U.S. Leads Insurance Policyholder Protection Around the World

(Originally published in the Spring 2019 issue of The Insurance Receiver and is reprinted with the permission of IAIR)

On January 1, I began a one-year term as Chairman of the International Forum of Insurance Guarantee Schemes (IFIGS). My colleague at NOLHGA, Peter Gallanis has been involved since the earliest days of IFIGS and I joined him a few years ago.

The objectives of the Forum are to facilitate and to promote international cooperation between Insurance Guarantee Schemes and other stakeholders in the development of policyholders’ protection. From time to time it may communicate views, ideas and experiences to interested parties. IFIGS is a voluntary not for profit membership network. It is independent of any government authority.  Currently there are twenty-five members and the membership is growing.

I took on this responsibility because of my very strong sentiment that the insurance industry is absolutely essential to the world economy.  The insurance promise makes opportunity a possibility. Our support of it keeps the industry strong and gives comfort and peace of mind to policyholders. Guaranty mechanisms ready to protect insurance consumers undergird the sanctity of the insurance promise by assuring the viability, commitment and reputation of the insurance industry.

IFIGS is well-positioned to be the global definitive expert on supporting the insurance promise. All protections do not have to be structured the same way, but the important role of policyholder protection mechanisms must be articulated clearly and effectively to regulators as they work as overseers of the global insurance industry.

To build the value of the organization, IFIGS members have set three long-term strategic objectives:

  • Information Sharing. IFIGS will collect information and be the global expert regarding insurance guarantee schemes and will be an active resource for IFIGS members, supervisors and standard-setters.
  • Member Outreach. IFIGS will develop a plan for actively recruiting new members and encouraging more active participation and leadership by existing members.
  • Reputation Enhancement. IFIGS will work to heighten its profile with supervisors and standard setters, including those that may be involved in developing new insurance guarantee schemes.

Examples of IFIGS effectiveness are not hard to find:

1. The consultation paper published by the IAIS in mid-November, 2018 concerned a proposed holistic framework for the assessment and mitigation of systemic risk in the insurance sector. The initial IAIS consultation included the following statement:

“In addition to the direct economic effects of an insurer’s failure to pay claims on consumption, by a reduction of policyholders’ wealth, a number of correlated failures could have additional knock-on effects, such as through some insurance guarantee schemes.”

IFIGS, in partnership with NOLHGA and NCIGF, commented on the consultation paper and strongly objected to that statement. The offending comment was removed from the revised paper.

It would have been nothing short of a disaster for global regulators to continue their consideration of approaches to insurer oversight if they believed that policyholder protection schemes could spread contagion! It could take decades to change that thinking and no one country could do that alone. But by working together, IFIGS and its members played a strong advisory role that regulators took seriously. That is the value of being collaborative and building on that strategy.

2. A July 2017 paper published by EIOPA (European Insurance and Occupational Pensions Authority) stated that a minimum degree of harmonization of policyholder protection schemes in the European Union would benefit policyholders, the insurance market and the financial stability of the EU. IFIGS was invited to present on the role that insurance guarantee schemes can play in resolution during an EIOPA recovery and resolution seminar.

Thanks to our active participation in IFIGS, the U.S. made a joint presentation (with Greece) to an audience of European regulators and companies, and our presentation drew more interest from the audience than any other presentation over the day and half seminar. From this experience it was confirmed what we had already learned; that European regulators are very curious about our state-based system of policyholder protection. As EIOPA continues to deliberate on harmonization, the background we provided should prove useful.

3. Finally, on another occasion, Peter Gallanis and I, joined by a colleague from Canada, were asked to represent IFIGS before a working group of international regulators (including James Kennedy from the Texas DOI and Alex Hart from the Federal Insurance Office) who were drilling down on the relationship between regulators and policyholder protection mechanisms. My understanding is that we were helpful in providing background on ways to collaborate to provide a more effective safety net to consumers.

 

A primary goal is to spread the value of our engagement with IFIGS to IAIR and the NAIC. And to take that back to the IFIGS membership and international regulators. Our resolution mechanism—composed of receivers and guaranty funds– is by far the most experienced and effective system in the world. The broader the expertise we can bring to the table, the more impactful we can be on behalf of the individual policyholders and claimants we serve.

For more on particulars of other mechanisms around the world, a good, but not definitive, resource is a discussion paper published by EIOPA. https://eiopa.europa.eu/Publications/Consultations/EIOPA-CP-18-003_Discussion_paper_on_resolution_funding%20and.pdf)

I am happy to discuss this organization and the value of the United States’ participation.  Please feel free to contact me.

Further information may also be obtained from the IFIGS website at www.ifigs.org.

Insurance Business Transfer Model Bill Takes Center Stage at NCOIL

The National Conference of Insurance Legislators (NCOIL) met in Nashville last week and spent a good bit of time talking about the very hot topic Insurance Business Transfers (IBT). For many, this was the main event from the meeting. Some have regarded the NAIC as slow to act on corporate division and IBT legislation; its Restructuring Mechanisms Working Group, designed to address these issues, only recently held its first call. So NCOIL is looking to fill the vacuum by considering a Model IBT Law based on the Oklahoma IBT statute passed in 2018.  Here are highlights from the NCOIL discussion:

  • Beth Dwyer (RI) provided background on corporate division and IBT statutes passed to date and an overview of the NAIC Restructuring Mechanisms Working Group’s charges. She explained that working group will develop a white paper that will provide an overview of IBT/corporate division statutes and an explanation of the perceived need for these statutes. She noted that the working group is looking at consumer protections and that a subgroup has been developed to look at the financial standards used in reviewing these transactions. She explained that guaranty fund/association issues are relevant where the statute involves personal lines.
  • Buddy Combs (OK), who was instrumental in passing the Oklahoma IBT statute, provided an update on a current bill designed to help implement the IBT statute. Among other things, the bill (SB 885) tries to address two issues that have come up as Oklahoma thinks about implementing its statute – confidentiality and guaranty fund application. Combs noted that Oklahoma is not rushing to pass this bill and wants to make sure they get it right.
  • Robert Redpath (Enstar) gave a presentation on the benefits of IBT statutes – using UK Part VII transfers as an example of a transfer framework with effective process and established history of success. He noted that this allows companies to efficiently use capital and divest non-core business and redeploy capital.  He advocated for a model to ensure consistency between states and avoid potential disputes over conflict with other state’s laws.
  • Doug Wheeler (NY Life) argued that several companies are concerned about these laws because many lack necessary regulatory controls. He explained that this is an extraordinary process and suggested that the framework fundamentally changes the insurance promise without policyholder consent. He argued that division statutes have the potential to create a good company/bad company situation, which may increase the likelihood of insolvencies. He also noted that mono-line companies with long-tail business can create insolvency risks. He urged careful consideration of the proposed models, noting that additional insolvencies could erode trust in the state system. Finally, he encouraged NCOIL to reach out to Peter Gallanis from NOLHGA to get the benefit of his expertise in this area.  Here is the link to his presentation.
  • Karen Melchert (ACLI) noted that the ACLI is still developing its guidelines on these issues, and the core of the conversations to date center on policyholder protections, including the need for proper notice and process and ensuring appropriate guaranty association/fund coverage.
  • During the Q&A portion of the panel, NCOIL members had questions about how the independence of the independent experts is determined. The legislators and panelists agreed that any division or IBT involving long-term care (LTC) business should be carefully considered. Combs agreed and noted that not all lines of business will be treated the same under the Oklahoma; he explained that Oklahoma regulators are concerned about LTC failures and implied that any IBT transfer involving LTC business would be given heightened scrutiny.
  • Finally, a representative from the Reinsurance Association of America explained that the lack of policyholder consent in these laws may result in conflict with laws in other states that require policyholder consent when a policy is novated.
  • The Committee plans to continue discussion on this model at the Summer National Meeting in July.

NCIGF is paying close attention to all activity related to the IBT debate. I will be giving a brief presentation at the upcoming NAIC meeting on the potential impact of IBT on policyholder protection. We will update you on that in due course.

NCIGF Reps Meet with Members of Congress

Recently, a number of NCIGF members, board members and staff took Capitol Hill by storm to do some updating on the state guaranty fund system. Meetings like these are critical, especially after an election year that saw a shift in power in the House of Representatives and the election of 100 new members of Congress, many of whom are without a background in financial services. Here are a few quick takes from the day:

  • 16 total meetings; 15 of which were with members of the Senate Banking and House Financial Services Committees.
  • Cross-section of senior members and freshman members, including:
    • Senate Banking Committee Chairman, Mike Crapo
    • Housing, Community Development, and Insurance Subcommittee Chairman, Lacy Clay
    • Housing, Community Development, and Insurance Ranking Member, Sean Duffy
    • 4 House Financial Services Committee freshmen
  • Overarching theme in the meetings was support for the state system.
  • Members and staff expressed appreciation for NCIGF’s engagement.

Many thanks to those who participated, along with John Blatt, Amy Clark and me (from NCIGF staff): Chad Anderson (WGFS), Charlie Breitstadt (Nationwide), Allan Patek (WI), Barbara Law (GFMS), Barry Miller (DE), Brad Roeber (CA) and Frank Knighton (GA). I feel confident we are off to a good start with this Congress. We’ve invested large amounts of resources, especially since the financial crisis, to assure federal lawmakers that the state-based safety net is prepared to protect consumers. Now is not the time to let up.

Encrypted Phishing Email

We received an interesting phishing email attack this weekend – something I had never seen before.  One of the property managers at our building sent a number of us at NCIGF an encrypted email with the subject line: “New Message from your email contact  9801210”.  The body of the email contained an encrypted email message with a link to click to get the message – very standard stuff.  Looking at the link, it went to a microsoft.com domain that prompted you to enter your credentials.  The good news is that no one here did that, primarily thanks to the quarterly cyber training and monthly phishing tests.  Presumably, the phishing attack was either an attempt to harvest credentials (username and password) or – and this is the theory I find more plausible – the encrypted email, once decrypted, contained some kind of malware/virus payload.  We don’t know for sure because by the time we started doing analysis, the initial “open message” link redirected to “page not found”.

We reached out to the sender this morning and they confirmed their email had been compromised over the weekend.

I’ve never seen a legitimately encrypted email be used as a vector for phishing.  While we do communicate to the building manager via email from time to time, we’ve never had cause to send PII.  No one in the office was expecting documents or messages from the building that would necessitate encryption.  This is a clever attack because it hijacks the notion that encryption=safe.  That said, if you receive an encrypted email from someone out of the blue, it’s always a good policy to be skeptical.  Reach out to the sender by phone (not email!) and verify that they sent it.

I’ve included a screenshot of the email in question with names redacted to protect the guilty.

 

Company Division Statutes Gain Steam in the States

Company Division Statutes, also known as restructuring statutes or business transfer mechanisms, are gaining steam in the state legislatures. These are statutes that permit an ongoing insurance company to divest itself of certain liabilities, along with a calculated amount of assets, and relinquish any ongoing responsibility for this business. The business divested would be put into an existing or newly created insurance company.   The statutes proposed typically call for a plan to be filed with and approved by the state’s commissioner of insurance.  Sometimes review and approval by the court is also required.  Requirements for notice to policyholders vary from state to state.  The most current proposals do not limit lines of business that can be subject to divisions.  Hence, types of insurance such as personal lines, workers compensation and long- term care could be involved.

This concept began to take shape many years ago when Rhode Island adopted Chapter 14.5 of its insurance code known as “Voluntary Restructuring of Solvent Insurers.”  The mechanism was narrowly crafted and applies to “insuring of any line(s) of business other than life, workers’ compensation, and personal lines insurance.”  (See RI Statute s. 27-14.5-1(6)).

Pennsylvania also had a related law (PA Bus Corp. Law § 1951 (repealed)) that provided for division of a solvent company. The statute was used most notably in 1996 by Cigna to divide the business of its Insurance Company of North America (“INA”) unit.  The newly formed entity, known as Brandywine, assumed certain run‐off blocks of business while INA continued to write new business. The law has since been repealed and replaced with the more generalized Associations Transaction Act (15 Pa.C.S.A. § 361) though its application to insurance policyholders is unclear.

In 2014, Vermont passed its Legacy Insurance Management Act (LIMA). According to the RunOff Re.Solve website (runoffresolve.com), LIMA allows a non-admitted insurer to transfer its discontinued commercial business to a third‐party company.  Such a division would require approval from the Vermont regulator, but the law does not mandate court approval. Personal lines coverages are excluded and policyholders can opt out of the transfer process.

Most recently, a litany of division statutes have been proposed in the following states and have progressed in the 2017 and 2018 sessions.  The current status of the proposals in these states is as follows:

Connecticut:  Division statute enacted in 2017

Georgia: Passed both houses and recently vetoed by the governor.

Illinois:  Division statute enacted in 2018.

Iowa: “Study” bill floated in 2018.

Oklahoma:  Division statute enacted May 2018.

Michigan:  Enacted in late 2018

Nebraska:  Proposal introduced in 2019

Again, these most recent proposals are not limited to certain lines of business nor is policyholder approval required. Whether there is guaranty fund coverage for the divided entity is also an issue of concern.  The NCIGF will be monitoring the issue closely and providing updates as things develop.

For additional details on division statutes please go to https://www.ncigf.org/library/ and search for “division.”

UDS 3.0 – JSON Based Layout

The UDS TSG seems poised to take up the task of revising the existing UDS standard. For those not familiar with the layout of UDS, they are fixed width, position delimited files, like you’d typically find on old mainframe type systems. They are not easy to work with and virtually impossible to modify. It’s not a stretch to say that the process of modifying a UDS file is nearly as complicated as completely revamping the standard because each row in a UDS file is a fixed length. Adding an additional field or increasing the length of a data element “breaks” any existing validation processes. Not only that, but any data that is longer than the spec allows gets lost/truncated. If a field is 30 characters long, but the data you want to put into it is 65 characters long, you’re going to lose 35 characters. There’s simply not a place for this data to go. The structure also has the unintended consequence of making UDS files virtually impossible to read and understand without a program to parse them for you.

Here’s a dummy A record we created for automated testing of the UDS Data Mapper:

HEADER02 55555AIN01IN99210201205082012050820120508P&CN 
A55555IN99135005111111 1234567 Joe Blow foo 3829 Coconut Palm Drive Indianapolis IN46201000020090622200805012010011800001Blow Joe 285 Fishpond Road Chicago IL606010000S12345678910000001200098+ 8UU 309 19990304 N 90 28 UBale of rags fell on employee, knocking her down,landing on top UU
A55555IN99105010222222 1234568 John Smith foo 3829 Coconut Palm Drive Indianapolis IN46201000020090622200805012010011800001Smith John 2709 Rifle Range Rd Chicago IL606010000S98765432110000001200098+ 8UU 309 19990304 N 90 28 UBale of rags fell on employee, knocking her down,landing on top UU
A55555IN99105010333333 1234569 Ralph Steadman foo 129 E Springbrook Dr Indianapolis IN46201000020090604200805012010011800001Steadman Ralph 285 Fishpond Road Chicago IL606010000S23456789010000001200098+ 8UU 312 19990304 N 61 52 UClmt stacking 2330 lb boxes up to the ceiling and felt pain in UU
A55555IN99105010444444 1234560 Bob Dylan foo 511 Benjamin Way Suite 113 Indianapolis IN46201000020090604200805012010011800001Dylan Bob 204 Nelsay Street Chicago IL606010000S34567890110000001200098+ 8UU 329 19990304 N 42 52 UCart ledged on trailer, while pulling on it, pulled musle in bac UU
A55555IN99105010555555 1234561 Django Rheinhart foo 511 Benjamin Way Suite 112 Indianapolis IN46201000020090606200805012010011800001Rheinhart Django 4403 Davidson Road Chicago IL606010000S45678901210000001200098+ 8UU 329 19990304 N 35 10 UWhile unloading trailer, a cart became loaded while attempting t UU
TRAILER 55555AIN01IN99210201205082012050820120508P&C00000000500000006000490+

Even knowing the UDS spec, it’s hard to tell what’s going on here. You really need a piece of software to break up the elements and tell you what’s what. Now, let’s contrast this with how this file might be represented in JSON:

{
  "record_type": "A", 
  "naic_number": 12345,
  "fund_location": "IN",
  "fund_type": 10,
  "date": 20190214,
  "coverage_code": [965005, 965010], //array of coverages
  "insolvent_company_claim_num": 123456789,
  "receiver_claim_number": 88888888,
  "insured":{ //insured structure encapsulates all the insured info in one place
    "name": "Bob Smith",
    "phone_number": 3175551212,
    "insured_address": {
       "street_address": "1234 Fake St.",
       "city": "Indianapolis",
       "state": "IN",
       "zip": 46202
    },
  },
  "policy_number": 99999999999,
  "date_of_loss": 20190101,
  "policy_effective_date": 20190101,
  "policy_expiration_date": 20191201,
  "claimants": [ //this is an array of claimants - no more counting claimants!  
  {
    "name": "Ralph Steadman",
    "claimant_address":{
      "street_address": "1234 Vegas St.",
      "city": "Indianapolis",
      "state": "IN",
      "zip": 46202,
      "birth_date": 20000101,
      "ssn": 1234567789,
      "coverages": [965005]
      },
  }, 
  {
    "name": "Inigo Montoya",
    "claimant_address":{
      "street_address": "1234 Princess St.",
      "city": "Indianapolis",
      "state": "IN",
      "zip": 46202,
      "birth_date": 19900101,
      "ssn": 1234567789,
      "coverages": [965005, 965010]
      },
  },
  {
    "name": "Robert Zimmerman",
    "claimant_address":{
      "street_address": "1234 Desolation Row",
      "city": "Indianapolis",
      "state": "IN",
      "zip": 46202,
      "birth_date": 19900101,
      "ssn": 1234567789,
      "coverages": [965010]
      },
  }
  ],
  "claim_reported_date": 20190130,
  "transaction_code": 123,
  "transaction_amount": -12345.00,
  "catastrophic_loss_code": 1234,
  "recovery_indicator_code": 88888,
  "pending_litigation": "Yes",
  "second_injury_fund_indicator": "N/A",
  "tpa_claim_number": 11111111,
  "issuing_company_code":,
  "wico_data": {  //struct for encapsulating all the wcio data in one location
    "injury_code":,
    "part_of_body":,
    "nature_of_injury":,
    "cause":,
    "act":,
    "type_of_loss":,
    "recovery":,
    "coverage":,
    "settlement":,
    "vocational_rehab":
  },
  "wcab_number": ,
  "employer_phone": 3195551212,
  "miscellanea": {
    "cell_phone_number": 123456789,
    "bank_info": "Chase",
    "maiden_name": "Karamazov",
    "location_of_goonie_treasure": "-77.0364,38.8951",
    "tpa_name": "Pat Nat",
    "tpa_location": "Florida"
  },
  "description_of_injury":"Lorem ipsum dolor sit amet, blandit persecuti eu cum, ne usu magna delicata consulatu. Elitr aperiam aliquid at eam, eu integre tractatos pro, ut diam debitis eos. Pro sint nobis vitae cu. Atqui lucilius iudicabit qui in.

In verear vituperata mea, sea ea aperiri vulputate. Dicat accusata inciderint cum te, brute euismod iudicabit vim et. Id quodsi disputationi cum, et adipiscing incorrupte per. Ancillae detraxit in eum, usu exerci dicunt ex, bonorum appetere democritum nam an.

Ex zril cotidieque has, eum ex vero legimus, nam iudicabit instructior eu. Ei sed altera suscipiantur, ubique noster an sed. Mei ne putant nostrum, et has causae eripuit. Sale graece antiopam ea mel. Cu verear habemus dignissim duo, ei omnes tibique mei.

Posse sonet qui ea, at nihil utinam maluisset sit. Nam posse intellegat ex, utamur probatus aliquando et per, mea oratio adolescens no. Mazim omnesque accusata eu has, ei quidam percipit interpretaris nam. Eius principes consequat no nec, graeci vivendo an sit, eum diam debitis explicari ut. His sint postea minimum ne. In modo alienum nec, mel sapientem forensibus te, ut audiam conclusionemque has.

Doctus efficiendi per ei, duo ad altera tractatos urbanitas, sed posse viris erroribus id. Ea saepe omittam iracundia mel. Nec ex facer neglegentur, in has quot verterem voluptatibus. Vim purto menandri et. Sed oporteat sententiae at, at omnis nominavi nec, nam purto habemus ne. Sed laboramus instructior voluptatibus ad.",
}

That’s a lot clearer. Everything is defined for you in a series of name/value pairs, so you know what data are what. It’s also not limited by length, so the full accident description and other fields that are typically longer than the UDS spec contemplates don’t get lost. Also, we’re able to encapsulate data that goes together: all the claimant data is in one block, addresses are consistently represented irrespective of who’s address it is, and data are nested instead of denormalized. Finally, perhaps the most exciting feature is that there’s a section for miscellaneous data not contemplated by the spec. Virtually anything can be added in there and it won’t break the spec. If you want it, it’s there. And if not, it can be ignored.

This is a clear win over the existing spec. I know adoption won’t be easy – all the funds and liquidators will have to change their systems. But I think the improvements are worth the investment. UDS, in its current incarnation (fixed files) is over 20 years old. It’s in dire need of a facelift.

New Year, New Faces

We will see several new commissioners across the country in 2019.  Here is a high-level summary of the commissioner changes, followed by a listing of the NAIC committee leadership for 2019. 

New Commissioners:

Arizona: Arizona’s Keith Schraad appears to have received a full-blown appointment as Director of Insurance (he had been interim director).  Schraad has over 25 years of both private‐ and public‐sector experience in the areas of insurance, healthcare, technology and government.

California: Commissioner Ricardo Lara won a close race against a well-funded former commissioner. Commissioner Lara has noted that his priority is “protecting consumers, patients, hard-working families, seniors, and the most vulnerable communities in [California].”

Colorado: Michael Conway, who had been serving as Interim Commissioner, has been appointed Commissioner of Colorado. Conway has extensive regulator experience; he served as the Deputy Commissioner of Insurance for Consumer and Compliance Services prior to taking the Commissioner role.

Georgia: Former Department Chief of Staff Jim Beck narrowly defeated insurance industry veteran Janice Laws. Beck has already prioritized fighting insurance fraud against seniors and bringing stability to auto insurance rates during his time as Commissioner.

Kansas: State Senator Vicki Schmidt was elected Insurance Commissioner.  As a State Senator, Schmidt served as Chair of the Senate Public Health and Welfare Committee. With substantial experience as a pharmacist, coupled with her legislative leadership background, Commissioner-elect Schmidt will bring a unique perspective and expertise to the NAIC.

Michigan: Anita Fox, a lawyer with over 30 years of experience, has been appointed Director of the Department of Insurance and Financial Services. 

Minnesota: Governor Walz has nominated former state Senator Steve Kelley as Commissioner of the Department of Commerce. Kelley was most recently a Senior Fellow at the Humphrey School of Public Affairs, University of Minnesota.

New York: Governor Andrew Cuomo has formally nominated Linda Lacewell to be the new Superintendent of the New York DFS. Lacewell, a former prosecutor, currently serves as Cuomo’s Chief of Staff and has been with his office in various capacities since 2007. 

Oklahoma: Glen Mulready was elected as Commissioner of the Oklahoma Department.  Mulready has chaired Oklahoma’s House Insurance Committee and was active at the National Conference of Insurance Legislators. He also has industry experience as a producer, so he hits the ground running. Mulready has announced Tyler Laughlin, a senior staffer with former Commissioner Doak, as his Chief of Staff, helping to ensure continuity in the transition.

Wisconsin: Mark Afable, an American Family executive, has been appointed Insurance Commissioner. Afable has voiced a desire to tackle the availability and affordability of health insurance once his term begins.

In Connecticut and Illinois, commissioner seats remain open under new administrations as of mid-January.  The Nevada governor-elect’s transition has not made any announcements regarding future leadership of its department.

The NAIC has announced committee leadership for 2019:

Life Insurance and Annuities (A) Committee
Chair: Doug Ommen, Commissioner, Iowa Insurance Division
Vice Chair: Stephen C. Taylor, Commissioner, District of Columbia Department of Insurance, Securities and Banking

Health Insurance and Managed Care (B) Committee
Chair: Jessica Altman, Commissioner, Pennsylvania Insurance Department
Vice Chair: Lori K. Wing-Heier, Director, Alaska Department of Commerce, Community and Economic Development, Division of Insurance

Property and Casualty Insurance (C) Committee
Chair: Elizabeth Kelleher Dwyer, Superintendent, State of Rhode Island Department of Business Regulation, Division of Insurance
Vice Chair: Scott A. White, Commissioner, Virginia State Corporation Commission Bureau of Insurance

Market Regulation and Consumer Affairs (D) Committee
Chair: Chlora Lindley-Myers, Director, Missouri Department of Insurance, Financial Institutions and Professional Registration
Vice Chair: Allen W. Kerr, Commissioner, Arkansas Insurance Department

Financial Condition (E) Committee
Chair: David Altmaier, Commissioner, Florida Office of Insurance Regulation 
Vice Chair: Tom Glause, Commissioner, Wyoming Insurance Department

Financial Regulation Standards and Accreditation (F) Committee
Chair: Todd E. Kiser, Commissioner, Utah Insurance Department 
Vice Chair: Jillian Froment, Director, Ohio Department of Insurance

International Insurance Relations (G) Committee
Chair: Julie Mix McPeak, Commissioner, Tennessee Department of Commerce and Insurance
Vice Chair: Gary Anderson, Commissioner, Massachusetts Office of Consumer Affairs and Business Regulation Division of Insurance

NCIGF CEO ELECTED CHAIR OF GLOBAL POLICYHOLDER PROTECTION GROUP

INDIANAPOLIS, IN, January 14, 2019 – Roger H. Schmelzer, president of the National Conference of Insurance Guaranty Funds (NCIGF), has been selected to serve as chairman of the International Forum of Insurance Guarantee Schemes (IFIGS). 

Schmelzer, along with Peter Gallanis, president of the National Organization of Life and Health Insurance Guaranty Associations (NOLHGA), NCIGF’s life and health counterpart, together have represented the United States as members of IFIGS since 2012.

Schmelzer, who has led the NCIGF since 2006, will be joined on the IFIGS Management and Support Committees by representatives from Canada, Chinese Taipei, Germany, Greece, Korea, Kenya, Romania, Singapore, Spain, Thailand and the United Kingdom.  He has served as IFIGS secretary for the past year.

“Insurance customers, industry and the economy are best-served when the insurance promise is secured,” said Schmelzer upon his election. “I’m enthusiastic about working with our global partners to further advance that objective.”

IFIGS facilitates and promotes international cooperation between insurance guarantee schemes and other stakeholder organizations with an interest in policyholder protection. The IFIGS is made up of 25 full and associate members, 22 of which are Insurance Guarantee Schemes (IGS) from Africa, Asia, Europe and North America. There are more than 30 IGS worldwide.

IGS protect policyholders of insurance companies that fail. Many IGS provide expertise in stabilization or restructuring resolutions, and all IGS can provide expertise and some form of insurance protection and/or financial support to assist in the liquidation of an insolvent insurer.

An international platform will elevate the U.S. guaranty system’s value to domestic solvency regulators, according to Schmelzer. “This is timely because the NAIC is undertaking its own initiatives that could affect the U.S. system,” he said.  “The broader our expertise, the more impactful we can be on behalf of the state guaranty funds, the carriers who belong to the state associations and most importantly to individual policyholders and claimants.”

Schmelzer noted the efforts of the NCIGF and NOLHGA as part of IFIGS have already made a difference, citing recent changes to international regulatory drafts which underscore the primacy of policyholder protection, the importance of pre-insolvency cooperation, collaboration between the guaranty system and regulators as well as clearing up any misconceptions that a guaranty association could spread financial risk.

NCIGF and NOLHGA will host the IFIGS annual conference in late 2019.

NCIGF Sees Progress at NAIC on LD and Troubled Co Regulation

NCIGF closed out 2018 on a very high note.  Regulators adopted very positive recommendations governing large deductible insolvencies, including that states be encouraged to adopt statutes that grant the receiver the authority to collect deductible recoveries.  If no statute is in place receivers are encouraged to execute an agreement with the guaranty funds to enable this process.  The Working Group noted that two large deductible model statutes are available – the NAIC and the NCIGF versions. 

While the issue is not quite wrapped up (NCIGF will be involved in continued discussions regarding the ultimate ownership of the deductible asset and the drafting of specific language for the Receivers Handbook) this progress is attributable the hard work of a number of our members.

Likewise, financial regulators invited NCIGF and NOLHGA to comment on the NAIC Troubled Company Handbook.  Our comments were supportive (and included some fine-tuning based on member liquidation experience) because the proposed revisions to the Handbook would improve guidance to regulators on issues NCIGF members have found especially challenging:

  • early communication with guaranty funds and pre-liquidation planning,
  • regulator attention to the condition and availability of digital data in a troubled company,
  • info on service arrangements (TPAs and MGAs),
  • gathering information on the type and location of collateral, such as that intended to secure large deductible obligations  

Especially impressive is the attention given to the importance of digital data in contemporary insolvencies.  There now appears to be universal agreement that this is a very critical element to a successful liquidation process and key to the collaboration between guaranty funds and receivers.

To be successful, NCIGF served as the “trusted expert” and the definitive source of information on insurance insolvency and its consequences.   As a result, we have enjoyed great cooperation from regulators on these issues, both of which matter to on a daily basis to NCIGF members and the policyholders you serve.  We will build on these developments in the coming year!