Settlers Life (VA)
Preliminary Meeting Held
A working group of the Settlers Life task force met today in Bristol, Virginia with the Receiver to gather preliminary data on the insolvency. Representing the task force were Mike Marchman, chair, Peggy Parker, task force member, Bob Tice, project manager, Frank O'Loughlin, legal counsel, and Holly Wilding, NOLHGA staff. States affected are: Arkansas; Delaware; Georgia; Illinois; Indiana; Kentucky; Louisiana; Maryland; Mississippi; Missouri; Nebraska; North Carolina; North Dakota; Ohio; South Carolina; Tennessee; and Virginia. Additional information should be available next week.
Task Force Chair - Mike Marchman; Staff Contact - Coastal States Life (GA)Settlement Received
The Receiver's counsel reported June 10 that they had received the $370,000 settlement from APAM, the former investment advisors to Coastal States. The court had approved this settlement the week of June 1. This was the last open litigation in the estate. Except for the disposition of about 20 policies issued before 1990 on which the receiver is gathering information, the estate could be closed. These pre-1990 policies were discovered only recently, and resolution is expected soon.
Task Force Chair - Jack Falkenbach; Mid-Continent LifeRelief Motion Denied
On June 8, 1999, Oklahoma District Court Judge Noma Gurich denied the motion of bidder UICI for injunctive relief requiring that bids submitted for Mid-Continent's business be returned to bidders, new standards be set up and a new timetable for bidding commence. The Judge also denied UICI's motion requesting that bid responses be kept confidential and that Florida Progress Corporation (Mid-Continent's ultimate parent company) be excluded from the bid evaluation process. In ruling, the Judge stated that UICI's motion was being denied without prejudice to its right to reassert the issues with respect to bid standards at a later stage of the proceedings.
In a related development, nine bid responses for Mid-Continent's business were publicly opened in the Oklahoma District Court on June 10. NOLHGA's Mid-Continent Task Force has made arrangements to obtain copies of the bids and will be reviewing the same.
Task Force Chair - Sonya Ekart; Staff Contact - Bill O'SullivanNAIC Meeting Report
Year 2000 National Contingency Plan
The NAIC held a workshop June 2 - 4 to develop a Year 2000 National Contingency Plan that will enable regulators to ensure the viability of regulation in time of crisis and to demonstrate to insurance companies, consumers and other constituents that insurance regulators have the flexibility to deliver on their commitments to sound insurance regulation. The Plan covers the functioning of state insurance regulation in six broad business areas: Consumer Complaints, Market Conduct, Financial Surveillance, Rehabilitation & Liquidation, Rate & Forms Filings, and Agent Licensing.
The workshop was attended by forty-seven individuals representing twenty-eight states, all of whom were state insurance department personnel except for five guaranty association representatives - Jack Falkenbach (DE), Paul Peterson (NOLHGA), Dale Stephenson (NCIGF), Steve Durish (TPCIGA), and Mike Marchman (GA).
In the Rehabilitation & Liquidation area, four options to handle Y2K crises were identified: transfer business to assuming insurers, remediate hardware/software Y2K errors through use of either internal (e.g. insurance department/receivership personnel) or external (e.g. guaranty association personnel, consultants, TPAs, industry personnel) resources, or as a last resort, utilize manual processing.
In this regard, guaranty association support is needed to identify: resource pools for assuming insurers; hardware/software vendors/consultants that provide packages to industry, outside consultants (e.g. TPAs, accounting, actuarial, computer systems), and any industry personnel that could be available to provide support. Additionally, any associations that have the capacity to lend assistance to other state associations or insurance departments that may experience Y2K problems should be identified.
The plan document was presented to the NAIC Executive Committee for approval with slide presentations to various other NAIC Sub-Committees during the balance of the summer national meeting. While some polishing of the document is expected, this Plan will be sent to the GAO to respond to its report issued at the end of April. The final document is expected to be published in July.
Guaranty associations are requested to identify any of the needed resources listed above that they believe may be interested in and capable of assisting the system in its Y2K efforts. Names of these resources may be sent to Paul Peterson at [email protected] or by calling 703.787.4119.
Staff Contact - Paul PetersonInsolvency EX(5) Subcommittee Working Groups
Receiver's Handbook Working Group
The Receiver's Handbook Working Group received updates on the three areas which will be the focus of this year's supplement to the Handbook: (i) Y2K, (ii) Legal and (iii) Health/HMO insolvency issues. The Working Group has asked for drafts of materials for these items by August with the final proposed work product to be submitted at the fall meeting.
With respect to Y2K issues, it was reported that NOLHGA's Y2K committee had provided suggested materials for inclusion in the handbook.
It also was reported that no new issues or topics were submitted for additions to the chapter on legal matters. Nevertheless, there will be an update to reflect case law developments. Finally, the Working Group still anticipates additions to Chapter 8 to cover HMO insolvencies. In addition, the Working Group will appoint persons to follow developments in this area for future possible changes.
Uniform Receivership Law Working Group
This newly appointed working group will make recommendations on the possible incorporation of the URL (or portions thereof) into the NAIC Model Insurers Rehabilitation and Liquidation Act (IRLA). Notwithstanding concerns voiced by members of the public about selective incorporation, the Working Group intends to undertake a section by section comparison of the URL and IRLA to determine which, if any, of the URL provisions should be incorporated in the IRLA. Members of the public concerned with this approach felt it would undercut some of the chief advantages of the URL - uniformity, well-organized layout of the statute and balance of interests among interested persons.
Guaranty Fund Issues Working Group
The Guaranty Fund Issues Working Group dealt with the following items:
1. Coverage of Equity Indexed Products - The Working Group held a public hearing on the ACLI's proposal for Model Act amendments to clarify coverage of equity indexed products. After brief discussion, the Working Group unanimously adopted the ACLI amendments. The amendments approved by the Working Group clarify coverage of equity indexed products in three respects: (i) they confirm the application of Section 3B(2)(c)'s interest rate adjustment provisions to equity indexed products, (ii) they limit coverage to values that have been credited and are not subject to forfeiture as of the date of the insurer's impairment or insolvency, whichever is earlier, and (iii) they allow guaranty associations, for the purpose of continuing coverage of equity indexed products, to substitute policies with fixed interest or other means of determining values. In the case of so-called "point to point" equity indexed contracts, the amendments provide that covered values shall be determined by calculating equity linked interest as if the contractual date for crediting interest is the date of the insurer's impairment or insolvency, whichever is earlier.
2. NAIC Position on Diversified Financial Institutions - Arnold Dutcher (Illinois) provided background on the Working Group's charge in this area. He explained that the affiliation of insurers with banks and other financial institutions would create potential conflicts over the management of the insolvency process governing these entities. Specifically, he expressed concern about insurance and bank regulators having different approaches for handling insolvency cases. He noted that bank regulators have a bias towards saving distressed institutions while insurance regulators more often than not seek to liquidate the entity. He also noted that the charge was intended to respond to situations where there was a co-mingling of assets between affiliated, insolvent insurers and banks. The Working Group intends to address these and other issues in a recommended position statement and will monitor pending federal legislation concerning financial services modernization.
3. Insolvency Issues Related to Managed Care Organizations - Given the increase in the number of HMO insolvencies, as well as perceived inadequacy in solvency and consumer protection measures, there is a renewed focus on this issue. It was announced that the Executive Committee would consider a charge that would provide for a joint undertaking by Insolvency (EX5) Subcommittee and Regulatory Framework (B) Task Force to make recommendations by with respect to solvency issues and insolvency protection measures for consumers with respect to managed care organizations. [Note: During the meeting the Executive Committee approved the charge for Insolvency Subcommittee and the Regulatory Task Force.]
Uniform Data Standards Working Group
The working group heard status reports from three technical support groups. The first reported that revisions to the operations manual for claims reporting in property/casualty estates is expected to be completed by the fall NAIC meeting. Also, it was reported that a recent survey revealed that receivers for property/casualty estates are beginning to use the uniform data standards to report claims. A second technical group reported that they were continuing to draft the uniform data standards operations manual for reporting claims in life/health/annuity insolvencies. A third group reported similar work was ongoing on the manual for financial reporting by guaranty associations.
Federal Issues Discussion Group
The key reporting items were as follows:
At the request of the NAIC, a bill introduced by U.S. Senator Grassley (R-IA) to amend the Federal Bankruptcy Act has been modified to delete provisions relating to health maintenance organizations. There are remaining concerns that the bill's definition of health care organizations could be interpreted to include HMOs and NAIC staff will seek clarification of this language. It was also reported that "Fabe Cure" legislation had been enacted in Idaho bringing to 28 the number of states passing such legislation.
Insolvency (EX5) Subcommittee
The Subcommittee heard reports from each of its working groups. In connection with the report from Guaranty Fund Issues Working Group, the Subcommittee voted to adopt the ACLI's proposed amendments to the Life/Health Model clarifying coverage of equity indexed products.
The Subcommittee also heard a presentation on the NAIC National Y2K Contingency Plan for insurance departments. (See related article in this edition of Wire for more details on the workshop).
Finally, the Subcommittee discussed its charge regarding confidentiality issues. This charge requires the review and consideration of amendments of relevant model acts (including the Life/Health Guaranty Association Model Act) to ensure that state, federal and international regulatory entities and law enforcement authorities are able to share information without compromising confidentiality and applicable privileges from disclosure. The Subcommittee will appoint a working group to review the applicable model acts and report back to Subcommittee.
Interstate Insurance Receivership Commission
There was brief discussion on two open drafting issues with respect to the Uniform Receivership Law. A proposal to expressly reference "stable value" products as insurance policies for purposes of distribution priority was deferred to allow for further discussion among interested parties. A proposal by the National Conference of Insurance Guaranty Funds to avoid the URL from being adopted without provisions dealing with guaranty associations was deferred because of concerns raised by members of the public. This issue will be revisited at the next meeting of the Commission.
Staff Contact - Bill O'SullivanETC.
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