NCIGF Assessment Liability Report Updated through 2Q 2020

The NCIGF Assessment Liability Report has been updated and posted to the NCIGF website with P&C guaranty fund assessment information through June 30, 2020. The report assists insurers in estimating their P&C guaranty fund assessment liabilities while eliminating the need to contact the guaranty funds in each of their member states.

The Assessment Liability Report includes – by statutory account of each state guaranty fund – actual and projected assessment and refund activity, net assessable premium, maximum assessment capacity, assessment type and procedures, lines of business and recoupment provisions. The NCIGF publishes the Assessment Liability Report prior to the end of the second, third and fourth quarters.

The assessment information is located on the NCIGF website under the Industry tab and the drop-down menu titled “Assessment Liability Information”.  Historical P&C guaranty fund assessment reports are also included.

NCIGF Continues to Represent U.S. Guaranty System Worldwide

On April 21, I participated in a stakeholder teleconference convened by the Resolution Working Group (ReWG) of the International Association of Insurance Supervisors (IAIS). ReWG, chaired by Alex Hart (a deputy in the U.S. Federal Insurance Office), is writing an application paper for use by global regulators in establishing and administering resolution powers in their country. James Kennedy from the Texas Department of Insurance and chairman of the NAIC Receivership and Insolvency Task Force also serves on the working group.

Prior to the meeting, NCIGF and NOLHGA submitted a joint letter that underscored two major points:

  • Policyholder protection schemes (PPS) are important partners in the insurance resolution process and not merely a source of funding; and
  • Early involvement in a resolution is a critical element of policyholder protection

We engage in these international processes because the concept of insurance resolution is evolving around the world. NCIGF and NOLHGA have been successful in persuading the IAIS that the protection of policyholders is equal to protecting counterparties when an insurance carrier fails which is not where the discussion started. Having made that case, the next objective is to continue to press the case for the importance of partnership between regulators and guaranty funds.

Bringing the guaranty fund system into the process at the earliest possible point of the liquidation leverages expertise and practices that will result in a seamless experience for the policyholder and support of the insurance promise. These are the same points we are making to our domestic regulators. It’s resulted in our inclusion in the confidential Receivership Financial Analysis Working Group (RFAWG) and has persuaded insurance receivers to consult with us much earlier to help our members to be better coordinated.

There’s also a parallel process underway at the European Insurance and Occupational Pensions Authority (EIOPA) intended to harmonize resolution authority across the European Union.

The EIOPA initiative matters to us because European regulators prefer having significant levels of capital already on hand with which to resolve an insurer failure, while the U.S. system is a post-event model.  Our goal with EIOPA is to make the case that there is no one way to pay for an insurance resolution. We want to keep the established and effective U.S. post-funding mechanics intact.

NCIGF has been working closely with the International Forum of Insurance Guarantee Schemes (IFIGS), of which we are a member, to take make this case, most recently at an EIOPA stakeholder meeting in late February.

IFIGS was asked to moderate a session on harmonization for EIOPA officials. While there’s been no final declaration from EIOPA officials, indications are that the U.S. argument in favor of multiple funding mechanisms was favorably received. I will keep you posted.

NCIGF Submits Comment on OK Business Restructuring Transaction

By Roger Schmelzer and Barbara Cox

The NCIGF has filed comments with as Oklahoma court in response to a petition to restructure certain policies of Providence Washington Insurance Company (PWIC) to Yosemite Insurance Company, pursuant to the Oklahoma Insurance Business Transfer statute. Both companies are affiliates of Enstar Group Limited.

Notably, the block of business proposed to be transferred includes workers compensation policies that were originally policies of the now insolvent ROA insurance company. These claims were serviced for some time by the guaranty funds before they were transferred to PWIC.

NCIGF’s comments called for the Court to consider the availability of guaranty association coverage for the transferred claims should Yosemite become insolvent. Further, NCIGF explained its position on the matter; that if there was guaranty fund coverage before the transaction there should be coverage after the transaction. Conversely, if there was not guaranty fund coverage before the transaction, coverage should not be created by the transaction.

The NCIGF also noted that it is not likely that most current state laws would be interpreted to achieve this result. NOLHGA and the Arizona Insurance Department also filed comments in the matter.

The transaction is representative of a trend in several states which have adopted statutes permitting division or transfer of blocks of insurance business to different entities. The relinquishing entity would have no residual liability for the business if assets become insufficient to cover claims. Guaranty fund coverage under current statutes for the transferred business under current guaranty fund law is unclear.

A pre-trial conference originally set for April 29 has been continued until September 23. The docket for this case may be accessed at https://www.oscn.net/dockets/GetCaseInformation.aspx?db=oklahoma&number=CJ-2019-6689.

NCIGF, NOLHGA and Arizona comments may be viewed at this link. NCIGF is represented in this matter by Derryberry and Naifeh, LLP.

Barbara Law and Jenny Anzalone-Ackley Elected to NCIGF Board

Two new NCIGF board members were elected at the most recent Board of Directors meeting held on February 19 in Sonoma, California. Barbara Law of Guaranty Fund Management Services (GFMS) and Jenny Anzalone-Ackley from Chubb were elected by the board to complete unexpired terms of former board members. Their elections were effective immediately.

Ms. Anzalone-Ackley will fill an industry vacancy for the next two years. She currently serves as Vice President and Deputy Director of the Assessments at Chubb Insurance Group. She began her time at Chubb in 2002 and has been part of the insurance industry for most of her career, specializing in financial services, IT and data management and compliance.

Barbara Law, a newer but familiar face among the NCIGF community, is the current President and CEO at GFMS. Stepping into the role in 2018, Ms. Law’s background also includes many years of experience within the insurance industry. She is currently chair of the NCIGF Bylaws Committee and serves on the NCIGF Board Finance Committee. Ms Law is completing the final year of former NCIGF board member Chuck Renn’s term and will be eligible for election to a full three-year term in May 2021.

The NCIGF board is once again at a full complement of 20 members, 12 representing industry and 8 representing guaranty associations.

Barbara Law
Jenny Anzalone-Ackley

NCIGF WEIGHS IN AT THE NAIC ON SUGGESTIONS FOR ESSENTIAL PROVISIONS FOR INSOLVENCY LAWS

The Receivership and Insolvency Task Force (RITF) submitted a request that members and other interested parties identify key provisions that states should have in their laws to promote effectiveness and consistency in receiverships, especially those impacting multiple states. Comments could refer to NAIC Model Law provisions, or specific receivership or guaranty fund laws.

In response NCIGF highlighted its efforts to modernize property casualty guaranty fund laws in the next several years. The plan would focus on the following areas:

  • Revise state laws as needed to afford appropriate coverage for business transfers under state division or insurance business transfer (IBT) laws. That is, adjust statutes such that if guaranty fund coverage was available before the transaction it would be available after such a transaction. Conversely, coverage should not be created by a division or IBT.
  • Revise state laws as needed to ensure that funding for operational expenses of the guaranty funds are available regardless of the level of insolvency activity. These revisions are intended to ensure that minimal staffing and physical facilities are available to ramp up quickly in the event of a short-fused liquidation. The revisions were crafted by the NCIGF’s Special Funding Committee that recently provided its final report to the NCIGF Board.
  • Revise state laws as needed to prevent “orphan claims” from arising. Orphan claims are claims that would normally be afforded guaranty fund protection that may be without coverage because of variances in state laws, usually related to variation in residency requirements.
  • Revise state statutes to address any other needed updates such as adding a claims bar date or modifying the base year for assessment calculation.

NCIGF also noted the need for large deductible liquidation act provisions in the various states. The NAIC’s Large Deductible Working Group agreed with the NCIGF view that addressing large deductible products in liquidation is much more efficient when there is a specific statute in place to address rights and responsibilities of the various parties in liquidation. The Working Group recently recommended a guideline suggesting that the NCIGF approach wherein reimbursements and collateral draw downs are remitted to the guaranty funds to the extent of their claim payments was an appropriate alternative to the NAIC model liquidation act (IRMA) language.

Our response to the NAIC is available here. Please feel free to contact Barb Cox if you have any questions concerning this matter.

Inside the Industry: NCIGF at the Triple-I Joint Industry Forum

On January 15 NCIGF had the opportunity to attend the Joint Industry Forum, hosted by the Insurance Information Institute (Triple-I). This one-day conference, held in the heart of New York City, brought together the top thought leaders throughout the insurance industry and trades organizations as well as main-stream media representatives.

Triple-I CEO, Sean Kevelighan, welcomed all 165 attendees by sharing his thoughts about the future of insurance. He cited the importance of continued education, evolution and creativity within the insurance world. He highlighted the continued utilization of new tools to help communicate better to the consumer as well as the requirement of all entities involved to strive to bring clarity through disruption.

“It’s incredibly valuable for us to be here. An ongoing strategic objective emphasized in our  2020 business plan is to engage more with industry and events like this give us a great platform to build those relationships,” Roger Schmelzer, NCIGF President and CEO, noted. “We have an opportunity here to network and hear more about what is top-of-mind for the industry.”

It was a robust program that included a full day of panels and speakers, with topics ranging from ‘Extreme Weather’ to ‘Insurance Vision: Seeing Beyond 2020’. Familiar faces from news media gave presentations, including Margaret Brennan, moderator of Face the Nation from CBS News and Dr. Rick Knabb, Hurricane Expert from The Weather Channel.

Roger Schmelzer is interviewed by AM Best

“We are part of their story,” Schmelzer continued. “These folks sit on our members’ boards and help guide public policy for the insurance world. We need to be part of the conversation, highlighting the value of the guaranty fund system.”

While at the conference, Schmelzer was asked to be interviewed by AM BestTV. See Roger’s interview with Meg Green here.

With NCIGF Help, NAIC Makes More Progress on Large Deductibles

Guaranty funds and receivers have been in conflict for more than 10 years over treatment of large deductible products written by companies that later go into liquidation. In liquidation, confusion can arise about who is responsible for collection of deductible recoveries and how collateral put in place secure collections should be managed. Additionally, there has been some disagreement among insurance company receivers and guaranty associations about how much of the deductible collection and collateral draw down should be returned to the guaranty funds to the extent of their claim payments. More recently, there has been a concerted effort by receiver and guaranty funds to resolve these issues. Two significant developments came about during the Austin NAIC meeting in December:

  • Regulators approved revisions to the Receivers’ Handbook to clarify best practices on various administrative issues relating to deductibles.
  • Taking it a step further, the Receivership Large Deductible Workers’ Compensation (E) Working group exposed a draft guideline on alternative approaches for statutory provisions on large deductibles in receivership. One alternative calls for the deductible recoveries and collateral drawdowns to be treated as general assets of the insolvent estate. The other, the approach endorsed by the NCIGF, calls for the recoveries and drawdowns to be remitted in full to the guaranty funds to the extent of their claim payments.

Both LD results came about due to purposefully more positive interactions based on a commonality of concerns between the parties. NCIGF was seen not as a rival but indeed as the “trusted expert” that we have tried to position ourselves as in all matters of public policy development when we are engaged. Barb Cox had the lead on this issue and received support from Rowe Snider and former FL manager Sandy Robinson. We owe them all a debt of thanks.

NCIGF Announces Policy Position on Restructuring at Austin NAIC meeting

At the Austin meeting of the National Association of Insurance Commissioners (NAIC) the NCIGF presented its position on guaranty fund coverage related to claims that might arise from business that is restructured pursuant to statutes in several states. These statutes, which are described as either Insurance Business Transfer (IBT) or Division statutes, permit a company to divest itself of certain blocks of business.  The transferring company has no liability should the assuming entity be ordered into liquidation. Further, the statutes permit various lines of business to be transferred including workers compensation and other personal lines.

The NCIGF expressed concern that under current guaranty fund law many claims presented to guaranty funds would not be considered “covered claims” – that is claims eligible for guaranty fund coverage should the assuming entity be liquidated.

To address this matter the NCIGF announced a multi-state effort to revise guaranty fund statute to afford claimants who are entitled to coverage before the restructuring transaction to have such coverage after the transaction. Further, the law adjustments will not permit claims to be covered if the claimant had no guaranty fund coverage before the transaction. This would include products written on a surplus lines basis or written by risk retention groups and the like which are excluded from coverage under current law.

The complete NCIGF policy position and related information may be viewed at https://www.ncigf.org/industry/public-policy-and-legislation/

NCIGF & NOLHGA Host Successful Gathering of Global Insolvency Officials

Just prior to the NAIC meeting in Austin, TX was the annual conference of the International Forum of Insurance Guarantee Schemes (IFIGS) in Washington D.C. NOLHGA served as co-hosts. This was my final duty as 2019 chairman of IFIGS. 17 of the 24 IFIGS members attended and we had about 60 people altogether at the conference on December 4. Special thanks to NCIGF board members Keith Bell, Joyce Mellinger, Smitty Harrison and Brad Roeber for their attendance and support.

Roger Schmelzer chairs the IFIGS meeting in Washington, D.C.

 

We covered a number of topics that are important to those who track international resolution matters. The benefit to us of IFIGS participation is a platform to keep our tested public policies and structure in front of the international standard-setters, including our own regulators who participate. This is another example of how NCIGF is expected to carry the water as subject matter experts on insurance liquidation public policies. Some takeaways for your consideration:

 

  • Tom Sullivan from the Federal Reserve (and member of Team USA) and David Wilson from the CA Liquidation office also participated in panel discussions. Securing their participation was strategically significant to us as it further builds the credibility of the U.S. guaranty fund system as opinion leaders and solidifies our strategic objective to be the definitive leader on matters concerning insurance liquidation and policyholder protection.
  • At the business meeting on December 5, the IFIGS membership approved every initiative presented as part of the strategic plan I put forward at the start of the year.
  • My goal as IFIGS chair was to assure a more stable, dependable and durable organization that would have credibility with supervisors around the world. Having that available will help NCIGF and NOLHGA represent our interests before international standard-setters. Structurally, that mission is well on its way to accomplishment and will be spurred further by the dynamic leader of the Canadian P/C guaranty fund we recruited to succeed me as chair.
  • The next step is to achieve financial continuity to carry IFIGS into the future.

 

I appreciate the support of the board for me to serve as chair in 2019 and am glad to pass on those duties. It was a worthwhile exercise and should be helpful in 2020, which is expected to be an active year internationally:

 

  • The IAIS Resolution Working Group (ReWG) is preparing to take up an advisory paper on insurance company resolution. We’ve been in close contact with FIO’s Alex Hart who chairs the group and I expect we will have excellent input.
  • Perhaps the most critical interaction at the IFIGS meeting was with Dimitris Zaferis, lead staff person for EIOPA. His organization is in the process of establishing “harmonisation” standards for resolution schemes in Europe (some of which have yet to be created). It’s important that major aspects of U.S. public policy (post-funding, primacy of policyholder protection, for example) be recognized as viable policies by EIOPA and the other international regulatory standard setters. Working both as the U.S. and as part of IFIGS, we should be well-positioned to effectively make our case.
    IFIGS Group