Volume X , Number 33

MPC Meets in Denver

The following are summaries of Task Force insolvency reports presented during the Members' Participation Council meeting held August 20-22 in Denver, Colorado.

  Staff Contact - Sean McKenna Executive Life (CA)

The Executive Life Task Force meeting in the round was held in closed session. Matters discussed included litigation reports, the FEC Litigation Trust, the Aurora-Swiss Re Agreements, and the budget.

Task Force Chair - Art Dummer;   Staff Contact - Bankers Commercial Life (TX)

Task Force Staff Contact Paul Peterson briefed attendees on the Task Force's marketing plan, which involves negotiating an assumption reinsurance transaction with New Era. Negotiations would occur after the end of September to allow rate increases in Texas (see below) to take effect. If New Era's assumption bid is acceptable, the Task Force expects to close the assumption transaction by the end of February 2002. The following resolution was approved by the MPC:

RESOLVED, that the Members' Participation Council

(1) directs the Bankers Commercial Life Insurance Company ("BCL") Task Force to market the BCL blocks of business to New Era Life Insurance Company ("New Era") only, in an attempt to solicit and complete negotiation of an appropriate assumption reinsurance agreement for such business. The attempt to market to New Era shall be in lieu of an open bid process at this time which process will remain an option depending upon the outcome of the marketing attempts with New Era, and

(2) such assumption reinsurance agreement shall be in a substantially similar form to the NOLHGA Standard Assumption Reinsurance Agreement among NOLHGA, affected guaranty associations, and New Era with such agreement to be signed by the President of NOLHGA, and

(3) directs the BCL Task Force to utilize the standard 30-day GA opt-out period.

Mr. Peterson also presented an update on the current status of the insolvency, noting that the guaranty associations have expended approximately $9.5 million as of July 2001 and that rate increases for the remaining in force Medicare Supplement business, in Oklahoma, Louisiana, and Texas, have been implemented. Task Force Legal Council Frank O'Loughlin (Rothgerber, Johnson & Lyons) gave a presentation on estate issues involving the reimbursement of expenses incurred by the guaranty associations and the potential distribution of existing estate assets. The Task Force will continue to monitor these issues.

Task Force Chair - William Falck;   Staff Contact - Paul Peterson Coastal States Life (GA)

Task Force Chair Jack Falkenbach (DE) reported that the group is working to close the estate, which has about $3 million remaining. However, the Liquidator has received inquiries relating to pre-1990 business. As a result, the Task Force proposed that it work with the Liquidator's staff and counsel to develop a final liquidation plan to close the estate and distribute its assets (97% of which would go to guaranty associations); under the plan, the guaranty associations would handle any subsequent policyholder inquiries and determine if they should be covered. A resolution to this effect was passed by the MPC.

Task Force Chair - Jack Falkenbach;   Staff Contact - Centennial Life (KS)

Task Force Chair Mark Femal (WI) announced that a distribution plan was filed on August 17, 2001; barring any complications, the distribution (about $24 million) should be made within 30 days. Femal noted that some of the states involved have negative balances and so will not receive any reimbursements. Task Force Legal Consultant Charlie Richardson (Baker & Daniels) updated the MPC on the Liquidator's lawsuit against the management of Centennial Life, the complaint against Jardine (a reinsurance broker), and a case against KPMG.

Task Force Chair - Mark Femal;   Staff Contact - Thunor Trust Companies

Task Force Chair John Colpean (MI) briefed attendees on the complex history of the insolvencies making up the Thunor Trust. In July, legal counsel for both NOLHGA and the Mississippi guaranty association met with counsel for the Mississippi, Missouri, and Tennessee receivers for an update on asset recovery matters; Mr. Colpean noted that the Mississippi receiver recently filed with the liquidation court an excellent summary of various claims and litigation in the United States and other countries. The Task Force will continue participating in asset recovery monitoring.

Task Force Chair - John Colpean;   Staff Contact - American Chambers Life (OH)

Task Force Chair Chuck Gullickson (SD) reported that claims processing is in the "mop up" stage, adding that there are very few in force life policies remaining and that Madison National has been contacted about assuming the policies, which are located in approximately 11 states. The Task Force is waiting for Madison National's response. The Liquidator will soon send an early access agreement (approved by the Task Force) to all affected guaranty associations. The Task Force is working with the Liquidator on asset recovery issues, and Andersen is performing an extensive document review.

Task Force Chair - Chuck Gullickson;   Staff Contact - Mutual Security Life (IN)

Task Force Chair Luther Hill (IA) reported that the Liquidator is close to closing the estate of this insolvency, which began in 1991, and the Task Force and its consultants are assisting in the closing effort. However, a lawsuit that the Task Force just became aware of threatens to postpone the closing, which was tentatively scheduled for November 2001. An early access distribution to the guaranty associations is still possible this year, even if the closing cannot occur. Task Force Legal Counsel Charlie Richardson explained that the suit against Cologne Re (which assumed a block of life insurance policies in 1992) has been filed in New Jersey State Court on behalf of certain policyholders.

Task Force Chair - Luther Hill;   Staff Contact - Bill O'Sullivan George Washington Life (WV)

Task Force Staff Contact Bill O'Sullivan told attendees that this 1991 insolvency is "limping toward the finish line," though some litigation remains. An early access distribution to guaranty associations of approximately $1.6 million is expected in the late third or early fourth quarter of this year, which will bring total recoveries to approximately 80 cents on the dollar. Longer term the Task Force hopes that guaranty associations will recover close to 90 cents on the dollar.

Task Force Chair - Bart Boles;   Staff Contact - Bill O'Sullivan

Kelldorf Joins MPC Executive Committee

Jamie Kelldorf, Executive Director of the Montana Life and Health Insurance Guaranty Association and Administrator of the Colorado and Wyoming Life and Health Insurance Associations, was named to the MPC Executive Committee. Kelldorf replaces Jack King, Executive Director of the Arizona Life and Disability Insurance Guaranty Fund, who is retiring in October.

  Staff Contact - Sean McKenna

Surguine Heads Arizona Guaranty Fund

Michael Surguine has accepted the position of Executive Director of the Arizona Life and Disability Insurance Guaranty Fund effective October 2001. Surguine has served as the Insolvency Counsel for the National Association of Insurance Commissioners (NAIC) since 1992 and was previously Deputy Receiver and Guaranty Fund Administrator for the Arkansas Dept. of Insurance.

  Staff Contact - Sean McKenna