FIO Releases Modernization Report

The Federal Insurance Office (FIO) has released its report on regulatory modernization. A copy of the report and the cover letter to House Financial Services Committee Chair Jeb Hensarling (R-TX) can be found on the NOLHGA Web site in the Press Room.

NOLHGA’s initial review of the report yields the following observations:

• The report does not contemplate replacing state-based regulation with federal regulation, but instead suggests areas where federal involvement could spur state-based regulation to greater uniformity: “…(T)his Report concludes that the proper formulation of the debate at present is not whether insurance regulation should be state or federal, but whether there are areas in which federal involvement in regulation under the state-based system is warranted.” (p. 5)

• The report suggests that state guaranty associations should adopt uniform policyholder recovery rules (p. 44) and goes on to say that if states fail to do so, federal involvement to “ensure fair treatment of all policyholders” may be necessary.

• On the point of guaranty system financial capacity, the report states, “…(D)espite significant apparent capacity in the guaranty fund system, it is unclear how the system would fare in the event of a failure of a large insurance group in the United States.”

• The report recommends that NOLHGA and the NCIGF model such “large failure” scenarios and have their work reviewed by FIO (p. 45).

The report will be discussed at greater length at the January 2014 MPC meeting in Scottsdale, Arizona.

2013 Insolvency Cost Information Report Now Available

NOLHGA has issued its annual Insolvency Cost Information Report, which assists member companies in establishing accruals for life, annuity, and health guaranty association assessments pursuant to Statement of Statutory Accounting Principle No. 35R - Revised Guaranty Fund and Other Assessments (finalized March 2000, revised October 2010) and SOP 97-3 - Accounting by Insurance and Other Enterprises for Guaranty Fund and Certain Other Insurance-Related Assessments (released December 1997 by the AICPA). The report contains information regarding the cost of insolvencies, assessable premium by state, and summaries of each state’s general assessment and premium tax offset provisions.

These reports have been issued by NOLHGA annually since 1992. This year’s report is available for download from NOLHGA’s Web site in the Facts & Figures--Insolvency Cost Information Files section. The report contains the following data files:

Costs: An Excel workbook with individual insolvency cost information along with various summary schedules and premium information by state.

Report: A PDF file that includes commentary on various insolvencies along with the schedules from the Costs file. Also included are general assessment and premium tax offset state provisions along with premiums by state.

In addition, there are special attachments dealing with Penn Treaty/ANIC and Lincoln Memorial cost estimates.

Also, summary assessment called and refunded information has been included on each insolvency case for use by member companies in their accrual process as they deem necessary. This information is compiled from the annual assessment submissions of each guaranty association. It is not audited by NOLHGA; therefore, NOLHGA will not be able to address any questions that member companies may have on the accuracy or completeness of the information. Those inquiries should be directed to the appropriate guaranty association.

Please note that some of the financial schedules will print in very small text and may be difficult to read. If the text is too small, it might help to set those pages to legal size and print them separately from the rest of the report.