https://www.insurerbrain.com/w/index.php?action=history&feed=atom&title=Definition%3ARelated-party_transaction 2026-06-13T15:56:31Z Revision history for this page on the wiki MediaWiki 1.43.8 https://www.insurerbrain.com/w/index.php?title=Definition:Related-party_transaction&diff=11736&oldid=prev 2026-03-12T00:28:25Z

<p>Bot: Creating new article from JSON</p> <p><b>New page</b></p><div>🔗 &#039;&#039;&#039;Related-party transaction&#039;&#039;&#039; is a business dealing between two entities that share a pre-existing relationship — such as a parent company and its subsidiary, affiliated insurers within the same [[Definition:Insurance holding company | holding company]] system, or an insurer and its officers, directors, or major shareholders. In the insurance industry, these transactions attract heightened regulatory scrutiny because they can be used to shift [[Definition:Risk | risk]], assets, or profits in ways that artificially improve one entity&#039;s financial position at the expense of [[Definition:Policyholder | policyholders]] or the broader [[Definition:Insurance market | market]]. Common examples include [[Definition:Reinsurance | reinsurance]] agreements between affiliated carriers, [[Definition:Service agreement | management service agreements]], and [[Definition:Investment | investment]] transactions conducted at non-arm&#039;s-length terms.<br /> <br /> ⚙️ State insurance regulators in the United States, guided by the [[Definition:National Association of Insurance Commissioners (NAIC) | NAIC]] Model Insurance Holding Company System Regulatory Act, generally require that related-party transactions above certain thresholds receive prior approval from the domiciliary [[Definition:Insurance regulator | insurance commissioner]]. The insurer must demonstrate that the transaction&#039;s terms are fair and reasonable, not detrimental to policyholders, and consistent with what would be negotiated between unrelated parties. [[Definition:Statutory accounting | Statutory financial statements]] require detailed disclosures in the notes and schedules — particularly Schedule Y, which maps the [[Definition:Insurance holding company | holding company]] structure — so that examiners can identify and evaluate the web of intercompany dealings. [[Definition:External audit | External auditors]] and internal [[Definition:Compliance | compliance]] teams also review these transactions to ensure proper documentation and pricing.<br /> <br /> 📊 Vigilance around related-party transactions protects the solvency safety net that supports every insurance promise. When an insurer cedes a disproportionate share of [[Definition:Premium | premiums]] to an offshore affiliate at below-market rates, or pays inflated fees to a management company controlled by the same ownership, the result can be a gradual erosion of [[Definition:Surplus | surplus]] that goes undetected until a [[Definition:Financial examination | financial examination]] or, worse, an [[Definition:Insolvency | insolvency]] proceeding reveals the damage. High-profile failures — from the self-dealing that plagued certain [[Definition:Workers&#039; compensation insurance | workers&#039; compensation]] groups to complex [[Definition:Finite reinsurance | finite reinsurance]] arrangements designed to smooth earnings — underscore why regulators treat these dealings as a core focus of [[Definition:Risk-based supervision | risk-based supervision]].<br /> <br /> &#039;&#039;&#039;Related concepts&#039;&#039;&#039;<br /> {{Div col|colwidth=20em}}<br /> * [[Definition:Insurance holding company]]<br /> * [[Definition:Statutory accounting]]<br /> * [[Definition:Affiliate reinsurance]]<br /> * [[Definition:National Association of Insurance Commissioners (NAIC)]]<br /> * [[Definition:Financial examination]]<br /> * [[Definition:Arm&#039;s-length transaction]]<br /> {{Div col end}}</div>

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