Monarch Life Insurance Company

  • Merrill Lynch
  • Single-Premium Life Insurance
  • Variable Life
  • Jerome S. Golden - Monarch
    • NAIC - Variable Life Insurance Task Force
  • 1988 0325 - GOV (Senate) - Tax Treatment of Single-Premium Life Insurance, (CSPAN) Single Premium Life Insurance, Max Baucus, (D-MT)  ---  [BonkNote]
  • 1995 - GAO - Insurance Regulation: Observations on the Receivership of Monarch Life Insurance Company, Government Accounting Office - 22p
  • (p105) - One whole life insurance brochure used by our agents in 1975, entitled the "Four in One Plan", does not mention insurance on either cover. - <WishList>
    • The back cover lists it benefits as, "retirement income, immediate estate, emergencies opportunities and self-completing it totally disabled.
    • Life insurance is only mentioned two places in the brochure, and odds are, if it could legally have been eliminated from the discussion, it would have been.
    • The words "death benefit" appear nowhere.
  • Advertising life insurance as a savings plan is nothing new. 

--  Gordon G. Oakes, Monarch, Chairman of the Board and President

1988 0325 - GOV (Senate) - Tax Treatment of Single-Premium Life Insurance, (CSPAN) Single Premium Life Insurance, Max Baucus, (D-MT)  ---  [BonkNote]

  • Before discussing the most current developments in Variable Life Insurance (VLI), I'd like to give a brief background to set those developments in perspective.
    • After extensive hearings in 1972, the SEC issued Rule 3c-4 in January, 1973, which subjected VLI to the 1933 and 1934 Acts, and exempted VLI from the 1940 Act, subject to the states adopting regulations that would provide for protections substantially equivalent to the relevant protections of the 1940 Act.
    • Under the rule, VLI was limited to products under which the insurance element was predominant.
    • The NAIC adopted a Model VLI Regulation in December, 1973, that was responsive to Rule 3c-4.
    • During that same year individual companies filed with the SEC Registration Statements (including prospectuses for their VLI products).
    • Rule 3c-4 started to become undone when the so-called "Mutual Fund Group" contested the Rule late in 1973, and, after a series of interim positions, the SEC withdrew Rule 3c-4 in early 1975.
    • The SEC indicated at that time its intention to propose a general rule exempting VLI from certain sections of the 1940 Act that were inappropriate for a life insurance policy.
    • During the period 1973 to 1975, no companies had their Registration Statements declared effective by the SEC, and, thus, no companies were marketing VLI in the general market.

--  Jerome S. Golden, Monarch Life

1976 - SOA - Current Individual Life Insurance Topics, Society of Actuaries - 18p

  • Pursuant to a congressional request, GAO examined the placing of Monarch Life Insurance Company in receivership, focusing on:
    • (1) whether the actions of the parent holding company or affiliated companies endangered the solvency of Monarch Life; and
    • (2) the adequacy of regulatory oversight leading up to the insurance receivership.

1995 - GAO - Insurance Regulation: Observations on the Receivership of Monarch Life Insurance Company. (Letter Report, 03/22/95, GAO/GGD-95-95), Government Accounting Office - 22p

  • When the product was launched, SEC ruled that one was allowed to illustrate a variable life product assuming a growth rate of only 8 percent in the underlying funds.
  • The resulting cash values were not much better than the old participating product.
  • When Monarch Life filed their prospectus, they managed to persuade the SEC that 8 percent was out of date and that 12 percent should be used.
  • Everybody used 12 percent, and the resulting variable product values were much better than those under the traditional participating product.
  • Should a little company go after a big investment name?
    • Monarch has done well with the Merrill Lynch name.

--  Michael R. Tuohy

1985 - SOA - Variable Universal Life Insurance, Society of Actuaries - 22p

  • ATTACHMENT  ONE-E - PRESENTATION  TO THE  NAIC  ACTUARIAL TASK  FORCE - MARCH 8, 1986 REQUESTING A REVIEW  OF PRESENT RESERVE  METHODS FOR  VARIABLE  LIFE INSURANCE  MINIMUM  DEATH BENEFIT GUARANTEE
    • Introduction
    • I am Randy Marash, an actuary with Monarch Resources.
    • As mentioned in Jerome S. Golden's memo to Ted Becker,  we are recommending review of the Minimum Death Benefit Guarantee (MDBG) reserve requirements in light of new and future variable life products and the current portfolio makeup and separate account investment  vehicles currently  available.

1986-2, NAIC Proceedings

  • b. Variable Life Guidelines for Model Regulation
    • Jerome S. Golden, of Monarch Resources Inc., in New York, is chairman of this advisory committee.
    • Attachment Two-J is a letter from Mr. Golden, dated May 20, 1983, which gives information on the progress of his committee up to that time.
    • In a more recent telephone conversation with Mr. Golden on May 19, 1983, he indicated that some further progress had been.

1983-2, NAIC Proceedings

  • 1996 - NAIC - Variable Life Illustrations Subgroup of the Life Disclosure (A) Working Group - June 2, 1996
    • Mr. Morse reported that under the current rules, a personalized illustration may be prepared using 0% and 12%.
      • The 12% includes the current morality and expenses and the 0% illustration uses the maximum mortality and expenses allowed in the contract.
    • Mr. Morse opined that this approach does not do consumers the best service.
      • He saw two problems with this approach:
        1. it does not do a good job of showing a consumer what the risks and results might be. The risks in a variable life product include:
          investment risks, a risk that the cost of insurance charges may go up, and a risk that the mortality costs may go up as time passes;
        2. not all purchasers invest in an aggressive stock investment option.
      • If 50% of the investment goes into treasury bills and 50% in stocks, the return shown should be 8% or 9% rather than 12%.
    • James Hunt (Consumer Federation of America) said that the illustrations of variable life that he had seen had been relatively cleaner than those illustrations of nonvariable life.
      • He was unaware of the reason why the SEC chose 12%, because the highest average return he had seen for historical returns on stock funds was approximately 10%.
  • 1995 - GAO - Insurance Regulation: Observations on the Receivership of Monarch Life Insurance Company - 22p
    • (p1) - Real estate investment losses of the parent holding company endangered Monarch Life’s solvency and led to the regulatory takeover.
      • The holding company pledged its Monarch Life stock as collateral on a loan, exposing the insurer to possible takeover by the holding company’s creditors
    • (p1) - The regulatory examination completed in January 1990 did not detect the risks facing Monarch Life because examiners did not assess whether the holding company could repay money borrowed from the insurer.
    • (p2) - Also, a holding company can draw on its resources to provide capital infusions and financial support for a troubled insurance subsidiary.
      • However, interaffiliate transactions may pose risks to an insurer’s solvency. 
    • (p2) - Moreover, financial problems within a holding company structure may adversely affect an insurer.
      • An overleveraged holding company cannot provide financial support for its insurer and may attempt to divert funds from the insurer to assist ailing noninsurance affiliates.
    • (p3) - Abusive interaffiliate transactions have contributed to several major life insurance failures.
      • The Baldwin-United failure in 1983 was caused in large part by abusive interaffiliate transactions in which the holding company siphoned cash from its insurance subsidiaries.
      • In an investigation of the 1991 failure of Guarantee Security Life, the Permanent Subcommittee on Investigations of the Senate Committee on Governmental Affairs learned that Guarantee Security allegedly used phony investments in unreported affiliates to mask its insolvency.1 
      • We previously testified that interaffiliate transactions drained the capital or masked the financial condition in four other failures: Executive Life of California, Executive Life of New York, First Capital, and Fidelity Bankers.