Pacific Standard Life Insurance Company (CA)

Policyholders Receive $85 Million Distribution

The Liquidation Trust was closed May 11, allowing for the California Liquidation Office (CLO) to distribute $85 million to former Pacific Standard policyholders. Approximately $53.4 million was transferred to Hartford Life Insurance Company for those policies still in force as of May 11. The balance will be paid by the CLO to policyholders who opted out of the assumption transaction with Hartford or to policyholders who surrendered their policies prior to May 11. Affected guaranty associations contributed $24.4 million to fund the transaction. Upcoming key dates:

Late May - Completion of the final accounting;

Early June - Hartford will notify in-force policyholders of the amount credited to their account values;

Mid-late June - Guaranty associations will receive detailed policy listings reflecting final account values;

Early July - The CLO will mail distribution checks; Early-mid 1999 - The CLO expects to close the estate.

Task Force Chair -- Bart Boles;   Staff Contact - Paul Peterson

ETC.

Kentucky Adopts New Model Act Provisions
The Kentucky legislature has adopted most of the new NAIC Model Act as its Life and Health Insurance Guaranty Association law (House Bill 684). It becomes effective July 15. The highlights:

Coverage - The new statute clarifies the association's coverage of non-residents. For group contracts, coverage is provided to resident certificate holders and not to the owners of the group contracts, avoiding the possibility of double coverage and indirect coverage of non-resident certificate holders through resident group contract owners. Coverage for structured settlement annuities is provided to resident payees rather than to the contract owners. New exclusions from coverage include policies providing voting rights, policies for which assessments are preempted, obligations that are not under the terms of a contract, and "synthetic" GICs (Kentucky does not cover unallocated annuities).

Limits of Liability - Under the new statute, the association's liability limits remain roughly the same except with regard to structured settlements, where $100,000 in present cash value annuity benefits are provided in the aggregate, including net cash surrender and net cash withdrawal values. An aggregate limit per life of $300,000 in benefits is provided for life products and $1 million in benefits is provided to an owner of multiple non-group life policies. Finally, Kentucky limits of liability are considered first, before taking into account subrogation and assignment rights and estate assets.

Other - Under the new "powers and duties of the association" section, the statute provides that no additional benefits are allowed to those to whom the association has offered a plan which fulfills its obligations. Significant changes also were made to the liberal construction provision, "definitions" section, the "powers and duties of the association" provisions relating to the fulfillment of the association's obligations and rights to assets, and the "assessment," "duties and powers of the commissioner," "prevention of insolvency" and "immunity" sections. For a copy of the bill, please call Angela Franklin at NOLHGA.
Staff Contact - Angela Franklin 703/787-4105

NAIC and AICPA Activity Regarding Guaranty Association Assessments
Concern over the increase in guaranty association costs due to a number of large insolvencies in recent years has led the NAIC and the American Institute of Certified Public Accountants (AICPA) to publish issue papers dealing with the proper reporting of assessments. In the past, member companies generally recorded guaranty association costs at the time of payment. No official guidelines existed regarding the proper reporting of these costs under statutory accounting or generally accepted accounting principles. The issue papers, however, will require member companies to establish a liability for these costs when, among other things, an insolvency has occurred which meets a state's definition of an insolvency and when the amount of the loss can be reasonably estimated.

NOLHGA has assisted the industry by compiling cost and premium information for those insolvencies in which it has been involved (generally multi-state insolvencies). Member companies use this information to establish their share of insolvency costs and to record the applicable liability.

The NAIC approached this issue as part of its codification project (Issue Paper Number 35, "Accounting for Guaranty Fund and Other Assessments") and the provisions in the paper become effective when the codification project is adopted. The AICPA recently released its Statement of Position (SOP)97-3, "Accounting by Insurance and Other Enterprises for Insurance-Related Assessments." These provisions will be effective for fiscal years beginning after Dec. 15, 1998.

NOLHGA's Accounting Issues Committee is reviewing these papers to determine what other data, if any, are not captured through NOLHGA's efforts and reporting processes, whether certain information referenced in the papers is available, and what, if any, improvements can be made to the reports issued by NOLHGA.

To obtain a copy of the NAIC's Issue Paper Number 35 or the AICPA's SOP 97-3, please call Paul A. Peterson at NOLHGA.
Staff Contact - Paul A. Peterson 703/787-4119

Anthony R. Buonaguro Accepts Position at Met
Anthony R. Buonaguro, NOLHGA's executive vice president and general counsel, has accepted a position with Metropolitan Life Insurance Company in New York City, where he will be vice president of business development. He will be working closely with Nicholas D. Latrenta, Met's senior vice president and a former NOLHGA chairman.

Mr. Buonaguro's legal expertise and business acumen have served NOLHGA and its members well over the past five years with respect to the resolution of some of the largest life and health insurance company insolvencies in the history of the insurance business.

NOLHGA President Brian J. Donnelly said in a special announcement to guaranty association administrators, "...I have consistently been impressed with Tony's scholarship and industry, and with the universal high regard he enjoys among those who work day-to-day on insolvencies. Our loss truly is Met's gain and we wish Tony well as he approaches yet another milestone in his career. "

Mr. Buonaguro will be at NOLHGA through June. He joins MetLife on July 6.

William P. O'Sullivan To Become General Counsel
The Executive Committee of the NOLHGA Board of Directors met and elected William P. O'Sullivan, NOLHGA's vice president and deputy general counsel, to succeed Anthony R. Buonaguro. Effective June 1, his new title will be senior vice president and general counsel.

Mr. O'Sullivan, a graduate of the University of Virginia and Boston College Law School, was corporate counsel at KTI Holdings, Inc., in New Jersey, before joining NOLHGA in January, 1995. He also had been assistant general counsel at Prudential Capital Corporation, a subsidiary of the Prudential Insurance Company of America.

  Staff Contact - Sean McKenna

MPC Schedule

Monday, June 1 NOLHGA Office All day, Whaleback Room Accounting Issues Committee Noon - 4 pm, Monhegan Room Confederation Life Task Force 4 - 5 pm, Winter Harbor Room Tuesday, June 2 NOLHGA Office All day, Whaleback Room American Standard Task Force 8 - 9 am, Winter Harbor Room Kentucky Central Task Force 9 - 10 am, Monhegan Room Brian Donnelly/New England Administrators 10 - 11 am, Breakwater Room Members' Participation Council 11 am - 6 pm, Ballroom A MPC Executive Committee(meeting as part of the Council meeting) 1:25 - 3:25 pm, Ballroom A Reception/Dinner 6 - 8 pm, Sebago Wednesday, June 3 Full Buffet Breakfast 7:30 - 8 am, Ballroom A Task Force Meetings(as part of the Council meeting) Centennial Life Task Force 8 - 9 am, Ballroom A Executive Life Task Force 9:15 - 11:15 am, Ballroom A Members' Participation Council 11:15 - noon, Ballroom A

  Staff Contact - Sean McKenna