GA Update Online is intended for NOLHGA’s guaranty association members only. The contents are confidential and should not be shared with third parties. NOLHGA reserves all rights with respect to applicable privileges from disclosure.
IN THIS EDITION:
- Introduction
- NOLHGA Meetings
- Constituency Relationships
- Financial Activities
- Financial Services Modernization
- MPC Activities
- NOLHGA Committee Activity
- Communications
- Legal Activity
- Systems Support/Technology/Web Site
- Professional Development
Introduction
In May 2014, the NOLHGA Board of Directors held its most recent quarterly meeting. Relevant portions of the management report provided to the Board are included in this issue of GA Update Online.
Since the February Board meeting in Dallas, staff has focused primarily on the following matters: (i) coordination and support for insolvency task force activity, (ii) coordination and support for the April MPC meeting and Education Day 2014 (an annual project of the Administrators Education Steering Committee), (iii) work related to financial services modernization, (iv) continued work to build stronger relationships with the health industry, (v) support and review work related to the audit of the organization’s 2013 financial statements, (vi) planning and coordination for the Legal Seminar and Annual Meeting, and (vii) support for other Board and MPC committees and subgroups.
Insolvency activity continues to be heavily focused on Penn Treaty Insurance Company (Pennsylvania) and Lincoln Memorial (Texas) and the transition of ELNY assets and restructured liabilities to the GABC runoff vehicle.
NOLHGA Meetings
2014 Annual Meeting
Work on the 2014 Annual Meeting program continues, with former NBA superstar Bill Walton confirmed as the luncheon speaker and Esfand Dinshaw, Chairman and CEO of Sammons Financial Group, agreeing to speak at the meeting. The meeting Web page is now live, and two promotional e-mails have been sent to prospective attendees.
2014 Legal Seminar
The Legal Seminar Planning Committee held several teleconferences to plan the program for NOLHGA’s 2014 Legal Seminar (which will be held at the New York Hilton Hotel on July 17–18). In support of the committee, staff has arranged for a “save the date” postcard to be mailed to potential attendees reminding them of the location and dates for the event; launched a Legal Seminar page on NOLHGA’s Web site through which potential attendees can access information and register for the event; and published several articles in the NOLHGA Wire promoting the event.
Constituency Relationships
GA Regional, Board & Annual Meetings
Paul Peterson attended the Kentucky Life & Health Insurance Guaranty Association board meeting to discuss the Lincoln Memorial and National States insolvency cases. Bill O’Sullivan attended the Louisiana Life & Health Insurance Guaranty Association Annual Meeting on April 24 and reported on the FIO report, pension de-risking transactions, and PPACA/health industry developments and their implications to the guaranty system.
ACLI
On February 25 and April 23, Peter Gallanis and Joni Forsythe participated in teleconferences of the ACLI’s Receivership Committee (formerly the Solvency Committee). The February 25 discussion included: (1) developments in guaranty association legislation, (2) the IRS consideration of a 501(c)(6) exemption for the Hardship Fund in ELNY, (3) Federal Home Loan Bank Legislation, (4) the NAIC’s IRMA Critical Elements project and the §612 reinsurance provisions, and (5) retirement income issues (including ERISA and annuity selection rules). The April 23 discussion was focused on guaranty association coverage for factored structured settlements and life insurance policies subject to settlements.
NAIC
NAIC Spring Meeting: Peter Gallanis and Joni Forsythe attended the NAIC Spring National Meeting, which was held in Orlando on March 29 through April 1. In particular, they attended meetings of the Life Insurance and Annuity (A) Committee, the Contingent Deferred Annuity (A) Working Group, the Unclaimed Life Insurance Benefits (A) Working Group, and the Receivership and Insolvency (E) Task Force. In addition, NOLHGA and the NCIGF jointly hosted a luncheon on March 30 for guaranty association administrators, board members, and invited guests to review NAIC activities impacting guaranty associations. The April 24 issue of GA Update Online included a report on relevant NAIC meeting developments.
Receivership Financial Analysis Working Group: On March 12, the NAIC Receivership Financial Analysis Working Group (R-FAWG) solicited NOLHGA’s input on a draft document entitled “Receivers’ Expectations for Guaranty Fund/Association Dues and Expenses.” The document is intended to serve as principles and guidance for states in dealing with guaranty association expense claims in receiverships. R-FAWG has scheduled a meeting on July 23 with both NOLHGA and the NCIGF to discuss the document.
To assist NOLHGA staff in responding to the document, MPC Chair John Colpean has appointed a committee of guaranty association administrators to review and provide input on the document. The committee consists of Bart Boles (Texas), who will chair the group; Candie Kinch (Idaho and Oregon); Mike Marchman (Georgia); Lowell Miller (North Carolina); Tom Peterson (Kentucky); and Chuck Renn (Missouri).
SEC Considerations Working Group: Staff (together with members of the Coverage/Claims Committee) have worked closely with the chair of the NAIC’s SEC Considerations Working Group to prepare draft guidance for handling variable insurance business in a receivership proceeding. The final version of the draft will be incorporated into the NAIC Receivers’ Handbook.
Financial Activities
In addition to routine accounting-related tasks, the Accounting Department has been involved in overseeing the year-end audit of the 2013 NOLHGA operating financial statements. Staff also calculated and mailed the fourth quarter 2013 quarterly assessments.
Since the last Board meeting, the Accounting Department has arranged for the following insolvency-related account distributions: (1) $2.4 million to affected members ($198,000 in estate distribution related to American Community Mutual and $221,000 and $2 million in premium collection refunds related to Lincoln Memorial and National States, respectively); and (2) $4.4 million to TPAs and receivers to fund claims and expenses for three active insolvencies.
Assessment Data Survey
Data specifications and delivery dates for the 2013 survey year were finalized with the NAIC during January. An additional request has been added to obtain state-level Medicare premium data for companies filing the health annual statement form. Similar to past years, the initial data files were provided in April. Strohm Ballweg has begun testing the files and importing the data into the survey database.
NOLHGA staff went through the testing processes and report files used in the review of premium reporting for Medicare business with Strohm Ballweg in January. Strohm Ballweg began testing on 2013 Medicare data so that the initial files were ready for review at the task force meeting on May 15–16.
Insolvency Financial Cost Information
NOLHGA staff reviewed existing insolvency data to calculate estimated estate assets, guaranty association recovery and coverage ratios, and estimated policyholder losses. The data is used to respond to various queries from outside parties (such as Congress) regarding insolvency and guaranty association activities.
NOLHGA staff also provided summary claims, expense, and recovery information for use in the annual reports to guaranty associations.
Financial Services Modernization
NOLHGA staff continued to work with outside consultants from Faegre Baker Daniels and Towers Watson to develop a model for analyzing and comparing protections afforded by the Pension Benefit Guaranty Corporation (PBGC) with protections provided by the state receivership and insurance guaranty systems. The current project work plan calls for a preliminary version of the model to be completed in May/June.
In addition, staff is working with the NCIGF and outside consultants to develop a plan for presentation to and discussion with the Financial Services Modernization Committee for modeling the capabilities of the life & health and P&C guaranty systems to respond to the failure of a large U.S. insurance group. This project is in response to the recently issued FIO report, which recommended that NOLHGA and the NCIGF periodically model the potential adverse impacts of a significant insolvency event on the two guaranty systems and share the results with FIO.
MPC Activities
In addition to routine MPC operations, highlights of work being done by several MPC Executive Committee-appointed subgroups include:
MPC’s D&O Subgroup
This subgroup assessed and reported on the potential impacts of its recommended D&O underwriter transferring its business to an affiliated company (Hudson Insurance Company), as well as a possible hardening of D&O markets. Once the subgroup completes its remaining work to document its findings on D&O coverage, it will focus on its new charge to investigate the availability of cyber-liability insurance coverage for guaranty associations.
GA Best Practices Subgroup
This subgroup completed work on an initiative designed to update the GA Best Practices Guidelines (previously developed in 2004), with an eye toward recrafting them into a useful self-evaluation tool for member associations. The final draft was shared with all guaranty association administrators in mid-April for review and comment. It is anticipated that a final work product will be presented to the MPC Executive Committee in advance of its July meeting.
Insolvency Task Force Resource Guide
This subgroup recently completed discussions on task force operations/activities and a review of the NOLHGA documents that govern or support a task force, and then developed a guide intended to serve as a quick reference to the details provided in the MPC Insolvency Task Force Guidelines and the Rules & Procedures of the Members’ Participation Council. It is expected that this guide will be especially helpful to new insolvency task force chairs, members, and consultants. The guide is currently under review by the MPC Executive Committee.
GA Operational Survey
This subgroup was appointed in January to develop a survey for administrators to complete that will serve several purposes: (1) to provide the Administrators Education Steering Committee with a tool to determine what issues are timely and warrant inclusion in educational programming for member association administrators; and (2) to provide an update to information previously collected relating to the membership’s organizational and operational processes. Such information would include insight into the prevalent technology, corporate governance, and regulatory compliance processes being employed by member associations. The survey has recently been finalized, and it is expected that a link to an electronic version of the survey will be distributed in the near future.
NOLHGA Committee Activity
Accounting Issues Committee
NOLHGA staff completed work on the 2013 IRS Form 990 and minor edits to the Accounting Guidelines Manual. The Form 990 samples were emailed to guaranty associations so they may refer to them when completing their 2013 tax returns. The committee elected to delay publication of the Manual until later in the year once a new section dealing with Audit Committee activities is added and a review of the existing investment guidelines section is completed. The committee’s next meeting is scheduled for late August.
Administrators Education Steering Committee
Staff supported this committee in the coordination of multiple educational presentations that were hosted as part of Education Day 2014, held in conjunction with the April MPC meeting in St. Louis. Topics included: (1) Insurance Products (Mark Hopfinger, Senior VP, Reinsurance Group of America); (2) Medicare C&D (Andrea Bowers (South Carolina), Lowell Miller (North Carolina), Paul Peterson (NOLHGA), and Kevin Griffith (Faegre Baker Daniels)); and (3) Business Continuity and Emergency Planning (Linda Becker (Kansas), Janis Potter (Illinois), Chuck Renn (Missouri), and Tom Sullivan (Iowa)). Evaluation results from these presentations were quite positive.
Communications Committee
Final revisions to The Nation’s Safety Net, a brochure that depicts the foundation of coverage offered by state guaranty associations, were completed in April. The brochure is expected to be completed in early June.
Coverage/Claims Committee
The committee met by teleconference on February 20 to review and approve a work plan for 2014.
MPC Security Advisory Committee (SAC)
The SAC continued its work to oversee and maintain compliance with the MPC Security Procedures, which included: (1) following up with individual guaranty associations to resolve compliance issues, (2) working on a more detailed breach contingency response plan, (3) reviewing the MPC’s Security Training Program for possible updates, (4) developing a compliance questionnaire for outside consultants, and (5) reporting on the SAC’s activities at the April MPC meeting.
Communications
GA Update Online
Two issues of GA Update Online were published. The March 14 issue contained details of the management report provided to the NOLHGA Board for its February meeting. The April 24 issue featured a report on the NAIC Spring National Meeting.
NOLHGA Journal
The first 2014 issue of the NOLHGA Journal, which featured coverage of NOLHGA’s 2013 Annual Meeting and an article on the FIO’s modernization report, was mailed in April.
Year-End Report to the Membership
Design work on the 2013 Year-End Report to the Membership is nearly complete. It will be mailed in late May.
Legal Activity
Since the last Board meeting, Legal Department staff has been engaged in the following activities:
GA Model Act Initiative
Staff continued to provide drafting and/or other support to various states (e.g., Alaska, Louisiana, Nevada, New York, and Pennsylvania) that have expressed interest in updating their guaranty association acts and also arranged for a telephonic meeting of the GA Laws Committee.
Conflicts/Antitrust Policy
The annual compliance questionnaire process under NOLHGA’s conflicts of interest and antitrust policies was recently completed. There were no material compliance issues disclosed as a result of the questionnaire process.
Other Matters
In addition, staff (1) surveyed which states provide guaranty association coverage for HMOs; (2) reviewed and analyzed both NCOIL’s Pension De-Risking Model Act and proposed federal retirement legislation for implications to the guaranty system; (3) provided “help desk” support to members and other constituents on various legal issues; and (4) provided legal support for updating NOLHGA’s Safety Net brochure.
Systems Support/Technology/Web Site
Financial Systems Project
Several NOLHGA staff members are working to update the documentation on NOLHGA’s electronic financial systems and work flows. The documentation will serve as the basis for a plan to integrate these systems. The project plan for an integrated system will be completed this year, and implementation of the plan is expected to begin in 2015.
Member Support
The Systems Department alerted our members about developing Internet security issues, such as the Heartbleed bug and the Internet Explorer security flaw.
Network Systems Status
The Systems Department updated and tested the backup agents on all of its servers. The recovery system currently in place is designed to have NOLHGA’s entire network up and running within four hours of a site-wide disaster declaration. A complete test of the recovery system will be performed this quarter.
NOLHGA, with assistance from TechClarity, LLC (an IT consulting firm), is upgrading its SharePoint Server (the server that hosts QUEST and the staff intranet) from 2007 to 2010. Due to some migration errors, the launch of the upgrade was delayed, but staff expects to complete the upgrade before the end of the quarter.
Technical Assistance for Guaranty Association Administrators
In addition to providing routine technical support to members, the Systems Department is reaching out to all members as part of this year’s member outreach program. Staff is also working on an update to our technology guidelines, with planned distribution in the third quarter.
The Systems Department is scheduled to host two in-person training sessions on Outlook for interested guaranty association administrators and staff. The one-day sessions will be held at NOLHGA’s offices on June 18 and 19. Ten people are registered to attend.
The May edition of the NOLHGAnet was distributed to guaranty association administrators and NOLHGA staff.
In addition, technical support was provided frequently to administrators during the quarter by answering technical support calls, responding to e-mails, and offering IT-related recommendations.
Web Site Updates
Several staff members are working to develop plans for improvements to the NOLHGA Web site. Plans include a redesign of the homepage as well as a review and update of the Frequently Asked Questions section.
Members of NOLHGA staff modified CERS (NOLHGA’s online consulting expense reporting system) so that certain projects can be designated as captive companies. This new feature offers online reporting of captive companies independently of NOLHGA-related projects. This change was implemented in order to provide GABC members with access to CERS for their expense tracking and reporting needs.
Professional Development
Joni Forsythe, Sean McKenna, and Joanna Akiyama attended the Networks Financial Institute’s 10th Annual Insurance Public Policy Summit in Washington, D.C., which featured presentations (including a presentation by a panel including Peter Gallanis) on U.S. and international regulation of insurance and financial institutions.
Sean McKenna also attended a course on the Adobe InDesign layout program in March and completed that course in May.
Joni Forsythe also participated in the following professional development events: (1) a webinar entitled “Data Breaches Are the New Reality: Are you Ready?”; and (2) a program sponsored by the NAIC and the Center for Insurance Policy Research entitled “Insuring Cyber Liability Risk.”
Kenny Bullock participated in a webinar on virtualization hosted by CDW called “Virtualization Journey.” The webinar involved the latest VMWware software features.
Meg Melusen participated in the following professional development webinars: (1) “You’ve Been Hacked, Now What?”; and (2) “NIST Cybersecurity Framework – Impacting Your Company.”
Peter Gallanis participated in the NAIC’s annual Insurance Regulatory Forum in Washington, D.C.