Month: December 2021

Breaking, to be updated

Dec. 29 — Three state regulators filed an appeal in the Supreme Court of Pennsylvania Dec. 27th against the amended rehabilitation plan for insolvent long term care insurer Senior Health Insurance Company of Pennsylvania. They were joined by a whopping 27 state regulators as amici to the case, demonstrating that well over half of U.S. states oppose the novel plan.

Three of the four National Association of Insurance Commissioners‘ incoming officers for 2022, President Dean Cameron, Vice President Andrew Mais, incoming Secretary-Treasurer Jon Godfread, North Dakota, are included in their opposition to the plan as amici. Several are former NAIC presidents with years, if not decades, of service in state regulation.

The case is could potentially tee up a united opposition from 30 state attorneys general if the rehab plan goes into effect because the intervening appealing states charge that the plan “overrides individual states’ regulatory authority over premium rates” charged on policies issue in those states.

If the appeal fails, the plan is expected to go live in April 2022, once policyholders mail back their choices by March from among the menu of options given in the rehab plan. Once the rehab plan tries to institute rates in other states, the state AGs would be prompted to act, potentially, as the opposing jurisdictions beleive this rate action would violate state laws.

For many of these regulators, SHIP’s rehab plan threatens one of the foundations of state insurance regulation, the authority of the states to set and approve their own rates for their state-licensed insurers.

The states of Maine, Massachusetts and Washington State and the amici are claiming that the lower court erred in approving the plan, that it places the burden of insolvency solely on the policyholders in violation of statute and disregards the best financial interests of policyholders and the state guaranty system, among other things.

The three states, who previously intervened in the case in lower court, argue that the rehab plan “disregards the long-standing state-based system for approval of insurance rates and instead imposes rates set by the rehabilitator and approved by the Pennsylvania Insurance Department and the Commonwealth Court. They said they were not aware of any plan that has tried “to supersede state rate regulation and set rates payable by policyholders in other States without review and approval by the insurance regulators of those States” in their appeal.

“The Plan fails to minimize the harm to policyholders, and it certainly appears that the Rehabilitator’s goal is solely to reduce SHIP’s deficit before it is placed into liquidation which is wholly inconsistent with the goals and purposes of there habilitation process,” the 27 amici states said in their brief, filed Dec. 22.

“The rate increases under the Plan are extreme, in some cases more than double the amount of the current premium.This can be expected to force unnecessary policy lapses for elderly policyholders who have paid premiums for many years in contemplation of the need for long term care,” they wrote.

These opposing states favor liquidation and the triggering of the state guaranty funds to help cover SHIP’s deficits to policyholders. The rehabilitators have successfully argued thus far in state court that their plan gives policyholders more flexibility for chooses. No matter which way it is slice, policyholders face a reduction benefits nad/or soaring premium increases.

As of Dec. 31, 2020, SHIP had total assets of $1,369,908,000 and total liabilities of $2,592,415,000 with a negative capital and surplus of $1,222,507,000. Thus, SHIP’s deficit or “funding gap” is $1.2 billion. The Commonwealth Court approved the rehab plan, led by Commissioner Jessica Altman, in August 2021 and again, more formally, in September. Altman first filed a petition for SHIP’s rehab in January 2020, and the lower court placed it in rehabbing an order that month, awaiting a plan.

The three state insurance regulators appealed to the Supreme Court on Sept.21, 2021 and in early October, applied for a stay pending appeal. The Commonwealth Court denied the appeal and the stay, but a November request for a stay to the state Supreme Court is still pending.

A response from the Pennsylvania Insurance Department, as rehabilitation, is pending.

The 27 Departments of Insurance of the Amici Curiaei insurance regulators are, from the document are below.

The five jurisdictions that have joined since mid-November as amici appear to be Alaska, Arizona, the District of Columbia, Indiana, Ohio and Vermont.

ALAKSA, DEPARTMENT OF COMMERCE, COMMUNITY, AND ECONOMIC DEVELOPMENT, BY
LORI WING-HEIER, DIRECTOR

ARIZONA DEPARTMENT OF INSURANCE AND FINANCIAL INSTITUTIONS, BY EVAN G. DANIELS, DIRECTOR

ARKANSAS INSURANCE DEPARTMENT, BY ALAN MCCLAIN, COMMISSIONER

CONNECTICUT INSURANCE DEPARTMENT, BY ANDREW N. MAIS, COMMISSIONER

DISTRICT OF COLUMBIA DEPARTMENT OF INSURANCE, SECURITIES, AND BANKING, BY

KARIMA M. WOODS, COMMISSIONER

INDIANA DEPARTMENT OF INSURANCE, BY AMY L. BEARD, COMMISSIONER

IDAHO DEPARTMENT OF INSURANCE, BY DEAN L. CAMERON, DIRECTOR

DOUGLAS M. OMMEN, INSURANCE COMMISSIONER OF THE STATE OF IOWA

LOUISIANA DEPARTMENT OF INSURANCE, BY JAMES J. DONELON, COMMISSIONER

MARYLAND INSURANCE ADMINISTRATION, BY KATHLEEN A. BIRRANE, COMMISSIONER

MISSISSIPPI DEPARTMENT OF INSURANCE, BY MIKE CHANEY, COMMISSIONER

NEW HAMPSHIRE DEPARTMENT OF INSURANCE, BY CHRISTOPHER R.NICOLOPOULOS, COMMISSIONER

NEW JERSEY DEPARTMENT OF BANKING AND INSURANCE, BY MARLENE CARIDE, COMMISSIONER

HON. RUSSELL TOAL, SUPERINTENDENT OF INSURANCE FOR THE STATE OF NEW MEXICO

NORTH CAROLINA DEPARTMENT OF INSURANCE, BY MIKE CAUSEY, COMMISSIONER

NORTH DAKOTA INSURANCE DEPARTMENT, BY JON GODFREAD, COMMISSIONER

OHIO DEPARTMENT OF INSURANCE, BY DAVE YOST, ATTORNEY GENERAL

OKLAHOMA DEPARTMENT OF INSURANCE, BY GLEN MULREAY, COMMISSIONER

TROY DOWNING, MONTANA COMMISSIONER OF SECURITIES AND INSURANCE AND STATE AUDITORRHODE ISLAND DIVISION OF INSURANCE, BY ELIZABETH KELLEHER DWYER, SUPERINTENDENT

SOUTH CAROLINA DEPARTMENT OF INSURANCE, BY RAYMOND G. FARMER, DIRECTOR

SOUTH DAKOTA COMMISSIONER OF INSURANCE, BY LARRY DEITER, DIRECTOR

UTAH INSURANCE DEPARTMENT, BY JONATHAN T. PIKE, COMMISSIONER

VERMONT DEPARTMENT OF FINANCIAL REGULATION, BY KEVIN GAFFNEY, DEPUTY COMMISSIONER

WEST VIRGINIA OFFICES OF THE INSURANCE COMMISSIONER, BY ALLAN L.MCVEY, COMMISSIONER

WISCONSIN OFFICE OF THE COMMISSIONER OF INSURANCE, BY MARK AFABLE, COMMISSIONER

WYOMING DEPARTMENT OF INSURANCE, BY JEFFREY P. RUDE, COMMISSIONER

News on Relevant Enforcement Actions Around the Country

Dec. 10, 2021 — The Allstate companies received a $225,000 penalty from the Insurance Division of the Vermont Department of Financial Regulation after an exam on claims settlement practices of third-party auto liability claims found certain violations.

According to a consent order and stipulation dated Dec. 8, 2021, the exam focused on auto liability claims that involved comparative negligence to check whether they were handled correctly under Vermont law.

The regulators found Allstate failed at times to document evidence of implementing so-called “reasonable standards” for promptly investigating claims.

While the department did not find any instance in which Allstate didn’t implement these reasonable standards, the company’s apparent lack of “proper documentation” led the Insurance Division to conclude there was a failure to implement. Vermont cited it lacked “evidence to the contrary.”

Regulators simply could not tell how Allstate was measuring up in promptly investigating these liability claims.

Of note, Allstate must also pay restitution with interest to any third-party claimant whose claim was initially denied in part or fully because it was assigned comparative negligence liability when a further review of the claim determined the assignment of liability to be faulty.

It is unclear how much the total payout would be. Allstate did not respond to an inquiry. However, the department began the Allstate exam on July 9, 2018.

Under the consent order, Allstate must also “properly document how the procedures its adjusters are to use when making comparative negligence determinations have been implemented.”

Vermont regulators gave Allstate a set of actions and materials for these procedures, including training materials, conducting accident scene investigations from inquiries and photographic evidence and vehicle inspections and documenting the process.

The company has already implemented training measures and controls, according ot the consent order. It has until Jan. 31 2022, to show the Department certification of shared liability training of all licensed adjusted in Vermont.

Vermont regulators wrote that they might conduct a follow up exam within 12 to 24 months to check on compliance.

Allstate means in this instance: Allstate Fire & Casualty Insurance Co.Allstate Indemnity Co., Allstate Insurance Co., and Allstate Property & Casualty Co.

Updated Jan. 25th with Hartt’s new job.

Hartt to take ‘early retirement’ after 21 years at NJ regulatory agency

Dec. 7, 2021 —

Key state insurance regulator Peter Hartt, who helped spearhead life insurance solvency oversight and expanded group supervision of Prudential Financial, will be ending his long career with the New Jersey Department of Banking and Insurance at the end of the year. 

Hartt will be joining Randall & Quilter Investment Holdings Ltd. as U.S. head of compliance and regulatory affairs. The dividend-paying non-life insurance group is domiciled in Bermuda, owns surety and other property casualty companies in the U.S. and Europe and buys discontinued books of non-life business and non-life (re)insurers and captives in run-off. It owns and manages both active and run-off businesses, often dissolving them, and also has operates as a fronting business, or conduit for capital providers in the insurance and reinsurance sphere.

Although he began his tenure at the Department in June 2000 as a public information officer. Hartt served as director of the division of insurance at the department during a critical time in state and federal relations involving solvency regulation. 

Hartt served as the state insurance representative on the U.S. Financial Stability Oversight Council from September 2016 to September 2018, a period when the Council was considering designating and de-designating large national life insurers as systemically important financial institutions. FSOC voted to remove the last insurance SIFI, New Jersey-domiciled Prudential, a month after Hartt left FSOC, based on work and findings he and other members contributed to the process.

Hartt also led the National Association of Insurance Commissioners’ Financial Stability Task Force and led on the initiate developed by state regulators to more broadly oversee and monitor life insurers’ financial health. He worked with global supervisory partners in developing international capital standards for large group insurers and on resolution issues as well, for orderly unwinding of assets.

Colleagues during his time on the insurance regulatory national stage were happy to praise his work in bringing understanding of the expanding state insurance solvency oversight system to his work on FSOC . 

“He was extraordinarily important for his work on FSOC, the right person at the right time,” said Eric Cioppa, Maine insurance superintendent and the current state insurance FSOC representative. Cioppa said Hartt was instrumental in establishing the macroprudential initiative at the NAIC, and contribute d a lot in this and other areas of oversight. He called Hartt a credit to the NAIC and FSOC. 

Tom Workman, the FSOC’s current presidentially appointed independent member with insurance expertise, whose tenure overlapped with Hartt’s in 2018, praised Hartt’s work. Workman said his FSOC colleague served with great knowledge, patience and grace at a critical time. This would have been during fraught deliberations on removing Prudential’s SIFI designation, when the state insurance regulator on the Council would have a strong voice but not a vote in deliberations.

Prudential was the largest U.S. insurance group in the U.S., the largest nonbank SIFI, and the last to lose its designation as such. Minutes of FSOC meetings show Harrt supported the de-designation of Prudential. Hartt was preceded at FSOC by John Huff and Adam Hamm, both former NAIC presidents.

Hartt became assistant director of the division in 2002 and acting director in 2011, according to an online bio The New Jersey state Senate confirmed him as director back in 2014.

No word yet on what Hartt will be doing next but look for more news in the new year.

FSOC grew out of the 2008-2009 financial crisis as pat of the Dodd-Frank legislation of 2010, to better oversee insurers’ and other financial institutions and mechanisms’ vulnerabilities in solvency and interconnectedness and to strengthen stability of the financial system.