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📋 '''Intercompany agreement review''' is the regulatory and due-diligence process through which [[Definition:State insurance department | state insurance regulators]] and transaction parties scrutinize the contracts that exist among entities within an [[Definition:Insurance holding company system | insurance holding company system]]. These agreements — which can include [[Definition:Tax allocation agreement | tax-sharing arrangements]], [[Definition:Management services agreement | management services agreements]], [[Definition:Reinsurance | reinsurance]] treaties, [[Definition:Cost-sharing agreement (insurance) | cost-sharing arrangements]], and [[Definition:Investment management agreement (insurance) | investment management contracts]] — govern how money, services, and risk flow between an [[Definition:Insurance carrier | insurer]] and its affiliates. In the insurance context, regulators pay close attention to these agreements because they can be conduits for draining capital from a regulated entity to benefit unregulated parent or sister companies.

⚙️ Under the [[Definition:Insurance Holding Company System Regulatory Act | Insurance Holding Company System Regulatory Act]] adopted in most states, material intercompany agreements involving a domestic insurer must be filed with and, in many cases, affirmatively approved by the domiciliary regulator before they take effect. During a [[Definition:Merger (insurance) | merger]] or [[Definition:Acquisition (insurance) | acquisition]], the acquiring party's due-diligence team combs through every such agreement to assess whether terms are arm's-length, whether pricing is [[Definition:Fair value assessment (insurance) | fair]], and whether any arrangement creates hidden liabilities or ongoing cash leakage. Regulators conduct their own parallel review when evaluating a [[Definition:Form A filing | Form A]] change-of-control application, often requiring the acquirer to amend or terminate agreements that appear one-sided or that could impair the insurer's [[Definition:Statutory surplus | surplus]] position post-close.

🔎 The stakes of getting this review right are substantial. A poorly structured [[Definition:Management services agreement | services agreement]] that charges above-market fees to the regulated entity can steadily erode [[Definition:Risk-based capital (RBC) impact | RBC ratios]], while an internal [[Definition:Reinsurance | reinsurance]] arrangement on non-arm's-length terms can mask the true risk profile of the insurer. Regulators have grown increasingly sophisticated in their examination of these contracts — in part because several high-profile insolvencies were preceded by aggressive intercompany transfers that went undetected until it was too late. For acquirers, a thorough intercompany agreement review is not merely a compliance checkbox; it is a critical safeguard against inheriting structural value leakage that may not appear on any single financial statement.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Insurance holding company system]]
* [[Definition:Affiliated transaction]]
* [[Definition:Form A filing]]
* [[Definition:Management services agreement]]
* [[Definition:Tax allocation agreement]]
* [[Definition:Arm's-length transaction (insurance)]]
{{Div col end}}

Definition:Intercompany agreement review - Revision history

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