March 4, 2005

MPC Meets in Tampa

The Members' Participation Council (MPC) met in Tampa, Fla., on February 24 and 25, 2005. The following are summaries of task force insolvency reports presented during the meeting:

  Staff Contact - Sean McKenna American Chambers Life Insurance Company (Ohio)

Task Force Chair Chuck Gullickson (South Dakota) reported that the task force is still actively monitoring the estate. The liquidator, who retained some estate assets because of claims against the estate by reinsurers, has received an offer of $36 million for one of the assets--a piece of Chicago real estate in which the estate owns a half interest. A decision on the offer should be made in 60 to 90 days. The liquidator's lawsuit against the company's former directors and officers has been settled, but a suit against its former accountant and law firm is still working its way through the courts. Finally, the liquidator plans to update guaranty association expense records, and the task force will soon survey affected associations on expenses and claims paid in 2003 and 2004.

Task Force Chair - Chuck Gullickson;   Staff Contact - Life and Health Insurance Company of America (Pa.)

Task Force Chair Linda Becker (Kansas) provided an overview of the actions taken by the task force so far and added that the task force is now focused on claims and policy administration, reinsurance issues, claim valuation analysis, early access distributions, and the possibility of moving or restructuring the block of long-term care insurance. The task force also recommended accepting an assumption reinsurance proposal from New Era/Philadelphia American for the life and accidental death and dismemberment business, and the MPC passed a resolution accepting the recommendation.

Task Force Chair - Linda Becker;   Staff Contact - London Pacific Life & Annuity Company (N.C.)

Task Force Chair Frank Gartland (Ohio) reviewed the disposition of various blocks of business, including the universal life block, which is experiencing some IRS 7702 difficulties, and the deferred annuity block. This block featured an exchange agreement with Hartford Life that resulted in approximately 5,300 "stayback" contracts still being administered by the guaranty associations. The block is shrinking as the surrender charges for many of the policies are reduced to zero. The task force expects the block to continue to shrink, and it plans to assess the likelihood of an assumption agreement in six months.

Task Force Chair - Frank Gartland;   Staff Contact - Paul Peterson Metropolitan Mortgage Companies

Task Force Chair Art Dummer (Utah) reviewed 2004 activity in this insolvency and reported that the three rehabilitators are currently working together to resolve inter-company asset-sharing issues. At this time, the rehabilitators do not expect guaranty associations to be triggered.

Task Force Chair - Art Dummer;   Staff Contact - National Health Insurance Company (Tex.)

Task Force Member Bart Boles (Texas) provided a brief overview of the company structure--National Health owns subsidiary Capitol Life and is itself owned by National Health Corporation. The task force is currently monitoring the status of the company.

Task Force Chair - William Falck;   Staff Contact - Reliance Insurance Company (Pa.)

Task Force Chair Tad Rhodes (Oklahoma) updated attendees on the latest activity in this insolvency, including an audit by the receiver. Project Manager Fred Buck (Buck & Associates) provided an outline of a proposal from Madison National to reinsure the "truckers' policies," and the MPC passed a resolution authorizing the task force to proceed with negotiations with the company.

Task Force Chair - Tad Rhodes;   Staff Contact -

Operational Audits, Guaranty System Modernization Highlight MPC Meeting

In addition to the task force reports, the two-day MPC General Session also included a number of presentations and other reports. Dotty Carley (Alabama), Phyllis Perron (Louisiana), and Henry Grimes (Florida) gave a presentation on how to prepare for an operational audit. Tad Rhodes (Oklahoma), Peggy Parker (Virginia), Tom Peterson (Kentucky), and Meg Melusen (NOLHGA staff) reported on the progress of the MPC Executive Committee subgroup charged with updating NOLHGA's Model Plan of Operation. The subgroup is reviewing comments on a draft Model Plan and hopes to have a final version by the next MPC meeting.

Joni Forsythe (NOLHGA staff) reviewed the activity of the NAIC's Model Act Revision Group in its efforts to draft a new Model Insurer Receivership Act. Guaranty System Modernization Task Force Co-chairs Chris Chandler (Prudential Insurance Company of America) and Jack Falkenbach (Delaware) updated attendees on the progress made by the task force since the 2004 Annual Meeting, specifically the task force's four new subgroups: accounting, assessment, technology, and GA statutes.

MPC Chair Falkenbach provided an update on the NOLHGA Board's activities, which focused on topics such as NOLHGA's 2005 organizational goals, recent activity in the Executive Life insolvency, and the NAIC's white paper on coordinating with guaranty associations. He also reported on the most recent meeting of the MPC Executive Committee, which featured reports from the Operational Audit and Plan of Operation Subgroups (see above) as well as discussion of an update of the MPC Task Force Guidelines headed by Art Dummer (Utah) and Bill O'Sullivan (NOLHGA).

NOLHGA President Peter Gallanis updated attendees on the status of financial services modernization efforts in Washington, D.C. He reported that there are indications that insurance will likely be on the agenda of both the House and Senate in 2005, but it is less clear what approach either body will take. At this time, there seems to be little or no support for federal preemption of state insurance regulation and the guaranty system, but the State Modernization and Regulatory Transparency (SMART) Bill and the Spitzer investigations have made it difficult to predict how insurance regulatory reform will proceed.

  Staff Contact - Sean McKenna

MPC Meeting Presentations Online

A number of the presentations given at the Tampa MPC meeting are available on the NOLHGA Web site in the "Events" section. Simply go to the "MPC Meetings" portion of the page and select the Tampa meeting dates, then hit "Go" to be taken to the meeting page, which has PDF files of the presentations. Users must log in to see the presentations, and some of the presentations are available only to certain user groups. If you have any questions or problems accessing the presentations, please contact Sean McKenna at [email protected] or 703.787.4106.

  Staff Contact - Sean McKenna