PCI Opposes Receivership Model

A major property-casualty trade group has reiterated its opposition to the National Association of Insurance Commissioners model receivership act.

In a letter to the NAIC, the Property Casualty Insurers Association of America (PCI) stated it is not able “to recommend a single element of Insurers Receivership Model Act (IRMA).”

The act establishes the procedures insurance departments go through when settling the affairs of an insolvent carrier, such as the order of distribution of the entity's remaining assets.

The association objects to making passage of the entire model act part of the requirements that state insurance departments need to see fulfilled in order to be fully accredited by the NAIC. New York State's is the only department currently operating without accreditation.

PCI has been an active participant in the drafting and adoption of IRMA and, along with other industry representatives, has repeatedly voiced its concerns with the model. The insurer trade group submitted the letter to NAIC at the request of regulators.

“When accreditation was first considered in the early 1990s, it was a response to the pressures on the federal level for federal solvency legislation,” wrote Michael Koziol, assistant vice president and counsel for PCI. “The industry reluctantly supported accreditation, but only in the context of solvency, as accreditation carries with it a 'back door' form of legislation: Pass this law or your state won't make the accreditation list.”

Mr. Koziol pointed out that with the industry's support, accreditation passed the NAIC and has been a successful concept to date. However, PCI continues to question IRMA's relationship to solvency. “Clearly that relationship is only tangential,” said Mr. Koziol. “IRMA addresses insurers that are in receivership and for whom it is too late for solvency.”

In its letter, PCI said it “agrees and supports the element of accreditation that a state should have a receivership model. But that is a far cry from requiring certain or all elements of IRMA to be part of accreditation. Rather, we have heard talk that the purpose of placing elements of IRMA into accreditation is to get states to pass these sections. At best, that is placing the cart before the horse and, at worst, making the state legislatures 'an offer they can't refuse.'”

“We think legislation is best left to legislators,” said Mr. Koziol. “We share the reservations of Delaware State Senator Harris B. McDowell III who, in a letter to the NAIC, expressed serious concerns that IRMA might become part of accreditation, effectively preempting state legislatures.

“PCI believes that making IRMA part of accreditation, in whole or sections, could jeopardize the entire accreditation process. As such, PCI will oppose such efforts in all states because accreditation, as far as IRMA is concerned, should be immaterial to its passage in any state.”