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/