Mid-Continent Life (OK)
Receiver Selects American Fidelity
On June 14, the receiver for Mid-Continent filed a report with the receivership court on the amended proposals submitted for the rehabilitation of Mid-Continent. The report stated the receiver's decision to select the amended proposal submitted by American Fidelity Assurance Company. Among the other matters, American Fidelity's proposal commits to refrain from increasing premiums on Mid-Continent's Extra-Life policies for 17 years, and thereafter limits premium increases with the maximum limitations contained in the policy riders.
The receiver anticipates filing a revised rehabilitation plan incorporating the American Fidelity proposal on or about July 12. A receivership court hearing will take place on or about July 26 for the purpose of approving a form of notice to policyholders concerning the proposed rehabilitation plan. It is anticipated that confirmation hearings on the rehabilitation plan will occur during the week of September 18.
Meanwhile, the Rainbolt/Novik team, one of the parties that submitted a revised proposal, has submitted a supplement to its rehabilitation proposal. The supplement contends that the Rainbolt/Novik proposal best accomplishes the purpose of the rehabilitation proceeding. It is unclear what effect this supplement will have since the receivership court's approved process did not recognize the right of the proposers to supplement their revised proposals.
Task Force Chair -Sonya Ekart; Staff Contact - Bill O'Sullivan American Chambers Life (OH)Post-Liquidation Medical Claims To Be Sent
The first batch of post-liquidation medical claims will be sent to guaranty associations the week of June 26. (This is a new batch and does not include the batch of medical claims that were processed by the receiver prior to liquidation.) Mark Femal and Rick Swanson plan to be at Antares' office on June 27 to review the claims processed report before it is distributed.
On June 23, a memo was faxed to guaranty associations as a follow-up to the June 9 memo regarding coverage of pre-liquidation unpaid prescription drug card claims. Many guaranty associations have notified NOLHGA that they will provide coverage for the pre-liquidation unpaid prescription drug card claims. The memo provides payment instructions that guaranty associations have requested.
Task Force Chair -Chuck Gullickson; Staff Contact - Kentucky Central Life (KY)The task force actuarial advisor is working on a wrap-up audit of the Kentucky Central "Shadow account." The audit should be completed by August 1. After the audit is completed, NOLHGA will distribute approximately $10.2 million distribution to affected guaranty associations. Those few states that may owe money as a result of the final audit and true-up will be notified in advance.
Task Force Chair -John Colpean; Staff Contact - Joni ForsytheSummer 2000 NAIC Report
The following is a summary of meetings attended by NOLHGA staff at the Summer NAIC meeting:
Insolvency (E) Task Force
It was reported that the Task Force adopted 2000 charges during a teleconference meeting held on April 27. In addition to various charges of an ongoing nature, the Task Force is charged with responding to the recommendations of its URL Working Group by the 2001 Winter Meeting. The Task Force also heard reports from its Working Groups as to business conducted since the Spring 2000 Meeting.
Insolvency (E) Task Force Working Groups
Receiver's Handbook Working Group
The Receiver's Handbook Working Group held a two hour working session for the purpose of reviewing comments on a new section on HMO insolvencies to be included in Chapter 8 - Special Insolvencies. At the suggestion of the American Association of Health Plans (AAHP) and others, the discussion on available guaranty association type protections will be included in a separate subsection. There are remaining drafting issues to resolve but it is anticipated that they will be resolved in an interim teleconference in advance of the NAIC's September meeting.
NOLHGA has been asked to review the Chapter dealing with Life and Health Guaranty Associations to determine whether any changes are required.
Uniform Receivership Law Working Group
The Working Group held a three hour working session for the purpose of continuing its review of the Uniform Receivership Law (URL) for the purpose of considering whether some or all of the URL should be substituted for the current NAIC Model Rehabilitation/Liquidation Model Act. The focus of the session was on addressing questions and comments on Chapters 5 through 7 of the URL. Various interested parties, including NOLHGA, presented responses to comments and questions previously raised by commentators. In the case of NOLHGA, support was provided for (i) guaranty associations' right to take an assignment of an insolvent company's reinsurance policies under Section 615, (ii) the treatment of guaranty associations' expenses as estate administrative expenses under Section 713 and (iii) the provisions dealing with early access plans under Section 715.
The remaining URL chapters will be reviewed at the NAIC's Fall meeting. It is anticipated that the Working Group will make its recommendation on the URL to the Insolvency (E) Task Force at the Winter 2000 Meeting.
Interstate Insurance Receivership Commission
It was reported that the Nebraska Life and Health Insurance Guaranty Association has undertaken a study of the treatment of GICs and funding agreements in insurer insolvencies. It is anticipated that the Nebraska Association's review will be completed in July. The Commission voted to defer consideration of an amendment to the URL addressing the priority of the foregoing products to allow for consideration of the Nebraska study.
The Compact Commissioners also reported that other states have not expressed an interest in joining the Compact. Nevertheless, the Commissioners stated that the present compacting states intend to continue the Compact in effect.
Regulatory Framework (B) Task Force - Managed Care Organization Working Group
The Task Force revisited the scope of its project. To date, the Task Force's objective has been to amend the HMO Model Act to broadly cover all entities (including indemnity insurers) that use manage care type techniques in the business of assuming health risk. Following discussion, the Task Force decided to narrow it focus and concentrate on updating the HMO Model in respect of the regulation of HMOs only. As a consequence, the Task Force's proposed amendments will be revised to reflect this more narrow scope. The Task Force will hold an interim teleconference to review the revised amendments so that they may be distributed in connection with the September NAIC meeting. The Task Force's new approach will help to eliminate potential concern that a "one size fits all approach" could create confusion over which entities are eligible for membership in the guaranty associations.
Financial Services Modernization (G) Task Force Working Groups
Privacy Issues Working Group
The Privacy Issues Working Group adopted a resolution providing for a delayed compliance date of July 1, 2001 for Gramm-Leach-Bliley's privacy provisions as applied to insurers. The resolution aligns state insurance regulatory requirements with those of federal regulators of banks and securities firms. In order to give effect to the delayed compliance date, each state will need to take individual action adopting the July 1, 2001 compliance date.
The Working Group also reviewed and heard comments from interested parties with respect to draft interim privacy regulations. The purpose of the regulations is to provide guidance to state insurance regulators in enacting privacy regulations under Gramm-Leach-Bliley. The draft regulations are characterized as interim because the NAIC intends to consider stronger privacy protections in the future. The draft regulations deal separately with privacy requirements for financial information and health information. The part dealing with financial information was described as closely tracking regulations issued by federal regulators for federally regulated financial institutions. However, one significant difference is that the NAIC draft regulations expand the scope of the privacy protections beyond "customers" of the financial institution (i.e., policyholders in the case of insurers) and include beneficiaries and claimants under insurance policies. In addition, the separate part on health information requires higher standard than that provided for financial information. The Working Group has requested that interested parties submit comments on the draft regulations by June 30.
Coordinating with Federal Regulators Working Group
This working group has been working on standard forms of information sharing agreements with the various federal regulators of financial institutions. To date, standard agreements have been developed for use by state insurance regulators with the Office of Thrift Supervision and the Office of the Comptroller of the Currency. The Working Group is in the process of negotiating similar agreements with the FDIC and the Federal Reserve Board.
The Working Group also has established 4 working groups to cover specific areas for potential coordination with federal regulators. One of working groups has been assigned the area of troubled companies, and has already met with federal regulators to exchange information on detecting and dealing with troubled companies.
Executive (EX) Committee Working Groups
National Treatment of Companies Working Group
The National Treatment of Companies Working Group is charged with developing a national treatment system for certain aspects of regulating insurers. The Working Group met twice during the Summer Meeting for the purpose of identifying regulatory processes that might be subject to national treatment. Among the processes being considered are company licensing, financial monitoring and holding company activities.
The Working Group is also seeking to identify the eligibility requirements and operating standards that a company would need to meet to enjoy national treatment, and the appropriate operating structure for implementing national treatment of insurers. With respect to the latter issue, the eligibility criteria being considered includes state licenses, capital adequacy, business plans, premium writings seasoning requirements and product marketing. The Working Group has eliminated several options for implementing national regulatory treatment that would give deference to the domicillary state, and is considering an accreditation program to oversee the regulatory processes subject to National Treatment.
The Working Group expects to hold an interim meeting in August.
Speed-to-Market Working Group
The Speed-to-Market Working Group is charged with improving the speed and efficiency of regulatory approval for insurance products. The Working Group has identified and is considering various options for multi-state regulatory processes and procedures that would expedite the regulatory approval of insurance products while continuing to provide adequate protections to consumers. During its meeting the Working Group discussed the merits of various options and narrowed the number of such options under consideration. The options still under consideration can be categorized into two general approaches: (i) domestic state regulatory approval of products with some form of oversight by other entities and (ii) the formation or use of a central vehicle/entity for purpose of reviewing filings. In connection with the possible implementation of these options, the Working Group is considering the usefulness of a central electronic filing repository, an interstate compact and reciprocal agreements.
Staff Contact - Bill O'SullivanLast Call For Legal Seminar Registration
The deadline for registration with NOLHGA for the 9th Annual Legal Seminar in Boston was Wednesday; however several individuals have called or faxed last minute registrations since the cut-off date. Please contact Karen Early at NOLHGA at (703) 787-4101 as soon as possible to be included on the registration list. Additionally, the hotel registration deadline was last Wednesday. The Fairmont indicates their rooms are filling quickly and any last minute reservations should be made as soon as possible. Any questions or concerns regarding hotel reservations should also be directed to Karen Early at (703) 787-4101.
Staff Contact -Model Act Amendment Surveys Due June 30
By now, all guaranty association administrators should have received the survey mailed by the Model Laws subgroup of the NOLHGA Legal Committee asking for input regarding their state's consideration, views and/or experience with the recent amendments to the NAIC Life and Health Insurance Guaranty Association Model Act. As indicated in the mailing, this information is being requested to assist the Legal Committee in preparing a report for the guaranty associations providing an analysis and explanation of the key amendments to the model act since 1997. The report is also intended to provide an overview of important implementation issues and the experience of states to date with these amendments.
On this last point, your survey responses are critical. Accordingly, we urge you to please complete the survey and return same to Bill O'Sullivan at NOLHGA by June 30, 2000. Your input and assistance in this matter is necessary and is greatly appreciated.
Staff Contact - Joni ForsytheCALENDAR/CONFERENCE CALLS
June 27 Claims Valuation Subgroup, Denver, CO
July 20-21 NOLHGA Legal Seminar, Boston, MA