NOLHGA Board, Task Force Chairs and MPC Exec Hold Second Meeting
The NOLHGA Board of Directors, insolvency task force chairs and the Members' Participation Council's Executive Committee held their second joint meeting Feb. 2-3 in San Diego. Discussion topics included risk retention; communications with insurance departments and receivers; balancing the interests of policyholders with those of guaranty associations; strategic planning; the NOLHGA annual meeting; insolvencies and industry trends.
The Board held its regularly scheduled meeting the afternoon of Feb. 3 and morning of Feb. 4. NOLHGA President Brian Donnelly's report to the Board included a review of the NAIC's winter meeting, details of his meeting with the ACLI's legislative staff, and an overview of his recent visits to the NOLHGA membership. The Board also heard reports on financial matters, Compensation and Legal Committee activities and MPC matters, including the newly appointed MPC Protocols Working Group.
MPC Chair Margaret M. Parker and Dick Klipstein of NOLHGA reported on the November joint meeting of NOLHGA and the International Association of Insurance Receivers, and Mr. Klipstein updated the Board on the status of the Mutual Benefit Life Insurance Company rehabilitation. For more detail about both meetings, please see the upcoming edition of "In the loop," a publication for guaranty association administrators and their boards of directors. It is expected that the loop will be distributed the week of Feb. 16.
Staff Contact - Sean McKenna The American Life Assurance Corporation (AL)Alabama Court Approves Assumption Agreement With New Era
The Montgomery County Circuit Court on Feb. 3 approved the assumption agreement among The American Life Assurance Corporation, New Era Life Insurance Company, the participating guaranty associations and NOLHGA. The five affected associations agreed to become participating guaranty associations. The associations, World Net Services (the guaranty associations' third-party administrator for claims processing) and New Era agreed Jan. 30 to transfer the administration of the ALAC business to New Era effective Feb. 1 in anticipation of closing the transaction in the near future. The only outstanding requirement for closing is approval by the insurance departmentfs of the affected states and by Texas - the state of New Era's domicile - of the assumption certificates.
The receiver provided $175,000 in early access funds on Feb. 4 to pay claims received by World Net through Dec. 31. Checks were processed Jan. 30 and mailed to policyholders Feb. 5. NOLHGA sent funding requests of $4.8 million on Feb. 5 to the participating associations. The receiver agreed to provide $100,000. Closing will occur as soon as the assumption certificates are approved.
Task Force Chair -- Mike Marchman; Staff Contact - Joni Forsythe American Standard Life & Accident Ins. Co. (OK)OK Supreme Court Overturns Judgment Against Guardian
The Oklahoma Supreme Court on Feb. 3 issued another opinion overturning the $15.7 million judgment against Guardian under a reinsurance agreement with American Standard Life and Accident Insurance Company. The judgment was based on an Oklahoma statute which precluded a reinsurer from exercising offset rights under a reinsurance agreement that did not provide for risk transfer. In John P. Crawford, Insurance Commissioner as Receiver for American Standard Life and Accident Insurance Company v. The Guardian Life Insurance Company of America, the Oklahoma Supreme Court found that the legislature intended for the statute to be applied only on a prospective basis, and that the lower court's Guardian judgment was based impermissibly on a retroactive application of the statute. The new opinion was in response to the court's own Dec. 16 order granting reconsideration in the case and confirmed its original opinion in favor of the Guardian.
Task Force Chair -- Andrea Bowers; Staff Contact - Bill O'Sullivan Executive Life Insurance Company (CA)THE AMICUS SUBGROUP OF the NOLHGA Legal Committee voted Feb. 3 to submit an amicus brief to the Mississippi Supreme Court in the matter of Bank of Mississippi v. Mississippi Life and Health Insurance Guaranty Association. In this appeal, the bank, trustee of a pension plan liquidating trust, seeks a reversal of the trial court's ruling denying guaranty association coverage based on the Pension Benefit Guaranty Corporation exclusion in the Mississippi Life and Health Insurance Guaranty Association Act which expressly excludes coverage for any unallocated contract issued to an employee benefit plan protected under the PBGC.
The trustee argues that the pension plan at issue, though eligible for PBGC coverage, wasn't protected within the meaning of the guaranty association act, because no PBGC payments were made. The trustee also argues that the PBGC exclusion does not apply to contracts purchased prior to the 1990 enactment of the exclusion, and that any retroactive application violates the contract clauses of both the U.S. and Mississippi constitutions.
The trial court rejected the plan's argument, finding that the plan paid termination insurance premiums to the PBGC and enjoyed termination insurance benefits within the PBGC's statutory limits. The court further concluded that the guaranty association law in effect at the time of insolvency governs the association's obligations, regardless of when the contracts were purchased, and that there can be no contract clause violation since the association's obligations are purely statutory - no contractual relationship exists. Oral argument has been requested, though no hearing has been scheduled.
Task Force Chair -- Art Dummer; Staff Contact - First National Life Insurance Company (AL)NOLHGA SENT TO THE AFFECTED guaranty associations on Jan. 30 detailed lists of policyholder refund of premium claims. Payment of these claims, totaling $300,000, will fulfill the guaranty associations' obligations under the canceled policies of this insolvent insurer.
The receiver indicated that the estate may not have sufficient funds to provide early access, even at the administrative expense priority. The Montgomery County Court on Dec. 28 approved the sale of the home office building for $1.4 million. The building, carried on FNLIC's books at $2.8 million prior to rehabilitation, was encumbered by a $1.4 million mortgage. The receiver expects to realize about $50,000 from this transaction.
Task Force Chair -- Mike Marchman; Staff Contact - Joni ForsytheETC.
1998 Legal Seminar
The Legal Seminar Planning Committee has begun preparations for the 1998 Legal Seminar, to be held July 23-24 in Reno, Nev. Charlie Richardson chairs the committee, whose other members are Jim Fagan (Arizona), Doug Furlong (New Jersey), Dick Horne (Arkansas), Van Mayhall (Louisiana) and Frank O'Loughlin and Dave Perry (Wisconsin). Please send ideas for topics to Mr. Richardson at Baker & Daniels in Indianapolis or to Joni Forsythe at NOLHGA
Staff Contact -- Joni Forsythe 703/787-4103
CALENDAR
Feb. 16 NOLHGA's offices closed in observance of Presidents' Day Feb. 23-25 Members' Participation Council, U.S. Grant Hotel, San Diego March 14-18 NAIC Spring National Meeting, Salt Lake City
Staff Contact - Sean McKennaCONFERENCE CALLS
Feb. 17 Legal Seminar Planning Committee, 1 pm EST
Staff Contact - Sean McKenna