IN THIS EDITION:

• Introduction
• NOLHGA Meetings
• Constituency Relationships
• Financial Activity
• NOLHGA Committee Activity
• Communications
• Legal Department Activity
• Systems/Technology
• Personnel & Operations

Introduction

In May 2010, 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, and in addition to routine administrative tasks, staff focus has primarily been on the following responsibilities and activities: (i) insolvency management and support of insolvency task force activity; (ii) FSMC Education Project initiatives; (iii) constituency relationship work, especially relating to ACLI and NAIC matters; (iv) planning and executing the April MPC in Albuquerque; (v) the audit of NOLHGA’s year-end financial statements and related reports; (vi) planning for the NOLHGA Legal Seminar (July 15-16, 2010); (vii) preliminary planning for the Annual Meeting (Oct. 5-6, 2010); and (viii) providing support for various Board committees and subgroups.

Current insolvency activity has been focused on Standard Life of Indiana; Penn Treaty Insurance Company (Pennsylvania); Executive Life of New York; Lincoln Memorial (Texas); Shenandoah Life (Virginia); Executive Life Insurance Company (California); Medical Savings Insurance Company (Indiana); Booker T. Washington (Alabama); Golden State Mutual (California); and three new cases—American Community Mutual Insurance Company (Michigan), Imerica Life and Health Insurance Company (Arkansas), and National States Insurance Company (Missouri).

NOLHGA Meetings

2010 Annual Meeting

Work on the Annual Meeting program and choosing speakers has begun. NAIC President Jane Cline (West Virginia) is the first confirmed speaker. The meeting is scheduled to be held October 5-6 in Seattle. A NOLHGA Board Meeting is scheduled for October 4, also in Seattle.

2010 Legal Seminar

Legal Department staff continued to work with the planning committee to organize this year’s program, which will take place on July 15-16 at the Marriott Marquis Hotel in New York City. Among other matters, staff has extended invitations to guest speakers, mailed a “save the date” postcard to potential attendees, helped design an area on NOLHGA’s Web site where potential attendees can obtain information and register for the seminar, and prepared a budget showing projected expenses and revenue for the event. To date, confirmed “outside” speakers for the event include: Leah Ward Sears, former Chief Justice, Georgia Supreme Court; Susan Voss, Iowa Insurance Commissioner and NAIC President-Elect; James J. Wrynn, New York Superintendent of Insurance; Douglas Elliott of the Brookings Institution; Bryan Gardner of KBW; Ernest Patrikis of White & Case; and H. Rodgin (“Rodge”) Cohen, Managing Partner, Sullivan & Cromwell.

Constituency Relationships

NAIC

In March, Bill O’Sullivan attended the Spring NAIC Meeting in Denver. The key receivership-related meetings included: 1) the Receivership and Insolvency Task Force; 2) the Long Term Care (EX) Task Force; and 3) the Financial Regulation Standards and Accreditation (F) Committee. In addition, NOLHGA and the NCIGF sponsored the Guaranty Fund Forum breakfast on March 27 to review recent NAIC activities impacting guaranty associations.

The NAIC’s Financial Condition (E) Committee has formed a subgroup to assess the solvency and other implications to health insurers of the recently enacted Affordable Healthcare for America Act, and to recommend charges for other Financial Condition (E) Committee Groups to address these implications. Joni Forsythe participated in the subgroup’s initial call on April 15. The subgroup’s priorities include the development of definitions for medical loss ratio components and the creation of an emergency blanks proposal to conform to the expanded health data reporting requirements under the new law. At this time, the subgroup is working with an NAIC health actuary group to develop recommendations regarding medical loss ratio components, and NAIC staff is developing a first draft blanks proposal. NOLHGA will continue to monitor developments with respect to this subgroup and related E Committee activities.

ACLI

Bill O’Sullivan and Peter Gallanis participated in a regular telephonic meeting of the ACLI Solvency Committee on March 15, and several staff members have provided technical support to ACLI staff and working groups relating to the ELNY case, state legislation, and various aspects of regulatory reform.

Member Associations

On April 22-23, Peter Gallanis attended the Annual Meeting of the Louisiana guaranty association and discussed with Board members, staff, and invited guests developments in pending insolvencies and regulatory reform efforts on Capitol Hill.

On April 28–30, Sean McKenna attended the joint Annual Meetings of the North Carolina and South Carolina guaranty associations, where he conducted a presentation on the information available on the NOLHGA Web site (www.nolhga.com).

Financial Activity

Accounting

The Accounting Department has been involved in overseeing the year-end audit of the 2009 NOLHGA operating financial statements. An Audit Committee meeting is scheduled for May 11 in Chicago, and a report will be made to the Board at its May 12 meeting. Representatives of McGladrey & Pullen will be attending the May 11 committee meeting.

In addition to routine requirements, NOLHGA’s accounting staff: (1) calculated and mailed the fourth quarter 2009 assessments; (2) provided support to the Thunor task force by retrieving several years’ worth of invoice documentation to substantiate an expense claim; and (3) conducted three proofs of claim surveys for Executive Life of New York, Reliance, and Thunor Trust. For six insolvency cases, NOLHGA distributed $18.6 million in funds to affected member state associations.

Insolvency Data Systems

Staff completed the upload of fourth quarter 2009 expense information from the NOLHGA-B database and successfully updated insolvency expense files with no issues.

Internal Audit

Paul Peterson, NOLHGA’s internal auditor, completed his review related to the follow-up on the 2007 internal audit. The results of this review will be reported on in detail to the Audit Committee at its May 11 meeting and at a higher level to the Board on May 12.

NOLHGA Committee Activity

Accounting Issues Committee

The committee completed work on a sample IRS Form 990 and redrafted related sections of the Accounting Guidelines Manual. The new Accounting Guidelines Manual was posted to NOLHGA’s Web site and distributed electronically to all member guaranty associations.

Assessment Data Survey Task Force

Staff updated 2009 data requests with the NAIC and finalized delivery dates; initial data files were received and tested satisfactorily.

Administrators Education Steering Committee

The committee hosted an education session in connection with the Albuquerque MPC meeting. The program, which was very well received, featured the following topics: “The Long-Term Costs of Long-Term Care,” “Variable Annuities--A Whole New Ballgame,” and “Securities Issues in Insurance Insolvencies.”

Coverage/Claims Committee

At the request of the committee, the ACLI has formed a working group to assist in the review of coverage issues relating to joint annuities and guaranteed separate account products. During April, committee representatives participated in several teleconferences of the ACLI working group for the purpose of addressing those coverage issues.

Legal Committee

Legal Department staff arranged a telephonic meeting of the Legal Committee on April 23. The principal purpose of the call was to organize the committee’s efforts for the year.

MPC Business Continuity Subgroup

Staff provided support to the MPC Executive Committee Business Continuity Subgroup, which continued to work on a draft template business continuity plan for individual guaranty associations to consider. The plan includes strategies, actions, and procedures to resume business and service operations in the event of an unexpected loss in staff or damage to one’s office.

The subgroup is currently working on several documents for associations, including an overview, concepts and guidelines, a detailed template business continuity plan, and a scaled-down plan intended for use by a small association.

The subgroup held teleconferences in late February and early April for an in-depth review of draft documents. They also held an in-person meeting at the Albuquerque MPC to review an appendix on pandemic influenza issues. The documents are almost in final form. The subgroup plans to coordinate with the Life and Annuity Privacy Group by sharing the draft documents to ensure consistency between developed materials.

Communications

Communications Strategy

The Communications Department took part in a conference call on March 10 to discuss NOLHGA’s communications strategy for the ELNY case. The department also developed a set of frequently asked questions (FAQs) for distribution to guaranty association administrators—portions of this document would also be used as an informational “backgrounder” for media inquiries. Work on the FAQs document is nearly complete.

The department also attended an ACLI meeting on March 31 to discuss the ELNY matter.

GA Update

The April 2010 GA Update was mailed to subscribers. The issue includes an article on NOLHGA’s goals by NOLHGA Chair Steve Lobell, an article adapted from NOLHGA President Peter Gallanis’s President’s Address at the 2009 Annual Meeting, and segments on new guaranty association personnel and NOLHGA’s recent activities.

Media Hotline

A media hotline was added to the NOLHGA Web site so members of the media can reach NOLHGA’s Communications Department immediately. The hotline is intended for those writing articles involving the guaranty system who need to meet an impending deadline but can’t reach NOLHGA representatives by phone. The hotline button is displayed prominently on the home page of the NOLHGA site and links media representatives to a form that asks for relevant information (organization, article topic, etc.). Once the form is submitted, the relevant information is packaged into an email that is immediately forwarded to the President and Director of Communications.

2009 Year-End Report

NOLHGA’s 2009 Year-End Report to the Membership was mailed to members in late April.

Legal Department Activity

Since the last Board meeting, Legal Department staff members have been engaged in the following activities:

Model Act Initiative: Staff organized a teleconference of the GA Laws Committee on March 16 for the purpose of updating the committee on efforts to update guaranty association laws across the country. In addition, staff continued to provide technical and other support to the ACLI and individual states with respect to updating guaranty association laws.

Privacy/Security: Staff supported efforts of the Privacy Working Group to develop recommended data security procedures for the MPC’s use in all multi-state insolvencies. The group, which met on April 30 in Chicago to review a revised draft of data security procedures, anticipates presenting its work product to the MPC in September.

Conflicts/Antitrust Policy: Staff, working with NOLHGA’s IT Department, helped develop an online application for conducting NOLHGA’s 2010 conflicts and antitrust compliance surveys. Notice and instructions for completing the 2010 surveys, together with a link permitting responses to be submitted electronically, were e-mailed to affected persons in April. So far the feedback on the online application has been positive.

Other Matters: Staff also engaged in the following activities: (1) provided “help desk” support to member associations and other constituencies regarding guaranty association legal questions; (2) provided support to insolvency task forces with respect to authority issues and drafting confidentiality, engagement, and various other agreements; (3) supported the work of the MPC Asset Recovery Group tracking estate asset positions; and (4) organized a staff “purge” day for the purpose of retaining and disposing of documents consistent with NOLHGA’s document management policy.

Systems/Technology

Quest

The Information Systems, Communications, and Insurance Services Departments held several online training sessions for guaranty association administrators on QUEST, NOLHGA’s new online receivership library (QUEST replaced the Information Resource Center, or IRC). The sessions were held in late February—the system went live in January—and were well-received by attendees. Feedback from the members on QUEST has been very positive.

The Information Systems, Insurance Services, and Legal Departments are working on a strategy to ensure data integrity in Quest and improve the search capabilities and user friendliness of the system. Some of the objectives include: making sure all documents have searchable text, a review of content file types, a review of file/library names, and a general clean-up of library folders.

Technical Assistance for the Guaranty Association Administrators

The Systems Department continues to assist guaranty association administrators by answering technical support calls and responding to e-mails.

Finally, the April edition of the NOLHGAnet was distributed to the administrators and the NOLHGA staff.

Personnel & Operations

As of early April, Cathleen Travis’s temporary engagement as a retained NOLHGA project management specialist concluded; she will continue to serve as project manager for several insolvency task forces on a case-by-case, contract basis (akin to our engagements of Fred Buck and others as task force project managers).