Guarantee Security Life (FL)
Lindell Settlement Approved
The Receiver filed March 3 a motion to approve settlement with Ann Lindell. Under the settlement, Lindell will transfer to the Receiver over 180,000 shares of common stock of Hayes Lemmerz International Inc. and over 67,000 warrants to purchase common stock of Hayes Lemmerz International Inc. Hayes Lemmerz is the successor to MWC Holdings, Inc., and the common stock and warrants are the entire proceeds of the MWC Holdings, Inc., securities that William Blackburn had transferred to Lindell. Blackburn was one-half owner, chairman of the board, secretary, treasurer and a director of GSLIC's parent company Transmark USA Inc.
Through this settlement, almost $5 million in value will be transferred to the Receiver in the form of Hayes Lemmerz International Inc. common stock and warrants. Upon the transfer of funds or property to the Receiver, the Receiver will distribute such funds or property in accordance with the provisions of the GSLIC Rehabilitation Plan.
In the absence of written objections to the settlement filed with the Court by March 15, the Receiver will seek entry of an order approving the settlement without further notice or hearing.
Task Force Chair - Frank Gartland; Staff Contact - Bill O'Sullivan Executive Life (CA)Proposed Schedule 9.3.3 Changes
Administrators of associations affected by Executive Life received this week from the California Conservation and Liquidation Office proposed policyholder listing changes to Schedule 9.3.3 of the Enhancement Agreement. The Executive Life Task Force has asked Arthur Andersen to review the proposed changes and provide a report to the participating guaranty associations. In the mean time, participating guaranty associations are asked to report any comments they may have to Kevin Stephens of Arthur Andersen 202.862.2566 or Angela Franklin at 703.787.4105.
In other news, Effective immediately, members may contact ELIC Project Manager, Don Kinney at his new address: Carefree Office Center, 7518 Elbow Bend Road, Carefree, AZ 85377, 602.575.0664 (phone), 602.575.0665 (fax).
Task Force Chair - Art Dummer; Staff Contact -NAIC Meeting Report
Receiver's Handbook Working Group
The Working Group considered a suggestion that there be a one year hiatus from further changes to the Receiver's Handbook. The hiatus would allow recently adopted changes to be incorporated in the publication. Changes proposed in 1997 (and adopted in 1998) are still in process of being published and changes proposed in 1998 are slated for approval this year. Ultimately, the group decided to focus on three areas this year: (i) legal/case law update, (ii) Y2K impact s and (iii) health insolvency/HMO issues. Interested persons were asked to provide input on the Y2K and Health issues by April 5. The Working Group also will accept input on other issues but will hold off on including in Handbook until next year.
Guaranty Fund Issues Working Group
The Working Group unanimously adopted an amendment to the NAIC Life/Health Model Act that would effectively exclude "charitable gift annuities" from guaranty association coverage. The Working Group then proceeded to discuss its proposed charges for 1999:
1. Consider Coverage of Equity Index Products - The Working Group also continued discussions on the ACLI's proposed Model Act amendments for the purpose of clarifying coverage of equity indexed products. One member of the Working Group raised an issue with respect to an apparent inconsistency in terminology used to clarify that interest rate adjustment provisions are intended to apply to equity index products. Richard Darling (Illinois) questioned whether the reference to "impaired insurer" in this provision would alter the date of guaranty association coverage. Mr. Darling also expressed concern that the proposal was inconsistent with certain positions taken by the NAIC in its letter to the Securities and Exchange Commission of December, 1997. In particular, Mr. Darling questioned the proposal's fairness to the extent it could cut off the equity index feature in the middle of the term of a contract . Mr. Darling suggested that the calculation of equity index values should be made as if the term of the contract ended on the insolvency date. Michael Surguine (NAIC staff) asked whether special disclosure should be made regarding the extent of guaranty association coverage in the event that the ACLI proposal was to be adopted. A proposal was made for the Working Group to hold an interim meeting for the purpose of further discussing and resolving these issues.
2. Recommend a NAIC Position on Diversified Financial Institutions - There was some uncertainty as to what was intended by this charge. Peter Gallanis (Illinois) stated his belief that the intent was to develop an NAIC position for dealing with "turf" issues over assets and approach in the case of the bankruptcy of a diversified financial company that has insurance company affiliates in receivership proceedings. Mr. Surguine indicated he would discuss with Arnold Dutcher (Illinois) for further clarification.
3. Insolvency Issues Related to Managed Care Organizations - The Working Group discussed the status of the "CLEAR" project and acknowledged the need to continue to monitor the efforts of that group. It also was noted that Senator Grassley (Illinois) had again proposed a bill to amend the Federal Bankruptcy Act. His current proposal does not contain a provision submitting HMOs to the jurisdiction of Federal Bankruptcy Court.
Interstate Insurance Receivership Commission
The Commission has two new representatives with Cathleen Travis replacing Peter Gallanis as Illinois' representative and Commissioner Timothy Wagner replacing Timothy Hall as Nebraska's representative.
A report was provided on the status of the Uniform Receivership Law (URL) in the compacting states. Nebraska is the only compacting state in which the URL has been introduced as legislation. The URL is expected to be introduced in Michigan and Illinois later this year.
A brief report was provided on two open issues. Concerns raised by life reinsurers remain unresolved. A proposal to include guaranteed investment contracts as insurance policies for the purposes of the priority of distribution section is still being considered by the Commission.
Regulatory Framework (B) Task Force
The Task Force discussed its charges which include reviewing current model laws governing health carriers and other health care organizations for the purpose of developing common definitions and regulations of similar type entities assuming health risk. The Task Force's intent is to amend current model laws to address the issues and to develop a new model to the extent necessary. Several industry representatives noted that this effort should include consideration of insolvency issues.
Federal Issues Discussion Group
The group discussed three recent developments:
(i) In Humana v. Forsythe, the U.S. Supreme Court ruled that the prosecution of claims against an insurer under the federal civil Racketeer Influenced and Corrupt Organizations Act (RICO) did not invalidate, supercede or impair state law regulating insurers and therefore was not preempted by the McCarran-Ferguson Act. The court's rationale was RICO advanced the state's interest in fighting insurance fraud, and did not frustrate an articulated state policy or administrative regime, and therefore would not be reverse preempted by McCarran-Ferguson.
(ii) In United States v. Blue Cross Blue Shield of West Virginia, the federal government was granted an extension for requesting Supreme Court review of the decision of the West Virginia Supreme Court in the case. The government has until April 5, 1999 to file a petition for certiorari seeking Supreme Court review. The West Virginia Supreme Court had ruled that claims of the federal government was subject to the claims bar date and priority of distribution rules governing insolvency proceedings under West Virginia law.
(iii) It was also reported that U.S. Senator Grassley (R-IA) intended to reintroduce a bill which was first introduced last year for the purpose of modifying the federal bankruptcy act. Unlike last year's bill, this version would not provide for federal bankruptcy court jurisdiction over health maintenance organizations. However, it was reported that Senator Torricelli (D-NJ) may have interest in this issue given several recent managed care organization failures in New Jersey.
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 amendments to the Life/Health Model excluding charitable gift annuities from coverage.
The Subcommittee also discussed two of its charges for the coming year. With respect to its charge to consider the Uniform Receivership Law, the Subcommittee formed a working group to consider the extent to which provisions from the URL should be incorporated into the NAIC Insurers Rehabilitation and Liquidation Model Act. NOLHGA volunteered to serve on this working group. The Subcommittee also considered a new charge regarding confidentiality issues. The charge requires the review and amendment of relevant model acts 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. Members of the Subcommittee were asked to compare applicable laws in their respective jurisdictions with the given model laws to assess the treatment of confidentiality issues.
Uniform Standards Working Group
The technical support group continues development of generic product codes to be used for reporting unearned premium and loss claim information between guaranty associations and receivers. These codes will be used in the electronic reporting files by both guaranty associations and receivers.
The technical support group continues developing the reporting formats to be used by life/annuity/health guaranty associations in reporting their financial transactions to receivers. Additional fields will be added in order to track receipts. The group also recommended that quarterly or semi-annual reporting together with inception to date reporting be made by guaranty associations in order to reduce the amount of reconciliation work receivers will have to perform at the close of an estate.
The implementation date to be used for reporting both the claim and financial information will be July 1, 2000. The first report to receivers should be made at the end of the third quarter.
Staff Contact - Bill O'SullivanETC.
On March 10, NOLHGA assistant counsel Meg Melusen gave birth to Madison Ruth Melusen. Mother and daughter are resting comfortably.
CALENDAR/CONFERENCE CALLS
March 16 Communications Committee Teleconference, 1-3pm EST
July 15-16 NOLHGA Legal Seminar - Note Date Change, More Information Next Week