On August 8, 2013 the Restructuring Plan for Executive Life Insurance Company of New York (ELNY) closed. Under the Plan all remaining assets of ELNY were transfered to a new District of Columbia captive, GABC, owned by participating state life insurance guaranty funds and run by the National Organization of Life and Health Guaranty Associations (NOLHGA). GABC has now assumed responsibility for all the remaining ELNY annuity contracts, but on a restructured basis that reduces the value of the contracts by close to $1 billion. Almost all of the reduced value falls on one category of contracts — structured settlement annuitants. Now that ELNY is formally gone, it is time for regulators, legislators, guaranty associations, insurers and consumer groups to look back at what went wrong with ELNY and the lessons it can teach us about a flawed insurance insolvency process. To do this, however, it is necessary to remove from the conversation certain postures taken in the court proceedings leading to the approval of ELNY’s liquidation and the Restructuring Plan.
My Insight column, “Gone But Not Forgotten,” in the September 9, 2013 issue of Insurance Advocate magazine, discusses a number of myths about ELNY that need to be understood for there to be any meaningful discussion about changes to the insolvency process. The myths discussed are:
- The Plan is not discriminatory. It is discriminatory in two major ways.
- Guaranty Associations will pay out their full limits in many cases. They will not pay out full limits on any contract.
- ELNY was in financial decline when placed in rehab. It wasn’t.
A copy of the column, which explains these myths in more detail, can be accessed here.