Blog – Page 2

Barbara Law and Jenny Anzalone-Ackley Elected to NCIGF Board

March 13, 2020March 13, 2020 Robin Webb Leave a comment

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.

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

February 24, 2020February 24, 2020 Barbara Cox Leave a comment

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

January 30, 2020February 10, 2020 Robin Webb Leave a comment

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

January 3, 2020January 3, 2020 Roger Schmelzer Leave a comment

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 & NOLHGA Host Successful Gathering of Global Insolvency Officials

December 18, 2019December 18, 2019 Roger Schmelzer Leave a comment

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

Court Rules CIGA Not a “Primary Plan” Under the MSP

November 12, 2019November 12, 2019 John Blatt Leave a comment

On October 10, 2019, the 9^th Circuit Court of Appeals issued a landmark decision holding that the California Insurance Guaranty Association (CIGA) was not a primary plan under the Medicare Secondary Payer Act (MSP) (CIGA v. Azar, 2019 WL 5076945 (9th Cir., Oct. 10, 2019) (link to 9th Cir. Opinion)). The court’s ruling alleviates CIGA’s responsibility to reimburse the Center for Medicare and Medicaid Services (CMS) for conditional payments made on behalf of workers’ compensation claimants and may also obviate its need to adhere to Medicare Set-Asides for claim settlements.

The ruling stems from a lawsuit filed by CIGA seeking to curtail conditional payment reimbursement requests from CMS that were unrelated to covered claims. CIGA asked the court for a declaratory judgment holding that 1) CIGA is not a primary plan under the MSP, 2) that CMS must adhere to the claims bar date, and 3) that CMS’s all-or-nothing billing practice is improper and must not continue. The district court found in favor of CMS on the first two issues but agreed that CMS should only seek reimbursement for conditional payments from CIGA where the diagnostic code related to a covered claim. The parties cross-appealed.

The 9^th Circuit focused exclusively on the preeminent issue; whether CIGA was a primary plan under the MSP. Like the district court, the 9^th Circuit examined the issue in terms of federal preemption. The court began by reviewing the MSP to determine whether CIGA could be deemed a primary plan. While MSP does not define “primary plan”, it provides examples, such as state workers’ compensation acts. The court found that CIGA shares little with state workers’ compensation laws. While it may pay workers’ compensation claims, CIGA is triggered by an insolvency, not a work-related injury. Further, the California insurance laws specifically define CIGA’s as insolvency insurance. The court cited numerous examples of CIGA being deemed an “insurer of last resort”; a term antithetical to being a primary plan.

Finding that CIGA could not be deemed a primary plan under the MSP, the court turned its attention to whether Congress intended the MSP to preempt state laws governing insurer solvency. Congressional intent is derived from the statutory language and surrounding framework. Nothing in the MSP expressly related to insurer solvency. The closest indication the court could find was that the MSP supersedes state law with respect to Medicare Advantage plans under Part C and prescription drug plans under Part D, but that Congress clarified that those provisions did not apply to state laws relating to plan solvency. Thus, the 9^th Circuit reversed.

What happens next is still an open question. CMS has until November 24, 2019 to seek an en banc appeal (review by the full 9^th Circuit panel of judges) and until January 8, 2020 to file a writ of certiorari to the U.S. Supreme Court. It also has the option of amending the MSP to expressly apply to guaranty funds. Until then, this ruling is good law in the 9^th Circuit and persuasive elsewhere. The application of the ruling to other guaranty funds requires a state-by-state analysis, though there is benefit to be gained from coordination. The NCIGF Legal Committee will be working with members to ensure the most effective response.

If you have any questions or comments, please reach out to John Blatt (jblatt@ncigf.org).

GSI: Data Management Solutions for the Insurance Resolution System

October 28, 2019October 28, 2019 Connor Inman Leave a comment

Guaranty Fund Services (GSI)

GSI aims to assist Guaranty Funds with a suite of IT services including:

• Cloud hosting
We can plan and migrate your entire IT infrastructure to the cloud.

• Application Development
GSI can automate any existing paper processes in your office including collecting assessment data, proxy voting for your board, PTO forms, expense reimbursement, various UDS processes, setting up an internal intranet, Web site hosting, etc.

• IT security services
Do you have an IT audit coming up? Do you have the results of an audit that you don’t know what to do with? GSI can help you prepare in the leadup to an audit and assist with remediation.

• KnowBe4
We can assist or manage your KnowBe4 training and testing.

• Monitoring
GSI can setup daily security monitoring and provide executive level reports on what issues currently exist in your environment.

Receivership Services

GSI aims to assist receivers with the extraction and conversion of claims data from an insolvent insurer. GSI can do this faster and cheaper than anyone else in the entire market. We can accomplish this because we’re a for profit subsidiary of a not for profit entity – we don’t have a bench of consultants who need to get paid nor do we incur the types of expenses that other IT consulting technology companies have. The receiver only pays for the services it uses. Furthermore, GSI isn’t looking to maintain data extraction and conversion for longer than it needs to. We look to partner with the existing company or receivership staff to ultimately transition the UDS work to them. GSI likes to step in at the early, chaotic, but crucially important parts of an insolvency to make sure data gets where it needs to go, then looks to step away as the transition becomes more orderly.

Contact GSI

Company Restructuring Statutes Gain Steam in the States- NCIGF Adopts Policy Position

October 25, 2019October 25, 2019 Barbara Cox Leave a comment

Restructuring statutes, which take the form of either company division statutes or insurance business transfers (IBTs), 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.

At its October 2019 meeting, the NCIGF Board of Directors adopted a policy position on restructuring mechanisms. While the NCIGF takes no position on this or any other company business practice, it is concerned with the continued protection of covered policyholders and claimants in the event of insolvency. NCIGF public policy is focused on preserving guaranty fund (GF) coverage for policies and claimants where there has been a division or an IBT:

Where there was guaranty fund coverage before the division or IBT, state regulators should ensure that there is coverage after the division or IBT. A division or IBT should not reduce, eliminate or in any way impact GF coverage.
Where there was no coverage before the division or IBT, there should be no coverage after the transactions are completed. A division or IBT should not create, expand, or in any way impact GF coverage.
Guaranty fund representatives are a good resource for any guaranty fund coverage issues that arise in evaluating these transactions.

NCIGF’s complete position statement can be viewed here. Roger Schmelzer, NCIGF’s President and CEO states “our organization is focused on protecting the policyholders the guaranty fund system is intended to protect. Our position on restructuring mechanisms reflects this primary concern. Some state guaranty funds may have varying views on these statutes. In any case, we hope that regulators considering these transactions will keep the guaranty funds informed and make use of their expertise in the area of insurance insolvency.”

Background and recent developments. 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 transfer 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. (See VT ST T. 8 § 7111 et seq.)

Arizona also has a business transfer law. (See AZ ST § 20-736)

Most recently, a number of division statutes have been proposed and adopted in the following states, including the following:

Connecticut: Division statute enacted in 2017

Georgia: Division statute enacted in 2018.

Illinois: Division statute enacted in 2018.

Iowa: Division statute enacted in 2019.

Oklahoma: IBT statute enacted in 2018.

Michigan: Division statute enacted in 2018

Nebraska: Proposal introduced in 2019. Did not progress.

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 assuming entity is also an issue of concern.

For additional details on division statutes please go to https://www.ncigf.org/industry/public-policy-and-legislation/.