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.