Mid-Continent Life Insurance Company (OK)
Judge Reviews Rehabilitation Plans For Mid-Continent
Oklahoma County District Court Judge James Blevins on March 17 rejected the two competing rehabilitation plans for Mid-Continent Life Insurance Company. Oklahoma Insurance Commissioner John P. Crawford, acting as receiver, filed a plan calling for recoveries from a lawsuit against Mid-Continent's parent company, Florida Progress, to be used to rehabilitate the insurer. Mid-Continent's former management submitted their own plan, which provides for a combination of premium increases and a capital contribution from Florida Progress to solve the company's reserve problems.
Counsel for the receiver stated during oral argument that a premium increase was undesirable because it could result in shock lapses harmful to the company. The receiver also claimed that Mid-Continent's reserve deficiency was much greater than first believed ($348 million as opposed to $160 million), and that the receiver had discovered evidence directly linking Florida Progress to the company's reserve problems. Management countered by stating that the company's condition was deteriorating under the receiver's supervision, and that the receiver had failed to submit a meaningful plan to release Mid-Continent from receivership.
Judge Blevins refused to accept either party's plan, stating his preference for a plan which would increase premiums now to resolve the company's reserve problem. The judge also said the lawsuit against Florida Progress should proceed without delay and that any recoveries be used to reimburse policyholders for the premium increase.
Task Force Chair -- Sonya Ekart; Staff Contact - Bill O'Sullivan American Standard Life and Accident Ins. Co. (OK)JUDGE JOHN M. AMICK of the Oklahoma County District Court on March 16 issued an order amending American Standard's liquidation order to provide for an effective date of not later than Sept. 30, 1998. The order was previously scheduled to take effect April 1. The extension was made pursuant to an understanding between the receiver and the ASL Task Force, and in anticipation of closing an assumption agreement on or before that date.
Meanwhile, potential bidders for ASL's business have scheduled appointments to perform diligence work at the receiver's office. The due date for submitting bids has been extended to April 24 because of great interest expressed by potential bidders.
Task Force Chair -- Andrea Bowers; Staff Contact - Bill O'SullivanNAIC Spring National Meeting
The National Association of Insurance Commissioners held its spring national meeting March 14-18 in Salt Lake City. NOLHGA was represented by Brian J. Donnelly, president; Anthony R. Buonaguro, executive vice president and general counsel; and Richard W. Klipstein, executive vice president, insurance services.
INSOLVENCY (EX5) SUBCOMMITTEE
Receivers Handbook Working Group
The working group welcomed its new chair, Jeanne Bryant of Tennessee, and began preparations for the next edition of the handbook. A major undertaking on the life and health side will be a revision of Chapters 6 and 9 (relating to guaranty funds and general legal considerations) to reflect adoption last year of the new version of the guaranty association model act. Guaranty Fund Issues Working Group
The working group, meeting March 16, voted to approve a compromise proposal made by the American Council of Life Insurance to amend the guaranty association model act to make coverage of unallocated annuities optional. This proposal was approved the following day by the full (EX5) subcommittee, over the objection of Texas. The proposal will be brought to the executive committee and plenary at the NAIC meeting in June.
The working group also voted unanimously to table its discussion of coverage for contracts of health risk-bearing entities which are not insurance companies until after the NAIC's CLEAR group completes its consideration of how these entities should be regulated. CLEAR's report is not expected until the NAIC's December meeting. The ACLI expressed its view that such entities ought not be covered under the existing life and health insurance guaranty association model act.
Finally, the working group postponed its discussion of coverage for equity indexed products and charitable gift annuities until the June meeting.
Federal Issues Working Group
The working group discussed problems raised for insurance insolvencies from provisions of the pending federal financial deregulation bill and regulations governing life insurance company general account contracts proposed by the Department of Labor. Both the ACLI and NOLHGA will be filing comment letters on the regulations.
In addition, the group adopted unanimously a resolution urging Congress to amend the federal superpriority statute to exempt explicitly the administration of insurance company receiverships. The same resolution was then adopted unanimously by the full (EX5) subcommittee, which also urged expedited adoption by the executive committee and plenary.
EXECUTIVE COMMITTEE/PLENARY
The NAIC officially adopted two technical changes to the life and health insurance guaranty association model act that had been proposed by the National Structured Settlements Trade Association last year. These changes clarify that structured settlement annuities are entitled to coverage even if they have no cash value and that guaranty associations would retain no subrogation rights against single purpose qualified assignment companies which hold structured settlement annuities largely for tax purposes.
INTERSTATE RECEIVERSHIP COMPACT
The compact commission met March 16 and was chaired by Tim Hall of Nebraska, that state's new representative on compact activities. It was reported that the compact's finances continue to be in excellent condition and that no 1998 assessments will be necessary. Jim Stinson, chair of the Receivership Law Advisory Committee, reported that the draft Uniform Receivership Law was near completion. The commission indicated that the draft would be sent to all interested parties immediately upon receipt and that a public hearing to receive comments would be held in conjunction with the NAIC's June meeting. Guaranty association personnel who would like a copy of the draft when it is released are invited to call Cathy Travis at the Illinois OSD, 312/836-9524.
ETC.
Legal Seminar
The Legal Seminar Planning Committee is pleased to announce that Dean Robert Dougherty of the University of Nevada Medical School at Reno has accepted an invitation to address seminar attendees at a July 23 luncheon. Dean Dougherty will be speaking about the broad reaching impact of managed care on the health care industry in general and the medical profession in particular.
This year's seminar will be held July 23-24 in Reno, Nev. Registration materials will be sent shortly. Members and other Wire readers are encouraged to mark their calendars and plan on attending the seminar.
Staff Contact - Sean McKennaCALENDAR
March 30 Kentucky Central Asset Working Group, New York City April 23 NOLHGA Board of Directors, Milwaukee April 23-24 NCIGF Annual Meeting, Washington, D.C. April 30 Seventh ELIC installment payment due
Staff Contact - Sean McKennaCONFERENCE CALLS
March 24 Legal Seminar Planning Committee, 10 am EST