The nation's insurance guarantee funds organization reported today that insolvencies in the property-casualty sector have been on the low side, but there is a continuing movement on the legislative and business side for reforms.
A finding by the National Conference of Insurance Guaranty Funds (NCIGF) that liquidations are at a low followed a report last week from Standard & Poor's that the number of insolvencies has declined in recent years from 19 in 2004 to 10 last year (see NU Online News Service, March 28).
States are still grappling with The Insurer Receivership Model Act, a model crafted by the National Association of Insurance Commissioners, the guarantee funds reported. Only two states, Utah and Texas, have passed versions of the act, while several others have debated points of it.
The act establishes procedures for departments settling the affairs of insolvent carriers.
The guarantee group said it is watching carefully the debate over reinsurance collateral requirements for foreign insurers. It said the major concern is the ability of receivers to collect reinsurance when a foreign insurer goes into liquidation. Without funding mechanisms in place to promptly pay claims, the cost to guarantee associations would increase and be passed onto the public.
There also are ongoing discussions about finding market-driven solutions to address problems with troubled insurers before placing companies into liquidation. However, there does not appear to be "a rush of investment capital to fund insurance company runoffs."
On the issue of an optional federal charter, the NCIGF said it has taken no position other than to say that consumer rights need to be protected.
Any OFC legislation should provide provisions for the state guarantee funds to continue, disposing with the need for a National Insurance Guaranty Association. There should be no split between state and federal guarantee fund mechanisms. "Only one mechanism to protect both types of insurers should be in place," the report said.
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