Volume IX , Number 13 Mutual Benefit Life (NJ)

Request for Proof of Claim Information

On January 12, MBL Life Assurance Corporation (MBLLAC) filed for liquidation. As part of the liquidation process, MBLLAC has requested that guaranty association proofs of claim be collected and filed by NOLHGA. It is believed that guaranty associations may have outstanding, unbilled assessments for which MBLLAC is responsible.

On March 3, NOLHGA sent a memorandum to guaranty associations outlining a format for filing assessment calculations and supporting documentation with NOLHGA. As noted in the March 24 Weekly Wire, this material must be received by NOLHGA by April 11.

Task Force Chair - Art Dummer;   Staff Contact - National Affiliated Investors Life (LA)

On March 23, representatives from the National Affiliated Investors Life Task Force and NOLHGA met with Louisiana Insurance Department officials in Baton Rouge to discuss the transfer and assumption of National Affiliated's in-force life, health and annuity business to an assuming carrier. Department personnel also provided an update regarding various receivership issues.

After a second round of proposals were received by the task force in late February, a lead reinsurer was identified, and the task force, working with Louisiana Insurance Department personnel, began immediate discussions and negotiations with the prospective assuming carrier. The task force expects that an assumption agreement will be executed and submitted to the court for approval by mid-April, with a projected closing in early July.

Representing the task force and the domestic guaranty association at the meeting were: Task Force Chair Chuck Gullickson (SD), Phyllis Perron (LA), Van Mayhall (LA), Paul Peterson and Joni Forsythe. Representing the Louisiana Insurance Department were Craig Gardner, Denise Brignac, Ed Kubala and Barry Karnes, as well as several representatives of the Louisiana Receivership office. A representative of the proposed assuming carrier was also in attendance.

A task force teleconference has been scheduled for April 3 to provide a status update.

Task Force Chair - Chuck Gullickson;   Staff Contact - Paul Peterson National Heritage Life (DE)

Task Force representatives are scheduled to meet on May 2 with the NHL Trustees at the regularly scheduled quarterly Trust meeting. The purpose of the meeting is to hear the results of the year-end audit, as well as an overview of significant transactions and current status of the Trust.

Task Force Chair - Dan Orth;   Staff Contact - Inter-American (IL)

On March 21, the Appellate Court of Illinois affirmed a lower court's decision to deny guaranty association coverage in the case of Dynamic Systems, Inc. v. Illinois Life and Health Guaranty Association. The case involved a claim by Dynamic Systems, Inc. (DSI), a Maryland corporation, for guaranty association coverage of certain Inter-American guaranteed investment contracts purchased by the DSI Savings Enhancement Plan. In 1997, the trial court ruled that guaranty association coverage was not available because the contracts were unallocated annuities as a matter of law. The sole issue on appeal was whether or not the GICs in question were owned by individuals or by the Plan Trustee.

DSI first argued that although the Trustee was designated as the legal owner of the contracts, the Plan participants were the equitable and beneficial owners under the contracts. In support of its position, DSI noted that the trustees administered the Plan for the exclusive benefit of the participants, that the participants decided when and how to direct the investment of their funds, and that an annuity could be purchased on behalf of an individual participant. The court of appeals, however, found that beneficial and equitable ownership are not enough to satisfy the "issued to" and "owned by" requirements of allocated annuities provision in the Illinois statute. Moreover, after considering two decades worth of changes to the NAIC's Life and Health Guaranty Association Model Act, the court found the beneficial and equitable ownership arguments contradictory to legislative efforts made to address coverage issues for financial instruments common in today's marketplace.

DSI further argued that statements in the promotional booklets distributed to Plan participants such as, "your account is 100% yours" and that the company "guarantees your principal and the earnings on every dollar you invest," brought the contracts under the exception clause of the "unallocated annuity contract" definition. DSI contended that these statements amounted to "guarantees to an individual by the insurer under the contract." The court again disagreed, noting that these were not guarantees of annuity benefits to an individual. Instead, said the court, they were written in general terms without specifically identifying individual participants or fixed sums payable to individual participants.

Task Force Chair - William Falck;   Staff Contact -

CALENDAR/CONFERENCE CALLS

April 3 National Affiliated Life Task Force Teleconference, 10:30 am, EDT

April 3 American Chambers Life Task Force Teleconference, 2:30 pm, EDT

April 27 Legal Committee Federal Issues Subgroup, Herndon, VA

May 2 Compensation Committee Meeting, Tysons Corner, VA

May 2 Audit Committee Meeting, Tysons Corner, VA

May 2 NHL Trustees Meeting, Orlando, FL

May 3 Board of Directors' Meeting, Tysons Corner, VA

May 9 Legal Committee Meeting, Orlando, FL

July 20-21 NOLHGA Legal Seminar, Boston, MA

May 17-19 Members' Participation Council Meeting, Minneapolis, MN

MEMORANDUM

TO: Industry Colleagues
FROM: Peter Marigliano, Manager of Communications
DATE: March 31, 2000
RE: NOLHGA Website

NOLHGA is upgrading its website, including making some information available to the entire industry. So that NOLHGA is able to best serve you with respect to its website, please take a moment to fill out this survey and return it to me as soon as possible.

Thank you, in advance, for your help.

Please check the following types of documents that you would consider accessing through NOLHGA's website:

_____ Weekly Wire

_____ NOLHGA Journal

_____ NOLHGA Annual Insolvency Financial Reports

_____ NOLHGA Annual Report to the Membership

_____ NOLHGA Meeting Notices and Minutes

_____ NOLHGA Meeting Registration Forms

_____ Links to other industry sites

Examples _____________________________________

Other_________________________________________

Name ________________________________________

Organization ___________________________________

Please print out and return by fax to me at 703.481.5209.