Volume IX , Number 22
Bankers Commercial Life (TX)
Receivership Ordered; Task Force Named
On May 15, the Texas District Court of Austin issued a Temporary Injunction and Appointment of Receiver against Bankers Commercial Life Insurance Company, a Texas-domiciled company. Bankers Commercial wrote primarily Medicare supplement and hospital surgical policies. The company was licensed in: Arizona; Colorado; Florida; Louisiana; Missouri; Montana; Nebraska; New Mexico; North Dakota; Oklahoma; South Dakota; Texas and Utah.
MPC Chair Peggy Parker has appointed a task force consisting of: William Falck (FL, Chair); Chuck LaShelle (TX); Jack King (AZ); Phyllis Perron (LA) and Tad Rhodes (OK). The task force represents approximately 98 percent of Bankers Commercial business (based on 1999 premiums), with Texas and Louisiana alone accounting for 94 percent.
The business is currently being administered by United Teacher Associates Insurance Company in Austin, Texas. Representatives of the task force met with officials of United Teacher and the Texas Department of Insurance on May 23 to discuss the situation and to obtain additional information. Task force members are developing a plan of action. A report was sent to affected guaranty associations on June 2.
The task force working group, in conjunction with the Texas Department of Insurance and United Teacher Associates has drafted letters to policyholders, providers and agents assuring them that their policies are covered and that covered claims will be paid by guaranty associations, subject to the applicable coverage provisions. Those letters will be mailed next week.
Task Force Chair - William Falck; Staff Contact - Paul Peterson Inter-American Life (IL)Liquidator Prevails on Reinsurance Claim
On May 23rd, the Cook County Circuit Court ruled in favor of the Inter-American Liquidator on its breach of contract counterclaim against Employers Re. Each of Employers Re's direct claims were previously dismissed. In the remaining count for breach of contract, the Liquidator argued that Employers Re was liable under the Reinsurance Agreement for its share of the liability on the policies it had reinsured, and that it had waived certain provisions under the Agreement which may have limited or eliminated its liability and the court agreed. Based upon the damages testimony of the Liquidator's actuary, the trial judge awarded the sum of $9,552,215.
The damage award does not include a calculation of interest, which the Liquidator will now pursue. While it is estimated that approximately three-fourths of the award will benefit the guaranty associations, an appeal by Employers Re would delay any recovery.
Task Force Chair -William Falck; Staff Contact - Joni Forsythe Kentucky Central Life (KY)Settlement Discussions Ongoing
On May 17, 2000, Kentucky Central Task Force representatives met with the Kentucky Central Liquidator and representatives from the assuming carrier Jefferson-Pilot Life Insurance Company to discuss outstanding end of plan issues. Items of discussion included generally the status of estate litigation and real estate distribution efforts; maintenance of the "shadow accounts," end of plan audit and final true-up issues, including the policyholder persistency bonus and end of plan adjustments.
The focus of this discussion was directed towards resolving the issue of any potential exposure on interest guarantees post plan termination and the status of guaranty association efforts to obtain commissioner approval of the restructured minimum interest rate guaranty provision in the Jefferson-Pilot policies in those states where the guaranty associations have authority to issue "alternative policies." For the purpose of end of plan reporting as required by the terms of the Participation Agreement, Jefferson-Pilot agreed that guaranty associations that have filed for commissioner approval, but have received no response by the May 31, 2000 deadline will be deemed disapproved, subject to adjustment in the event approval is received by year-end.
In addition to discussion and negotiation of the foregoing, the task force is continuing to press the Liquidator for payment of the long pending administrative expense claims of NOLHGA and the guaranty associations. In this regard, the task force expects to update the expense claim through first quarter 2000 within the next few weeks. For those of you that have not yet submitted your expense forms, we ask that you do so immediately so that your expenses can be included in this update.
Task Force Chair - John Colpean; Staff Contact - Joni Forsythe American Chambers (OH)Task Force Activity
The Claims and TPA subgroup is working with Antares Management Solutions to resolve various service agreement related questions including customer service, pre-liquidation claim payments, drug card claims, and quality control procedures. The subgroup is also working with Antares to appoint a contact for guaranty association administrators with whom they can direct certain types of questions.
The task force's working group met by teleconference May 31 with the Liquidator and Antares. Arthur Andersen is working on an in-force listing and pre-liquidation claims detail that the Task Force anticipates will be sent out within the next two weeks. Antares expects to provide GAs with a batch of claims processed subsequent to the date of liquidation by the middle of June. Antares is negotiating extensions of the agreements that American Chambers had with discount service providers. The task force met by teleconference June 1, and approved arrangements developed by Antares regarding Automatic Clearing House payments.
The Liquidator has provided the task force with a summary of policyholder related litigation, and plans to send the litigation files to the appropriate guaranty association.
The Claims and TPA subgroup met by teleconference June 1 with the Liquidator and Merck-MedCo, the drug card provider for American Chambers. Later that day, the task force approved in principle a recommended arrangement for guaranty association funding of Merck-MedCo post-liquidation claims. The task force will soon provide guaranty associations with an analysis regarding Merck-MedCo claims for benefits prior to the May 8 liquidation date.
The task force's claims auditor's preliminary report identified generally positive results, but there are some areas that may cause future concerns. The error ratios identified were "well within industry standards," however, the auditors noted a somewhat high incidence of "procedural" errors, (i.e., errors that could result in financial errors on later claims).
Task Force Chair - Chuck Gullickson; Staff Contact - Investment Life (NC)Distribution Made
The Liquidator made a $3.5 million early access distribution the week of May 26. Thirty-three of the affected guaranty associations should have received their checks by today. This distribution left the estate with only a small amount of liquid assets, a few performing mortgage loans, and some properties tied up it litigation.
The Receiver's expenses for the three months ended Dec. 31, 1999 were $39,585. The $3.5 million early access distribution took most off the estate's interest bearing assets. Therefore, there will be very little future interest income to offset any future estate expenses. If it takes "four more years" to liquidate the joint venture asset, the Receiver would incur another $640,000 in expenses, leaving only about $600,000 to $700,000 for a final distribution.
Task Force Chair - Frank Gartland; Staff Contact -Legal Seminar Brochures Sent
Brochures were mailed this week outlining the topics and registration particulars for NOLHGA's Ninth Annual Legal Seminar in Boston on July 20-21, 2000. In addition to Wall Street Journal reporter, Ellen Pollock, the seminar will showcase two panel discussions exploring the ramifications of the Gramm-Leach-Bliley Act (GLB), i.e. the legislation passed last November which portends revolutionary changes for the financial services industry. The brochure includes a fact pattern insert, which will be the basis of discussion for the first financial services modernization panel. The second of these two panels will feature industry and regulatory authorities discussing the implementation of GLB, its impact on regulation at the state and federal levels, and how the GAs and others might be affected.
Details regarding registration for the seminar, along with hotel and flight information, are included in the brochure. Please note that the Registration Deadline is June 21st. Please contact Karen Early at 703-787-4101 with any questions.
Staff Contact -CALENDAR/CONFERENCE CALLS
June 7 Amer. Chambers Working Group Telecon. w/Liquidator and TPA, 3:00 pm ET
June 8 Amer. Chambers Task Force Teleconference, 3:00 pm ET
July 20-21 NOLHGA Legal Seminar, Boston, MA