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 Staff
• 2022 Annual Meeting
• Constituency Relationships
• MPC Activities
• NOLHGA Committee Activity
• Financial Activities
• Communications
• Systems Support/Technology/Website
• Professional Development

Introduction

On October 18, 2022, the NOLHGA Board of Directors held its most recent quarterly meeting in Tempe, Arizona . Relevant portions of the management report provided to the Board at the meeting are included in this issue of GA Update Online.

Since the August 18, 2022, Board meeting, significant staff time has been devoted to (1) planning for the 2022 Annual Meeting and October MPC meeting, both of which were hybrid meetings conducted in Tempe, Arizona; (2) coordination and support for insolvency task force activity, including significant staff support for task forces such as Global Bankers Insurance Group, Senior Health Insurance Company of Pennsylvania (SHIP), North Carolina Mutual, and Time Insurance Company; (3) continuing support for the LTC Re (Penn Treaty) and GABC (ELNY) runoff entities, including developing a plan for responding to LTC policyholders affected by Hurricane Ian; (4) outreach to member guaranty associations, in particular by visiting various associations and attending regional guaranty association meetings and association Board meetings; (5) preparing for the retirement of NOLHGA Vice President of Accounting and Finance Paul Peterson, both by identifying a replacement (see below) and by training NOLHGA staff on some of his responsibilities; (6) supporting member associations with business services, in particular technology hosting services; (7) participating in (and in some cases helping lead) numerous MPC Executive Committee–chartered committees and subgroups, including the Small Block Options Subgroup and the Service Providers Directory project; and (8) providing support for Board and MPC committees and subgroups.

NOLHGA Staff

Keith Sheridan has joined the NOLHGA staff as our new Vice President of Accounting and Finance. He attended the 2022 Annual Meeting in Tempe, Arizona.

2022 Annual Meeting

NOLHGA’s 2022 Annual Meeting was held on October 19–20 at The Westin Tempe in Tempe, Arizona. An MPC meeting was held on October 18, and the Annual Meeting also featured two meetings of the NOLHGA Board of Directors as well as the Annual Meetings of GABC and LTC Re. Apart from the Board of Directors’ meetings, all meetings were conducted as hybrid meetings. The Annual Meeting and MPC meeting received enthusiastic reviews on meeting evaluation forms.

Constituency Relationships

Guaranty Association Regional Meetings

On September 21 and 22, Michael McDonald attended the Midwest Region Administrators Meeting in Kansas City, Missouri. The meeting included discussions on specific estate issues, small block administration, purchasing groups, audits, Board committees, cyber insurance, claims handling, diversity/equity/inclusion efforts, and public policy efforts. On September 19 and 20, Mike Heard attended the West Region Administrators Meeting in Boise, Idaho, which addressed issues similar to those discussed at the Midwest meeting. On September 22, Peter Gallanis attended the annual meeting of the Virginia association and discussed with the Board regulatory priorities at the NAIC and solvency issues for the industry.

State Regulators & Industry

On September 29, Peter Gallanis, Mike Heard, Bill O’Sullivan, Alan Shortell (Life Insurance Company Guaranty Corporation of New York), and Joel Glover (Faegre Drinker Biddle & Reath) met with representatives from the New York Department of Financial Services and the New York Liquidation Bureau. The principal topic discussed was the importance and benefits of guaranty association pre-liquidation planning and coordination with receivers and insurance departments.

On October 4, Peter Gallanis, Mike Heard, Bill O’Sullivan, Caryn Glawe (Faegre Drinker), Ralph Donato (LTCG), and Tom Sullivan (Iowa guaranty association) met with representatives of Fortitude Re Insurance Company to discuss general market conditions for transferring blocks of business.

NAIC

An update concerning the NAIC’s recent activities, including developments at the NAIC’s Summer National Meeting in August (in which several NOLHGA staff members participated), was featured in the September 9 issue of GA Update Online.

American Academy of Actuaries

On September 30, Peter Gallanis, Mike Heard, Bill O’Sullivan, Sean McKenna, and Kevin Griffith (Faegre Drinker) participated in a Zoom meeting with Maria Carnovale (Nationwide) and Grace Lattyak (Aon), who are writing an issue brief for the American Academy of Actuaries on pension risk transfer transactions. The purpose of the call was for NOLHGA to respond to questions about guaranty association coverage of annuities issued in such transactions.

MPC Activities

MPC Executive Committee Asset Recovery Report Subgroup

On September 2, 2022, the Asset Recovery Report was made available to guaranty associations on NOLHGA’s website. The semi-annual report provides individual estate information such as what assets, if any, have been distributed or are expected for distribution and what outstanding issues must be resolved prior to estate closure.

The Asset Recovery Activity Report is combined with the Net Cost Summary, a chart that provides an estimate of total estate assets remaining in all open multi-state insolvency cases. Also included is the Closed Estates Summary, a listing of estates that are known to be closed and the dates of closing.

MPC Model Plan of Operations Subgroup

The subgroup continued its work on proposed updates and revisions to the NOLHGA Model Plan of Operations. In August, the subgroup met with a focus group comprising Lee Douglass (Arkansas), Ted Lewis (Utah), Pamela Olsen (Minnesota and Nebraska), Tom Sullivan (Iowa), and Don Thomas (Alaska) to discuss the draft. The subgroup received input on the first three Articles of the Model Plan and will be meeting with the focus group again in October to complete the review. After considering input from the focus group, the subgroup will finalize its work product for presentation to the MPC Executive Committee. The subgroup expects to complete its work this year.

MPC GA Best Practices Subgroup

The subgroup completed its annual review of the GA Best Practices document and submitted its proposed revisions to the MPC Executive Committee at the committee's October 2022 meeting. The revisions were approved, and after some minor edits, the revised document will be posted on the subgroup’s page on the members-only section of the NOLHGA website.

MPC Small Block Options Subgroup

The subgroup has continued its work on options for dealing with the administration of small blocks of insurance in runoff. After defining its scope, creating its specific charges, and beginning to explore options, the group continues to execute on its charges: (1) develop a checklist of issues for associations to consider in administration decisions; (2) develop an FAQ to help in decision making; (3) identify resources available within the system to assist member associations that want to consider self-administration; (4) develop a process and document templates for administration arrangements between state guaranty associations; (5) work with the Administrators Education Steering Committee to present an overview of member associations’ experiences with self-administration; (6) develop and implement improvements in the sourcing, contracting, and management of commercial TPA relationships; and (7) explore options for commercial TPAs. The subgroup will be meeting with the MPC Executive Committee to propose moving forward with (1) an education approach for the findings of the subgroup; and (2) determining a hosting solution for the checklists, documents, and other tools to make the information available to the membership. The subgroup provided an update on its progress at the October 2022 MPC meeting.

MPC Security Advisory Committee (SAC)

The SAC met in September and continued its work to oversee compliance with the MPC Security Procedures. Among other matters, the committee’s recent activities included: (1) updating the MPC security training program; (2) drafting a questionnaire on guaranty association legacy confidential personal information (CPI) on QUEST for the purpose of developing common document retention practices with respect to that information; (3) summarizing guaranty association responses to a questionnaire on cyber insurance coverage for the purpose of sharing such information with all associations; (4) drafting cybersecurity due diligence guidance for task forces in handling, transferring, and storing CPI in insolvencies; (5) tracking and monitoring state and federal legislation regarding privacy and cybersecurity; and (6) monitoring the activities of the NAIC Privacy Protections Working Group. The SAC plans to meet again in November.

NOLHGA Committee Activity

Accounting Issues Committee

The committee met on October 6 to discuss conducting an educational session on the Moody’s rollback provision in late 2022 or early 2023.

Communications Committee

The committee began work on its latest project—reviewing the FAQs section of the NOLHGA website to determine if any questions should be added or deleted and if any answers should be updated. The committee plans to have a revised set of FAQs posted on the site by year-end.

Coverage/Claims Committee

On August 21, a subgroup of the committee met by videoconference to commence a review of registered index–linked annuities (RILAs). The committee met with an industry representative to obtain additional information regarding the marketplace. The group is currently reviewing several policy forms from different insurers and plans to meet in October to continue its work.

On October 10, representatives of the committee met with the ACLI Receivership and Annuities Committees to discuss draft amendments to the GA Model Act’s definition of “unallocated annuity contract.” The committee prepared the draft amendments for the purpose of clarifying that annuities owned in certain personal trusts and custodial accounts would be excluded from the definition of an unallocated annuity contract, and therefore would be eligible for coverage as “allocated” annuities. As next steps in this project, the committee will report on the draft amendments to the member guaranty associations (most likely at the January 2023 MPC meeting), while the ACLI Receivership and Annuities Committees consider whether to seek changes to the NAIC GA Model Act based on the draft amendments.

Diversity, Equity & Inclusion Focus Group

The focus group met in September to discuss the status of the group’s 2022 planned activities, which include: (1) finalizing the guaranty association Board recruitment brochure; (2) following up with NOLHGA’s key insolvency consultants regarding their diversity, equity, and inclusion (DEI) experience and initiatives; (3) monitoring relevant insolvencies for the unique needs of policyholders from underrepresented communities; (4) monitoring the potential need for offering policyholder communications in different languages; and (5) monitoring DEI developments within the insurance industry and more generally in the country. In addition, the group conducted a panel discussion on DEI experiences and perspectives during NOLHGA’s Annual Meeting.

GA Laws Committee

With the passage of GA Act bills in Ohio, Washington, and New Jersey earlier this year, there are now 37 states that have adopted all or some of the 2017 amendments to the NAIC GA Model Act. In addition, a GA Act bill was introduced in Rhode Island this year but failed to progress out of committee.

In anticipation of 2023 legislative activity, staff has had ongoing discussions with industry and guaranty association representatives about the prospects for GA Act legislation being introduced in various states. During the balance of the year, staff will continue to coordinate with industry and guaranty association representatives and provide technical advice in support of GA Act bills being introduced in the coming year.

Public Policy Coordinating Committee/Education Project

Since the last Board meeting, Peter Gallanis, Mike Heard, Bill O’Sullivan, and Sean McKenna have met monthly with representatives from the NCIGF and Faegre Drinker to discuss regulatory and policy developments at the international, federal, and state levels and strategies with respect to the Education Project.

Financial Activities

The Accounting Department has been involved in finalizing the 2023 operating budget. The proposed 2023 operating budget was approved by the Finance Committee and was then approved by the NOLHGA Board at its October meeting. In addition to routine accounting-related tasks, staff also calculated and mailed the second quarter 2022 assessments.

The department coordinated the following insolvency-related account distributions: (1) $169,000 in premium collections related to National States to affected members; and (2) $1,097,000 to TPAs and receivers to fund claims and expenses for four active insolvencies.

Assessment Data Survey

The 2021 assessable premium data was released to the guaranty associations on September 30. The data is calculated using the information reported by member insurers on the Life, Health and Annuity Guaranty Association Assessable Premium Exhibit – Parts 1 & 2. The redesigned premium exhibits, which were put in place in 2021, accommodate changes in guaranty association acts that were adopted since 2000—in particular changes that were adopted in 2017. The new form allows for more detailed testing, particularly in the health account.

Guaranty Association Assessment Information

The collection of 2021 assessment activity from the guaranty associations has been completed. This annual project entails collecting assessed, called, and refunded assessment information by state, account, and insolvency for the purpose of publishing assessment-level activity reports each fall. The 2021 capacity estimates will be completed in October. Final reports reflecting assessment and capacity activity should be completed and posted to NOLHGA’s website in November.

Communications

GA Update Online

The August 24, 2022, issue of GA Update Online contained details of the management report provided to the NOLHGA Board for its August meeting. The September 9 issue featured updates on NAIC activity.

Systems Support/Technology/Website

Network Systems Status

The Systems Department moved NOLHGA’s staff library from QUEST to a SharePoint site, which now serves as the central repository for staff materials.

In August, a cybersecurity firm was hired to perform a vulnerability assessment of NOLHGA’s network, QUEST, and the NOLHGA website. The assessment did not reveal any critical vulnerabilities. The same firm has been hired to perform an operations security assessment—it will conduct a series of interviews with NOLHGA staff to review and evaluate the organization’s operational security controls.

In September, we updated the monitoring, patch-management, and backup policies for NOLHGA’s servers and laptops.

Technical Assistance for Guaranty Association Administrators

The department is expanding its level of support to member guaranty associations. In addition to website and email hosting, the department will offer OneDrive cloud storage and backup, the latest Microsoft Office Suite of productivity tools, tools for effective collaboration such as SharePoint and Microsoft Teams, antivirus software, monitoring and patch management software, and advanced threat email protection capable of detecting and blocking unknown types of malware. Guaranty associations will also be able to enroll in simulated phishing exercises (testing their employees’ ability to identify and report harmful emails) and reset their own passwords. Dan Hicks and Jaime Sanchez updated members on the Systems Department’s expanded level of support at the October MPC meeting. To date, 10 member associations have taken advantage of the expanded level of technology support.

In September, department members Dan Hicks and Jaime Sanchez hosted a webinar on password management for guaranty association administrators. Those who missed the webinar can watch it on request—just contact the Systems Department.

Website Updates

In July, a redesigned template for the Receivership pages in the members-only portion of the NOLHGA website was implemented.

In August, the member insurance company address update portal was changed to allow member companies to submit a separate contact for premium tax offset reports. The online publications area of the NOLHGA website underwent a modest redesign.

Publications & Online Events

The department has continued its work in planning and conducting NOLHGA’s hybrid meetings. The department recently worked with other staff members to set up a new event site and registration platform for the 2022 Annual Meeting.

The department recently switched its flagship publication (the NOLHGAnet) to an email-only format. We sent new editions of the publication to members in June, August, and September.

Professional Development

On September 8–9, Joni Forsythe participated in a professional development program sponsored by the American Management Association, which was based on Stephen Covey’s The Seven Habits of Highly Effective People.