1994 10 - GOV (House - Report) - Wishful Thinking: A World View of Insurance Solvency Regulation - John Dingell (D-MI) - 137p

  • 1994 10 - GOV (House - Report) - Wishful Thinking: A World View of Insurance Solvency Regulation - John Dingell (D-MI)  ---  [BonkNote]  ---  [PDF-137p]
  • (p22-23) - Efforts by the NAIC to arrange a cooperative State response to the solvency problems posed by First Executive ended in acrimony.
    • The New Jersey Insurance Department sparked the simmering self-interests of each State by demanding in late 1990 that Executive Life post a $500 million deposit in order to continue doing business in that jurisdiction.
    • This demand irked the NAIC's working group and the lead regulators in California and New York, who were urging restraint by other States so that· their monitoring activities could permit Executive Life to recover financially for the benefit of all.
    • As the market situation grew worse and trust among State agencies diminished, the NAIC decided to defend Executive Life by aggressively attacking the New Jersey Department for losing faith in the joint wisdom of other State commissions. 
  • (p23) - At an extraordinary plenary session in December 1990, the NAIC unanimously passed a secret resolution castigating New Jersey for acting unilaterally to preserve the interests of its residents.
    • The resolution used strong language to cite "the expert opinion" of the NAIC's working group that "the Executive Life Companies are in no imminent financial danger ... "
    • It went on to call New Jerseys actions "unacceptable" to· the NAIC, and .requested that other States "not take unilateral action" and "not be influenced" by the New Jersey Insurance Department. The primary conclusion stated:
      • NOW, THEREFORE BE IT RESOLVED that the NAIC believes that the action taken by the New Jersey Insurance Department is irresponsible and contrary to the best interests of New Jersey policyholders and all policyholders of Executive Life Companies ...
    • The resolution was distributed to State insurance agencies with an attached confidential letter, dated December 27, 1990, to all commissioners from the NAIC's working group.
    • This letter reiterated the group's expert opinion that Executive Life was OK, provided supporting data, and reminded the commissioners that California, New York, and other States had "carefully monitored" the companies since January 1990.
    • Concluding that "the companies are capable of meeting all current and projected obligations," the letter warned that "unnecessary and precipitous regulatory action" could harm their long-term viability.
    • Four months later, Executive Life was ordered into State-controlled conservation by the new California commissioner, who assumed office in January 1991.
    • The subcommittee thereafter received copies of the secret resolution and accompanying working group letter from anonymous sources.