Tag: NCOIL

NCIGF Makes Progress at NCOIL

Robin Webb Leave a comment

NCIGF-advocated measures received favorable action during the National Conference of Insurance Legislators (NCOIL) meeting last week in Charleston, S.C.

Language was approved making it an express requirement that the Commissioner find that guaranty association coverage is not disrupted before approving a division plan. NCOIL Committee members noted that the model as adopted was a positive development and parallel changes should be made to the previously adopted NCOIL IBT Model. Also adopted as part of the P&C GF Model was the NCIGF’s new language related to insurance company restructurings ensuring guaranty fund coverage neutrality.

“We appreciate the attention of NCOIL members to important issues that impact the state guaranty funds,” said Roger Schmelzer, NCIGF CEO. “It’s critical to state regulation that insurance policyholders be protected and that we know when that protection is in place even while the marketplace and policymaking evolves.”

Divisions and IBT. NCIGF has been keeping an eye on the development of division and insurance business transfer (IBT) statutes around the country. NCIGF has been concerned that guaranty fund issues have not been adequately addressed in some cases. Jointly with NOLHGA, NCIGF has developed language to clarify the need for the commissioner to review guaranty fund coverage issues during the approval process for these transactions. Further, the provisions assigned the burden of demonstrating the impact on guaranty fund coverage to the applicant insurance company. The revisions are consistent with the NCIGF policy that guaranty fund coverage should not be disrupted by a division or insurance business transfer (IBT). That is, if the claim would have been covered before the transaction that coverage should remain in place after. However, guaranty fund coverage should not be created by a transaction when it did not exist before the transaction.

Special Funding Committee language. Changes were also adopted to the NCOIL Model Property Casualty Guaranty Fund model to add optional assessment language that would give guaranty associations the ability to assess for administrative and overhead costs in periods of low claim activity. NCIGF was successful in achieving adoption of this model in 2008. It is often used as a resource for states considering amendments to their acts.

At the April meeting, the Committee adopted optional assessment language designed to provide guaranty associations the ability to assess for administrative and overhead costs in periods of low claim activity. (A provision developed by the NCIGF Special Funding Committee.)  Further, the Committee adopted the NCIGF’s new language related to insurance company restructurings. This language, consistent with NCIGF policy ensures that guaranty fund coverage remains in place after a transaction, but such coverage is not expanded.

Schmelzer said that since NCOIL membership is composed of state legislators whose focus is insurance issues in their states, NCIGF engages at that level to build public policy bridges by which to share to its trusted, non-partisan expertise. “It’s a win-win; work at NCOIL often translates to state legislative efforts and NCIGF has expertise on a very discrete area of insurance policy,” Schmelzer said.

He also said that NCIGF will be working with NCOIL to develop amendments to its IBT model. Committee members also expressed interest in a general update on guaranty fund matters which NCIGF will provide.

Insurance Business Transfer Model Bill Takes Center Stage at NCOIL

Roger Schmelzer Leave a comment

The National Conference of Insurance Legislators (NCOIL) met in Nashville 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. NCOIL is 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 NCOIL meeting on the potential impact of IBT on policyholder protection. We will update you on that in due course.