American Chambers Life (OH)
New Insolvency Task Force Named
In response to a Rehabilitation Order entered on March 13 against American Chambers Life, MPC Chair Peggy Parker has appointed Chuck Gullickson, SD, to chair the task force. Members of the task force are: Bart Boles, TX; Andrea Bowers, SC, Mark Femal, WI, Frank Gartland, OH; and Ray Terfera, MA. ACLIC was licensed in 38 states and the due diligence period begins next week. NOLHGA has sent a copy of the Rehabilitation Order and a preliminary estimate of guaranty association obligations to affected states.
Task Force Chair - Chuck Gullickson; Staff Contact -PA Supreme Court Denies Appeal of Gersenson Case
In a one-line decision entered last Friday, the Pennsylvania Supreme Court denied the guaranty association's Petition for Allowance of Appeal in the case of Gersenson v. Pennsylvania Life & Health Insurance Guaranty Association. The court also denied separate petitions filed by NOLHGA and the California Insurance Commissioner seeking leave to file amicus statements in the matter.
The class action case involved allegations by Pennsylvania residents that the Pennsylvania association fell short of satisfying its statutory obligations to ELIC policyholders by failing to maintain the monetary value of their original contracts. The plaintiffs also argued that the California court lacked jurisdiction to approve the release of the Pennsylvania guaranty association in accordance with the ELIC Enhancement Agreement and Rehabilitation Plan and that enforcement of the release would violate due process.
At trial in June of 1998, the Philadelphia County Court of Common Pleas accepted the plaintiffs' contentions and entered a monetary judgment against the Pennsylvania association. In the appeal to the Pennsylvania Superior Court, NOLHGA filed an amicus brief supporting the guaranty association's position that full faith and credit should be given to the California rehabilitation court's approval of the ELIC Enhancement Agreement and Plan, and that as a consequence, no additional guaranty association benefits were due to policyholders who opted-into the Plan. Following oral argument on the issues, the appellate court affirmed the trial decision in April, 1999. The Pennsylvania Supreme Court's denial of the appeal last week effectively affirms the unfavorable decisions by the lower courts.
Task Force Chair - Art Dummer; Staff Contact -NAIC Spring Meeting Summary
The following is a summary of meetings attended by NOLHGA staff at the Spring NAIC meeting:
NAIC/Industry Liaison Committee
The focus of the discussion was on steps the NAIC is taking to implement provisions of Gramm-Leach-Bliley Act, and to enhance the efficiency of state insurance regulation. In connection with those efforts, the NAIC has established 9 new working groups, and will seek to address the following matters: (i) proposed amendments to state laws and regulations to achieve functional regulation as contemplated by the Gramm-Leach-Bliley Act (GLB), (ii) uniform licensing standards for producers, (iii) facilitate financial examinations and reviews of national companies, (iv) implementing functional regulation and sharing regulatory information, (v) improving speed and efficiency of regulatory approval for new insurance products, (vi) regulatory re-engineering for commercial lines, (vii) market conduct reforms, (viii) facilitate electronic commerce that protects consumers and (ix) develop proposal for a state based system that would provide for the national treatment of insurance companies. The schedule calls for the new working groups to deliver their recommendations by the Winter 2000 meeting.
There also was discussion on NAIC efforts to develop privacy regulations for use by states in connection with the implementation of GLB. Industry representatives expressed concern over the possibility that some states would adopt non-uniform privacy regulations. It was reported that some states are considering more stringent privacy regulations than those required by GLB.
Financial Services Modernization Task Force
There was a report on continuing regulatory cooperation between the NAIC and federal regulators, in particular in the area of information sharing. A representative from the Federal Reserve Bank of Boston spoke on the Federal Reserve's role as "umbrella" regulator under the Gramm-Leach-Bliley Act. In addition, the new working groups charged with implementing applicable provisions of the Gramm-Leach-Bliley Act provided reports on their initial efforts and plans for the year.
Regulatory Framework (B) Task Force
The Task Force discussed proposed amendments to the HMO Model Act. Among other changes, the amendments would change the Act's name to the Managed Care Organization Act, and would result in "managed care organizations" being subject to the Act. "Managed care organizations" would be broadly defined to include any health carrier offering a health plan that requires or creates incentives for covered persons to use health care providers managed, owned, under contract with or employed by the carrier. The amended Act would allow a licensed insurance company to conduct a managed care business either directly in its own name or through a subsidiary or an affiliate. NOLHGA will be monitoring the proposed amendments for possible implications to the life and health insurance guaranty system.
Insolvency (E) Task Force Working Groups
Receivers Handbook Working Group
The Receivers Handbook Working Group discussed draft materials on HMO insolvencies to be included in Chapter 8 - Special Insolvencies. The American Association of Health Plans (AAHP) submitted written comments on the materials, including a suggestion that all references to guaranty associations should be struck. The rationale for this comment was that the issue of guaranty association coverage was a policy matter that was best left to other groups within the NAIC. Following discussion, it was decided that a teleconference would be held with representatives of the working group and the AAHP to further discuss the AAHP's comments. It was also announced that other parties would have until April 1 to submit comments on the HMO materials, and that the Working Group would be seeking to finalize the materials at the 2000 Summer meeting.
The Working Group also discussed its charge for 2000, which will be to review the Receivers Handbook for appropriate modifications, and to finalize any such modifications by the Winter 2000 NAIC meeting.
Guaranty Fund Issues Working Group
The Working Group's principal charge for 2000 is to prepare a paper on receivership related issues arising from the recently enacted Gramm-Leach-Bliley Act (GLB). The paper will seek to answer, among other issues, (i) whether state receivership and guaranty fund statutes are preempted by GLB, (ii) the significance of GLB with respect to information sharing between state and federal regulators, (iii) the extent of the Federal Reserve Board's authority to examine insurers under GLB, (iv) the extent to which the federal regulators could hinder the ability of state regulators to place an insurer in receivership, and (v) the potential for conflict between federal and state regulators over the use of insurer assets to protect an affiliated bank. It was announced that a draft of the paper would be exposed for a 60 day comment period, after which time the working group would hold an interim teleconference so the paper could be finalized at the 2000 Summer meeting.
Uniform Receivership Law Working Group
The Working Group met for an extended session to begin its review of the Uniform Receivership Law for the purpose of considering whether some or all of the URL should be substituted for the current NAIC Rehabilitation/Liquidation Model Act. The focus of the session was on addressing questions and comments on Chapters 1 through 4 of the URL. The balance of the URL chapters will be reviewed at the NAIC's Summer and Fall meetings. 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.
Insolvency (E) Task Force
The Task Force re-appointed and assigned charges to each of its Working Groups (i.e., Uniform Data Standards Working Group, Receivership Handbook Working Group, Uniform Receivership Law Working Group, Guaranty Fund Issues Working Group and Federal Issues Discussion Group) for 2000. It also heard reports from each Working Group as to business conducted during the Spring Meeting.
Interstate Insurance Receivership Commission
The Commission voted to defer consideration of an amendment to the URL addressing the priority of certain "stable value" products in insurer insolvency proceedings.
An informal meeting was held immediately following the Commission's meeting for the purpose of discussing the possible expansion of the Compact to other states. The general response of industry was that it would be difficult to dedicate significant resources to such an effort in light of the ongoing demands associated with the implementation of Gramm-Leach Bliley and related matters.
Staff Contact - Bill O'SullivanETC.
Discounted tickets available from United Airlines for flights to NOLHGA Legal Seminar
CALENDAR/CONFERENCE CALLS
March 21 Legal Committee Claims Valuation Subgroup Meeting, Orlando, FL
March 30 Joint Seminar Technical Group Meeting, Chicago, IL
May 2 Compensation Committee Meeting, Tysons Corner, VA
May 2 Audit Committee Meeting, Tysons Corner, VA
May 3 Board of Directors' Meeting, Tysons Corner, VA
May 9 Legal Committee Meeting, Orlando, FL
July 20-21 NOLHGA Legal Seminar, Boston, MA