Guaranty Conference Boss Seeks To Wise Up Insurers

The new head of the National Conference of Insurance Guaranty Funds, said after taking on the job he discovered that insurers have a knowledge gap about his operation.

Roger Schmelzer, president and chief executive officer of the non-profit NCIGF that supports property and casualty insurance guaranty funds in the various states, said during an interview yesterday that when he became president last year he reached out to insurers to find out what they knew about guaranty funds.

They confessed not knowing much and then they would go to look up their fund assessment, Mr. Schmelzer related.

“What they should worry about is how their assessment became what it was…. Insurance companies need to be more aware,” he remarked.

State guaranty fund assessments are typically collected following an insolvency of an insurer domiciled in the state and are generally capped at 2 percent of a company's net direct premium written in similar lines as those written by the insolvent insurers.

Mr. Schmelzer noted that the funds, which have claims limits ranging from $100,000 to $1 million, have “never exceeded 35 percent of our funds.”

In the scheme of things, the role of the Indianapolis-based NCIGF is to provide national assistance and support to the various state funds.

Mr. Schmelzer, in addition to embarking on his current general informational campaign, is ramping up the NCIGF's efforts to “offer alternatives” to policymakers considering rules and laws governing insurance receiverships and the guaranty system.

According to Mr. Schmelzer, the NCIGF tries to promote good solvency regulation, but does not take positions in state legislatures. The NCIGF does, however, make suggestions concerning fund-related matters.

“Legislators ask and we share observations.”

He noted that the p-c guaranty funds created in the 1960s were built to secure small personal insurers, but have lately been ask to handle the defaults of large commercial insurers.

If the public policy is to continue the funds as the bulwark for personal lines insurers, “we have to take steps to mitigate against commercial claims,” he said.

Mr. Schmelzer said the NCIGF is also suggesting that rules be adopted that exclude claimants with a net worth that is above a set number. “We suggest not allowing those claimants in guaranty funds,” he advised.