Receivership and Insolvency (E) Task Force

Receivership and Insolvency (E) Task Force
March 30, 2008

The Receivership and Insolvency (E) Task Force met Mar. 30, 2008. During the meeting the Task Force:

Received a report from the Receiver’s Handbook Working Group, which summarized that the Working Group continued to conduct weekly conference calls over the past three months to discuss and draft revisions to the remaining chapters of the Receivers Handbook on Insurance Company Insolvencies (Handbook). The Chair intends to continue to have weekly calls over the next two months in order to expose a final draft prior to the NAIC Summer National Meeting.

Received a report from the Receivership Model Act Revision Working Group, which summarized the Working Group:

Discussed the Chair’s referral memo to the Life Insurance & Annuities (A) Committee in order to request input on how the Working Group might proceed with revisions pertaining to Section 19: Prohibited Advertisement of Insurance Guaranty Association Act in Insurance Sales; Notice to Policy Owners of the Life and Health Insurance Guaranty Association Model Act (LHGA Model Act). The section currently prevents life insurers or their agents from using the existence of the guaranty associations and their coverage as tools in the marketing of life insurance or annuities. The LHGA Model Act also requires insurers to provide some disclosures about the guaranty associations as part of the delivery of the policy documents. Based on previous discussions by regulators and interested parties, several different perspectives make it difficult to move forward with this Section.
Voted to increase the coverage limit of annuity benefits and governmental retirement benefit plan from $100,000 to $250,000 within the existing draft LHGA Model Act.
Voted to increase the coverage limit of health insurance benefits related to long term care insurance from $100,000 to $300,000 within the existing draft LHGA Model Act.
Tabled a motion on health insurance benefits relating to basic hospital medical and surgical insurance or major medical insurance in order to provide an opportunity for interested parties to provide evidence to support the appropriateness of the existing coverage limit of $500,000. The Working Group also encouraged interested parties to prepare statistical data to support the appropriateness of any existing or proposed coverage limit that has not yet been approved.

Received a report from the Receivership Technology and Administration Working Group, which summarized the Working Group:

Received and discussed comment letters regarding the proposed Receivership Data Privacy and Security Procedures (Procedures) that the Task Force referred back to the Working Group for more consideration based on responses related to life and health receiverships. Additionally, on April 28, 2008, the Working Group will hold a conference call to consider whether the proposed procedures should be applicable to only property and casualty receiverships, and whether an alternative solution should be developed for life and health receiverships.
Discussed the status of the Global Receivership Insurance Database (GRID) public web site that recently became active on the NAIC web site at http://www.naic.org/cis/index.do. GRID is a voluntary database provided by the state insurance departments to report information on insurer receiverships for consumers, claimants, and guaranty funds. All NAIC members are contributing to the database at this time.

Received a report from the Hazardous Financial Condition Model Revisions Subgroup that reports to both the Task Force and the Examination Oversight Task Force. The report summarized the Subgroup met via conference call on February 20, 2008 to discuss and expose revisions to Model Regulation to Define Standards and Commissioner’s Authority for Companies Deemed to be in Hazardous Financial Condition.

Unanimously adopted the draft Property and Casualty Insurance Guaranty Association Model Act after discussion and revisions were approved in relation to controversial elements within the Property and Casualty Insurance Guaranty Association Model Act. The revisions includes the following motions:

A vote of 13-7 in favor of retaining Section 2 – Purpose and Section 4 Construction that was deleted by the Receivership Model Act Revisions Working Group in their proposed revisions.
A vote of 11-9 in favor of excluding assumption of business from unlicensed carriers from the definition of “covered claims.” Under the current model, policies assumed from an unlicensed carrier are not included within the definition of covered claims for the guaranty association. On 5/9/06, the Working Group voted 7-4 to include these policies as covered claims.
On 3/4/06, the Working Group voted 10-5 to delete the last sentence of Section 10C related to a receiver being bound by guaranty association claims determination. A motion to restore the language failed with a Task Force vote of 8 to 12.
On 5/25/06, the Working Group by a vote of 6-4 adopted a revised version of Section 16 on immunity of the guaranty association, its staff, members, directors, and the receiver and its staff. The immunity section in the prior model was substantially unlimited other than as it was interpreted by the courts. The new version of the provision removes immunity for the association for tort claims and for contract claims arising out of its statutory obligations. The Task Force voted in favor of deleting the Working Group’s revision.

Discussed the NOLHGA response to a questionnaire submitted by the Task Force during March 2008 that solicited comments on the appropriate treatment of structured settlements in the insolvency context. As a result of the discussion, the Chair formed a Structured Settlement in Insolvency Context Subgroup under the Task Force to research issues surrounding structured settlements in the insolvency context. The Subgroup is comprised of interested parties and regulators and will be chaired by New York.

Discussed the possibility that Senator Sununu (ME) prosing new legislation with respect to the federal priority of claims which would be of interest to the Task Force.

Action Items:

Adopted the amended draft of the Property and Casualty Insurance Guaranty Association Model Act.