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Press Release

October 07, 2013

Contact: Matt Anderson, 212-709-1691


Fidelity New York Also Agrees to Put in Place Enhanced Policyholder Protections – Modeled on Those DFS Established at Other Insurance Firms Owned by Private Equity Companies

NEW YORK, NY – Benjamin M. Lawsky, Superintendent of Financial Services for the State of New York, announced today that Philip A. Falcone is banned from exercising direct or indirect control over the management, policies, operations, and investment funds of Fidelity & Guaranty Life Insurance Company of New York (“Fidelity New York”) or any other New York-licensed insurer for a period of seven years. Mr. Falcone is also banned during that period from serving as an officer or director of Fidelity & Guaranty Life and its subsidiaries or any New York-licensed insurer, as well as participating in the selection of any such officers or directors. The ban of seven years from these activities shall also apply to the employees of Harbinger Capital Partners, LLC.

The ban announced today stems from a settlement that Mr. Falcone and Harbinger Capital Partners entered into with the Securities and Exchange Commission, which detailed admitted facts and wrongdoing that demonstrate serious issues related to Mr. Falcone’s fitness to control the management, operations, and policyholder funds of a New York insurance company. The SEC settlement stated that it “may have collateral consequences under federal or state law and the rules and regulations of self-regulatory organizations, licensing boards, and other regulatory organizations.”
Superintendent Lawsky said: “It is vital to ensure that those who operate insurance companies will always put retirees and policyholders first and act with the utmost integrity. DFS will continue its work to protect retirees and annuitants when private equity firms purchase insurers. We look forward to continuing to work with other insurance regulators on these important issues.”
Fidelity New York has also agreed today to put in place a series of enhanced policyholder protections – modeled on those that other insurers owned by private equity firms and investment companies have established at the request of the New York State Department of Financial Services (DFS). Earlier this year, Guggenheim Partners, LLC and Apollo Global Management, LLC agreed to similar policyholder protections in their acquisitions of annuity companies.

Recently, DFS has highlighted a spike in private equity firms and other investment companies moving into the annuity business. This trend raised concerns since such firms typically have a more short-term oriented business model than traditional insurers, and the annuity business is focused on ensuring long-term security for policyholders.

The key heightened policyholder protections to which Fidelity New York agreed include:

  • · Heightened Capital Standards. Fidelity New York will maintain Risk-Based Capital Levels (RBC Levels) at an amount not less than 450 percent. (Capital serves as a buffer that insurers use to absorb unexpected losses and financial shocks – better protecting policyholders.)
  • Backstop Trust Account. Fidelity New York will establish a separate backstop trust account totaling approximately $18.5 million to provide additional protections to policyholders above and beyond the heightened capital levels. If Fidelity New York's RBC levels fall below 450 percent, the funds in the backstop trust account will be used to replenish (“top up”) Fidelity New York’s RBC levels to at least 450 percent. The $18.5 million in the trust account will be held separately from other Fidelity New York funds for seven years and dedicated to the sole purpose of protecting policyholders.
  • Stronger Disclosure and Transparency Requirements. Fidelity New York will file quarterly RBC level reports to DFS – rather than just the annual reports required under New York Insurance Law.


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