- In the U.S., many states have laws that permit insurers to offset a portion of their future premium, income and/or franchise tax liabilities by the amount of the guaranty association assessments they have paid (e.g., 20% over 5 years).
- This, in turn, reduces the tax bases of those states. (p4)
2018 0223 - ACLI Letter to FSB - 5p
Policyholder Protection In Insurance Company Failures
- ATTACHMENT FOUR-C - Statement of The American Council of Life Insurance <ACLI> - Before The Guaranty Fund Issues (EX5) Working Group B - September 11, 1995
1995-3, NAIC Proceedings
- Further, state guaranty funds protect policyholders from any shortfalls. (p2)
2010 0420 - NAIC letter to Senators on the Restoring American Financial Stability Act of 2010 (RAFSA) - 4p
GUARANTY FUND (EX4) TASK FORCE
- Brian Quigley (Travelers) .....noted that the task force should be aware that the trend is toward no coverage for GICs.
1987-2, NAIC Proceedings
- With several life insurers in trouble today, the life insurance guaranty associations nationwide could muster under $9 billion if they were called upon.
- As I put it in my testimony, that would hardly pay the bonuses that these companies are offering.
-- J. ROBERT HUNTER, DIRECTOR OF INSURANCE, THE CONSUMER FEDERATION OF AMERICA
- Despite unfounded concerns from some circles, our state guaranty fund system has robust capacity to resolve insurance company failures and provides an important incentive to the insurance industry to manage risk and promote solvency, as insurers are assessed for the failures of their fellow competitors.
- Given that policyholder dollars are paid into a proven system of resolution (coupled with appropriate solvency standards), these policyholder dollars should not also be used to pay for the failure of systemically risky entities within the new federal authority.
2010 0603 - NAIC Letter to GOV - 4p
- This led to creative solutions to some of the major insolvencies, such as establishing the Guaranty Reassurance Corporation, which was formed to take over the assets and liabilities of the insolvent Guaranty Security Life.
- In this plan, there was a 25% moratorium surrender charge assessed against policyholders who wished to surrender.
- These graded off over a five-year period. The funding of the guaranty associations' obligations for Guaranty Re was also spread over a five-year period.
- They funded them, in effect, with notes at the beginning of the 1993 Reassurance Plan.
- As many of you know, the funding for Executive Life was also spread out over a number of years.
Who bears the cost?
- To determine the cost of recent insolvencies, and how long has it taken to resolve them, let's define a major insolvency as one that has policyholder obligations of more than $100 million.
- There have been 14 of these in the last 10 years, including three big ones:
- Confederation Life,
- Executive Life, and
- Mutual Benefit.
- Total policyholder obligations were $28 billion as of the date of the liquidation order.
1998 - Once in a Hundred Years, Society of Actuaries - 22p
Meanwhile, the state guaranty funds may create the illusion of safety where it does not exist.
- While the funds might be able to absorb the failure of a single large insurer, it is almost certain that they would not be able to handle the simultaneous failure of several large insurers in a timely fashion.2 (p4)
2009 0317 - GOV - Perspectives on Modernizing Insurance Regulation - [PDF-160p]