On November 1, Amanda Barbera officially became the Executive Director for the Oklahoma Property & Casualty Insurance Guaranty Association. Notably, Ms. Barbera was the past Executive Director, serving in Oklahoma from 2015 to 2018. Now based out of Indianapolis, she has been the Executive Director for the Indiana Insurance Guaranty Association since 2018. “It is incredibly rewarding for me because I can continue in my capacity in Indiana but also have the opportunity to work with Oklahoma, a state where I still have several ties and a strong appreciation for the work they do after serving there for so many years,” Ms. Barbera said in a statement to NCIGF.
The decision was made in Oklahoma after the association’s board met in September to review a proposal from Barbera outlining the contractual relationship where she would liaise with them, oversee the office operations and help lead and fulfill the mission of the Oklahoma organization, including insolvency management. “My role will be to represent both states’ interests when necessary. For instance, if I’m on a coordinating committee where both Indiana and Oklahoma have claims, I will be on the committee on behalf of each entity.” (Contractually, any conflict of interest would be raised to the board level.)
One key to Amanda’s success is the quick turnaround with her onboarding process. Since the work of guaranty funds is specialized, the utilization of Ms. Barbera’s expertise ensures that there will be no lulls in service for the Oklahoma Property & Casualty Insurance Guaranty Association, as she already understands the employees as well as the relationship with the receivership office.
Ms. Barbera will remain based out of Indianapolis but plans to return to Oklahoma regularly to manage as well as meet and coordinate with the Oklahoma association board.
“This is the Essence of What the Guaranty Funds Exist to Do…” – Brad Roeber
One of the highlights of the 2019 Fall Workshop was a panel entitled, Disaster Sight: Listening to History for Creative Problem Solving. Among the panelists was Brad Roeber, Executive Director of the California Insurance Guarantee Association (CIGA). Mr. Roeber gave a brief overview regarding a creative solution he employed in late 2018 when it came to the liquidation of Merced Property & Casualty Company, a small California Central Valley insurer impacted by the California wildfires. This is a closer look at that situation as well as a challenge from Mr. Roeber to all Guaranty Funds to secure the future of the system by leveraging creativity as well as compassion.
Robin Webb, NCIGF Communications & Member Support Manager: Brad, you’re the current Executive Director over at CIGA, tell me about stepping into that role as a former Industry representative.
Brad Roeber, Executive Director, CIGA: I served on the NCIGF Board as an industry member for a number of years so I have a fairly unique point of view, especially given that I ended up choosing to work with the guaranty funds for a living, now being the CIGA executive director. I believe in the mission very much and I thought that, at this time in our history, there was an opportunity to lead in a different way. We exist solely to serve consumers who have no place else to go. Everything that I’m doing and everything I’m encouraging my employees to do is to think about the people that are sitting there with nothing…whether it’s an injured worker in the comp world or it’s a claimant of a non-standard auto insured who has gone down or the folks up in Paradise, California who, in one day, lost everything and then a few weeks later, lost their insurance too.
Robin: And you’d only been in your role a short time when the California wildfires tore through this heavily wooded area in the Butte County? Tell me about getting creative when it came to helping those claimants from Merced who lost their homes.
Brad: Yes. Whether you call it creative solutions or just finding answers where maybe there are no obvious ones, to me that’s what we need to do. I’m not the first person who’s hired existing staff to handle an insolvency, but it goes beyond that. Now we’re leveraging those people [from Merced] who did a great job for us to do more work and keep them on the payroll longer, so there is an economic value to how we handled it. And, talking about Merced specifically, we are going to handle that estate with an administrative expense load that’s exceptionally low. And that is because we didn’t have to pay southern California salaries to those folks, and we didn’t have to pay the overhead of southern California. We paid the overhead in a little farm town in the middle of the agricultural part of the state. There are all kind of little savings like that just from being open to new possibilities. And like I’ve said, utilizing existing staff is not a new idea, but I think the way we leveraged it in this particular case was a little different.
Robin: Take us back to the very beginning. What happened with Merced?
Brad: The story of Merced is a pretty simple one. I had gotten here at the end of September 2018 and on November 8th, the fire starts. We got a call saying that there was this little central valley carrier that was a hundred years old and it was likely to go under. Most of their book of business was property and so it was pretty clear that something was going to go down. As it turns out, some of their employees knew within a week that they were done because the company had about $30 million in assets and the exposure was within the $100million range. So, we knew…it’s going to go.
Robin: In your time in the insurance world, had you ever experienced a disaster like this?
Brad: One of the things that was interesting here, and it’s a good lesson for the future of the guaranty funds, was I was among just a few people at CIGA that had ever actually been involved in a property disaster and had adjusted property claims. My experience, a lot of which was in the Midwest, was with tornadoes and things of that nature. I had been on site in multiple places where a tornado had ripped through and the houses were completely gone. There was one that happened a little east of Peoria a few years back where people were sitting at home on a Sunday morning eating breakfast and the next thing they know, the alarm is going off, they are running to the basement and the house is just gone. So, I had some pretty unique experience around those types of situations and adjusting those property claims.
Robin: When you heard about Merced, what was your first step?
Brad: I decided to go up there and see the people (and this was before the liquidation order). I went up to the Merced offices and talked with the claims staff and told them that it appeared that the company is in trouble but that the guaranty funds are the backstop for it and at CIGA I didn’t have anybody that knows how to adjust claims on property…so, would you be willing to work with us? We tried to be creative about engaging them and we set up a ‘stay bonus’ system to reward them if they stayed until the end of the insolvency.
We had our people lined up to handle everything and then it started. We went to work and began adjusting the claims. The fire had started on November 8th and right after Thanksgiving the fire finally got put out, so it burned fully for about three weeks. Then, on December 3rd the company was declared insolvent. Because of the pre-planning we had done and the fact that there was not a huge number of claims, we actually started issuing checks on that Friday, December 7th. The next week, in earnest, we were producing more checks for those folks, allowing the coverage gap to be minimal, almost nonexistent.
Robin: You mentioned specifically some creative solutions in regard to claim caps, tell me more about that.
Brad: The CIGA statute says that we could pay a maximum of $500,000 per claim for non-workers compensation claims. We talked in advance with our counsel and discussed the option of looking at the caps differently. Instead of one homeowner’s claim, we look at the homeowner’s policy in multiple parts where there are four basic coverages – dwelling, structures, contents and additional living expenses. We developed the option of treating this as four claims as opposed to one single claim.
Robin: Why was this solution so important to you?
Brad: This is the lens I was looking through: If we don’t find a creative way to deal with this part of it, then we will not represent the insurance industry as a safety net. Because of this four-coverage approach, we were able to cover the entirety of people’s claims with the exception of just a few (maybe 30-40 whose domicile exceeded the $500,000 cap). It created a productive solution out of a situation that was really awful for these people. It allowed them to move on with their lives.
Robin: And there was another area, the contents portion of the coverage, that you dealt with pretty swiftly as well, right?
Brad: Yes. When you adjust a property claim and there is contents damage, typically it’s handled by the consumer providing an inventory and the adjuster going through the list of all of the homeowner’s items and coming up with a cash value for all of those items. Then, when the consumer actually goes out and purchases those items, they provide proof, and only then can they be paid the difference. Obviously, it’s a pretty arduous process. Well, we decided to offer to pay eighty percent of whatever the contents coverage amount was, without an inventory. No questions asked. Again, that piece of it, that type of solution had been done before but not very often and not so efficiently or at such a high percentage amount. And with the exception of just a handful of claimants, we have had no complaints.
Robin: Where did the Merced employees end up?
Brad: We’ve given them additional work to do. We have other work that had been done by third-party administrators and I’m starting to feed them additional files to adjust. It saves us money and also keeps them employed. We wanted to reward them for being loyal to us and seeing this insolvency through to the end.
Robin: Thank you for sharing that story. It’s incredibly compelling.
Brad: It’s important to remember that this is not a tale of woe. This is not a story about a bunch of greedy insurance companies who try to do the wrong thing. This is a group of really well-intentioned people who have gotten educated and want to do a better job for the policyholders. The guaranty funds were there. We served these people who literally had no place else to go.
Robin: How do you balance the idea of going above and beyond to some who maybe have the mindset of not being a charity organization or taking up the mantle that their job is, in fact, to minimize the claims they pay?
Brad: I’m compelled because I’ve been on a disaster site before. The first time I went to a disaster site and looked into the eyes of one of my customers who had lost everything, that was a seminal moment for me almost fifteen years ago. At the time, I had forgotten why I’d gotten into the business – I had gotten caught up in making money and driving combined ratio and cutting claims cost and all of those things. I realized then that it wasn’t about any of that. It was about doing the right thing and taking care of these people. That was the promise. When you think about NCIGF, it’s about the promise. The promise isn’t that we make a lot of money…if it happens, then that’s great. But the promise is that we take care of people when they’ve lost everything and have no place else to go. It is a noble business.
On June 4 Louisiana adopted legislation to define how large deductible policies are handled in an insurance liquidation. The new law tracks closely to model language adopted by NCIGF and reflects the NCIGF position that deductible collections and other recoveries are to be remitted at 100% to the guaranty funds to the extent of their claim payments.
In the context of this legislation “large deductible” policies are:
Workers compensation policies in which the insurer agrees to pay the claims from dollar one.
However, through policy endorsement, the policyholder is obligated to reimburse the insurance company up to a certain specified amount – usually upwards of $100,000. (Sometimes through special arrangement with the insurance company the policyholder pays the deductible amount in the first instance – however the insurance company always has the ultimate responsibility to pay the claim.)
These mechanisms allow the policyholder to save on premium and at the same time protect the injured worker.
Any collection issues are addressed between the policyholder and the insurance company, but the worker gets needed benefits on a timely basis. Typically, the policyholder obligation to repay is secured by collateral furnished by that policyholder.
Confusion often ensues if the insurance company goes into liquidation and an insurance guaranty fund assumes the obligations of the insolvent insurer for workers compensation cases. Statutes such as the new Louisiana law settle various issues such as 1) who is responsible for collection of the large deductible recoveries, 2) how collateral put in place to secure these obligations should be administered post-liquidation, and 3) does the recovery become a general asset of the now insolvent estate or is it remitted to the guaranty fund paying the claim to the extent of that claim payment?
According to Roger Schmelzer, NCIGF President and CEO, “these issues are important to the guaranty funds for several reasons: 1) Any confusion about the status of the various parties, such as the policyholder, the claimant, the receiver and the guaranty fund, can result in collection delays and litigation – both of which diminish available funds to reimburse the deductibles; 2) guaranty funds are a limited safety net – ultimately the cost of the guaranty fund payments is passed on to the public by various recoupment methods – having the structure in place to reimburse guaranty funds quickly on deductible payments reduces the cost to the public, and, importantly, bolsters the ability of the guaranty funds to provide seamless protection to injured workers.”
The new Louisiana law addresses all these issues and will do much to eliminate confusion and delay in future Louisiana insurance insolvencies. It’s essential elements are:
It calls for the receiver to assume collection efforts.
The receiver administers the collateral, draws down on the collateral should the policyholder fail to pay within a certain time frame, and eventually returns any excess collateral to the policyholder.
Guaranty funds receive reimbursement in full for their claim payments out of the deductible collections or collateral draw downs. (More information on this rather complex statutory scheme, and other similar laws, can be obtained by review of the new law available https://www.ncigf.org/industry/public-policy-and-legislation/.)
The other states that have adopted similar statutory changes are California, Pennsylvania, Illinois, Indiana, Michigan, Texas, New Jersey, Utah, Florida, Missouri, and West Virginia. Most follow some version of the template of the NCIGF model which has been revised over the years to reflect experience in dealing with these products in an insolvency context. The first state to enact the bill was Pennsylvania during the aftermath of the Reliance insolvency. Reliance was liquidated in 2001 and the legislation was added in 2004.
Special appreciation to John Wells, Executive Director of the Louisiana fund. John was instrumental in vetting this bill with state policymakers.
NCIGF Vice Chair Chad Anderson (WGFS) and NCIGF CEO Roger Schmelzer recently returned from the Asian International Forum of Insurance Guarantee Schemes (IFIGS) meeting held in Taipei, Taiwan. Both spoke to a roomful of 150 Public officials and academics from throughout Asia about the value of insurance guaranty funds.
Anderson delivered a robust briefing on how the U.S. property and casualty safety net works and the system’s place in state-based insurance regulation. It was an important presentation because most of the audience was not familiar with consumer protection for casualty products. Nearly all the topics addressed in the two-day meeting involved life mechanisms with an emphasis on avoiding failure altogether and efforts to assist regulators in achieving that end.
Delivering the keynote speech as chairman of IFIGS, Schmelzer outlined common objectives for all nations with policyholder protection laws; early involvement, prioritizing insurance customers and making sure regulators had a full and accurate understanding of how guaranty programs work, concluding by saying that meeting these elements will help to stabilize economies around the world.
Schmelzer pointed to deliberations anticipated later this year by international regulators (including representatives from the United States) on the ideal future state of guaranty systems worldwide. He cited these talks as a critical opportunity to help regulators generate a comprehensive body of knowledge and realistic expectations of insurance safety nets and their missions. Schmelzer also asserted that it was equally important to create an understanding that there is no single best way to protect consumers.
Update provided by the Missouri Insurance Guaranty Associations
Jefferson City, MO: Tamara W. Kopp has been named the new Executive Director of the Missouri Insurance Guaranty Associations by the Associations’ Executive Committee. Kopp takes the helm on October 1, 2019, when Chuck Renn retires after managing the Associations since 1992.
Kopp has spent her legal career with the Missouri Department of Insurance, most recently as receivership counsel representing the receiver for failed insurance companies. Kopp brings an understanding of government, insurance regulation, and company resolutions. She has served on the boards of directors for the International Association of Insurance Receivers (IAIR) and the Women Lawyers’ Association of Mid-Missouri (WLAMM). Kopp also represented the Missouri Department of Insurance on various National Association of Insurance Commissioners (NAIC) Committees, Task Forces, and Working Groups. As Executive Director, Kopp will continue her involvement with NAIC and IAIR while adding the National Conference of Insurance Guaranty Funds (NCIGF) and the National Organization of Life and Health Guaranty Associations (NOLHGA) to her schedule.
“On behalf of the Missouri Insurance Guaranty Associations, we want to thank Chuck for his 27 years of outstanding service to the guaranty associations and to Missouri consumers,” said Mike Voiles, Missouri Farm Bureau and Chair of the property and casualty guaranty association.
Tamara Kopp said, “Chuck has built a solid organization. I’m looking forward to continuing his level of excellent service for Missouri insureds to keep promises made.”
Kopp earned her law degree from the University of Missouri – Columbia and her bachelor’s degree from Northwest Missouri State University.
The Missouri Insurance Guaranty Associations provide protection within limits to insureds, beneficiaries, and claimants who are disadvantaged due to the insolvency of a member insurance company. Not all companies are member companies and not all types of insurance policies and coverage are subject to the protection provided by the Missouri Insurance Guaranty Associations. There are two insurance guaranty associations in Missouri that are jointly administered from one office. However, they have distinct responsibilities under their respective statutes. One association is responsible for insurance company insolvencies among the member life and health insurance companies, and the other association is responsible for insolvencies occurring among the member property and casualty insurance companies.