has a “regulatory history,” we also upload the supporting documentation required during legal reviews.
Winddown of Redundant Entities
Depending on the deal’s structure, there may be one or more businesses that will no longer operate after a merger or acquisition is complete. Winding down these entities in a timely and appropriate manner is essential to avoiding unnecessary costs and regulatory penalties.
Our insurance licensing experts help surrender unneeded entity licenses. We also help transition responsibility for renewals and other compliance tasks to individual licensees as they move on to other opportunities. We schedule these actions, as well as the termination of affiliations and appointments, to ensure continuity of service for policyholders.
Our corporate compliance experts can also help withdraw foreign entity registrations with non-domicile Secretary of State’s Offices. This includes resolving any past-due annual returns or tax filings needed to bring the business into good standing with regulators prior to the wind-down process. Once all withdrawals are complete, we can dissolve the business in its domicile jurisdiction.