Insurance IOI (Items of Interest) Blog

Rethinking Insurance Guaranty Funds

December 23, 2012

The failure of Executive Life Insurance Company of New York under the management of the New York Liquidation Bureau has raised a number of issues regarding the insolvency process in New York.  Not the least of these issues is the fact that the court approved restructuring agreement addressing the $1.6 billion deficit has quite literally exhausted the funding available to the New York life guaranty funds for any future insolvencies.  The Executive Life failure has also exposed the shortcomings of the life guaranty fund structure nationwide, particularly as applied to structured settlement annuities.  My Insight column in the November 26, 2012 issue of Insurance Advocate ( discusses these issues and offers some suggested changes that should be considered by legislators, regulators and the life insurance industry.  A pdf copy of this column can also be downloaded from the publications page of my website at


When is a Release Not a Release?

October 24, 2012

The Insurance Division of the New York Department of Financial Services has proposed a regulation severely limiting the use of releases in the settlement of both first party and third party claims.  The consequences of this proposal, in particular how the regulation places the interests of third party claimants above those of policyholders, are the subject of my Insight column in the October 15th issue of Insurance Advocate entitled “When is a Release Not a Release?”  Here is a link.

While we’re on the subject, how about we agree that it is OK to refer to the Insurance Division of the New York Department of Financial Services as simply the NY Insurance Department, NYID or NYDOI as in the old days?  Like those of us that still refer to the Met Life Building in Midtown Manhattan as the Pan Am building although it has not borne that names since 1981.  Unfortunately, the NY Insurance Division of the DFS does not lend itself easily to an acronym, although Superintendent Lawsky has acknowledged that the DFS is lovingly referred to as Doofus in some quarters.  So how about I-Doofus for the insurance division? Like the classic I Claudius?  Just a thought.

Immunity For [All] Some!

October 10, 2012

My Insight column for the September 24, 2012 issue of Insurance Advocate ( explores the issue of whether a receiver should receive immunity for managing the estate of an insolvent insurer and if so, whether that immunity should be granted on a case by case basis by the supervising court or by statute for all receivers.  While the topic of immunity for receivers has been debated for many years, the issue is particularly relevant today in view of the court’s grant of judicial immunity to the receiver and his agents in the Executive Life Insurance Company of New York matter where the company was not insolvent when placed into rehabilitation in 1991, but is now insolvent by more than $1.6 billion.  Does this grant of judicial immunity effectively prevent exploring the causes of the insolvency and, if appropriate, holding those responsible accountable?  A copy of the column is available from my website at

Domestic Excess Line Carrier — An Oxymoron?

September 26, 2012

Excess and surplus line insurers have historically been defined as “non-admitted” foreign or alien companies that can only write risks through licensed excess line brokers, and only on risks that have either been rejected by “admitted” carriers or meet other specific statutory requirements.  Legislation proposed in New York would allow the creation of domestic excess line insurers, joining two other states, Illinois and New Jersey, which allow such entities.  My Insight column in the September 10, 2012 issue of Insurance Advocate magazine entitled “Domestic Excess Line Carrier – an Oxymoron?” explores the pros and cons of the proposed legislation and why this apparent contradiction may actually be beneficial to the industry, its customers, investors and regulators.  A copy of the column is available from my website at

Remembering Fred Perrotta

July 31, 2012

Fioravante “Fred” Perrotta died this past July. His NY Times obituary (July 28, 2012) focused on his public service as a key aide to Governor Rockefeller in the 1960s and later as part of Mayor Lindsay’s administration, including an unsuccessful run for city comptroller. In between those two lives, however, Fred played a significant role in the insurance business – and in my career.

In the mid-1960s, Fred was appointed as a senior deputy in the Insurance Department. At the same time, I was a fledgling staff lawyer at The United States Life Insurance Company of New York, the oldest stock life insurance company in the US. In 1967, New York adopted the predecessor to current Article 15, the Holding Company Act. Shortly after the law was in effect, my employer became the first company in New York to create its own parent under the new law – USLIFE Corporation. One of its first acts was to hire Fred away from the Insurance Department as vice president and secretary to help set up the new company. To provide Fred needed assistance, I was transferred from the life company to the holding company.

Fred was instrumental in organizing the company and establishing its working relationship with regulators, forming the basis for future dealings under the holding company law. He also helped USLIFE start the pursuit of an aggressive capital raising and acquisition program that simply could not have been accomplished directly through the life company with all the investment and management restrictions under the Insurance Law. In other words, he helped USLIFE take advantage of the freedom provided by setting up a parent company. Today most company executives grouse about the restrictions of the holding company act, particularly the registration and disclosure aspects of the law. However, historically the holding company law was designed as much to help insurance companies address capital and expansion needs that could not be adequately addressed under capital and ownership restrictions of the insurance law, as it was to provide disclosure and control over insurance company ownership and management.

Fred’s stay at USLIFE was not long – about a year as I recall – but it was certainly an exciting and important time, not just for USLIFE as a new entity, but also for setting the practical ground rules for operating under the holding company law. It was exceptionally thrilling for me to have been a part of this new venture, and when Fred left to join the Lindsay administration, I was fortunate enough to assume his position as corporate secretary. Even though Fred was the person most responsible for USLIFE to eventually be in position to have its stock listed on the NYIE, it was my good fortune as corporate secretary to be on the floor of the exchange the day of the first trade in 1969 (My gosh! Was it really that long ago?)

Fred was well known to many in the insurance industry during his many years prior to retirement as a senior partner at the Rogers & Wells law firm. But the significance of his short stint at USLIFE, and his involvement with the holding company law, are not as well known or recognized. Fred, thank you for all you did for our business, and for all you taught us about the importance of communication and cooperation among regulators, management and investors to help the industry thrive.

The Elephant in the Courtroom

July 2, 2012

In March of this year an eleven day hearing was conducted in New YorkSupreme Court for Nassau County to consider the rehabilitator’s petition to liquidate Executive Life Insurance Company of New York (ELNY) and approve his proposed restructuring plan.  The court issued a decision on April 17, 2012 approving the rehabilitator’s petition, determining that ELNY is insolvent, ordering it liquidated, and approving the proposed restructuring plan. 

In an article appearing in the June 2012 issue of AIRROC Matters, the magazine of the Association of Insurance and Reinsurance Run-Off Companies, I contend that the court’s approval of the petition and plan is far from a final resolution of the long ELNY saga. The Court’s ruling is more about the allocation of pain than a solution to the underlying problem. My article, The Elephant in the Courtroom, examines this underlying problem — the lack of accountability in the receivership process in New York — an issue that that remains unaddressed by the court ruling, the order of liquidation or the restructuring plan.The full article can be viewed online at the AIRROC website.

A Billion Here A Billion There

June 13, 2012

It is surprising enough that the $1.6 billion deficit in the Executive Life of NY rehabilitation receives so little media attention, but most people would also be surprised to know who will ultimately bear that loss. My current Insight column in the June 4 issue of Insurance Advocate magazine explores this issue as well as the consequences of ELNY on the NY State life guaranty funds. The column can be viewed on-line at:

New Column

May 28, 2012

I was asked recently by Steve Acunto, the publisher and editor of Insurance Advocate magazine to write a regular column on developing issues, particularly on the legislative and regulatory fronts.  The first installment of my column, Insight, appears in the May 21, 2012 issue of IA.  The column, which will be a regular feature of IA, can be viewed at  In his introduction, Steve stated:

In this issue of the Insurance Advocate Peter Bickford’s column premieres on page 12. Peter is a longtime, rather astute observer of the business, whose work we have featured with great pride over the years. We believe that, in keeping with the Insurance Advocate’s mission to observe regulation and legislation that affect the progress of insurance, as well as to look out for the livelihood of independent insurance agents and brokers, always seeking to improve the system as it now exists, we are advocates for good insuring practice on all sides. Peter Bickford has earned many stripes in this very same advocacy sphere and we welcome him to our pages.

Now all I have to do is deliver the goods . . .  regularly. . .  No pressure!

I look forward to your comments and suggestions for items of interest that you believe should be explored.

The Trouble with ELNY

February 14, 2012
Soothsayer:  Beware the ides of March.
Caesar:  What man is that?
Brutus:  A soothsayer bids you beware the ides of March.

William Shakespeare, Julius Caesar, Act I, Scene 2

On March 15, 2012 a hearing will be held before Justice Galasso in New York Supreme Court, Nassau County, to consider a petition by the rehabilitator of Executive Life Insurance Company of New York (ELNY) to liquidate ELNY and to approve a restructuring plan of its remaining contracts. The stated reason for the rehabilitator’s action is to address a $1.5 billion shortfall that prevents the rehabilitator from continuing to pay 100% of ELNY’s contractual obligations, primarily under annuities issued in the 1980s to fund structured settlements.

Under the proposed restructuring plan, the remaining ELNY assets are to be transferred to a new entity owned and controlled by the participating state life insurance guaranty funds, which will contribute funds to the new entity in amounts based on their individual state fund laws. The ELNY contracts will be restructured to a level that can be supported by these assets, and the obligations as restructured will be assumed by the new entity. Because most of the annuities are relatively small and fall within guaranty fund caps, the rehabilitator has estimated that roughly 84% of all annuitants will continue to receive their full periodic annuity payments. Many annuitants, however, will see their periodic structured settlement payments reduced by up to 50% or more.

At the hearing, the Court will consider whether or not the proposed restructuring plan is in the best interests of ELNY’s policyholders, annuitants and the general public based on its current condition and existing laws.  Another but equally important consideration, however, is how the receivership process failed ELNY, its policyholders and annuitants, and in 20+ years of rehabilitation managed to take it from a solvent company to more than $1.5 billion in the hole.

In the hope of keeping this historic perspective as part of the current dialogue, I have written an article examining the circumstances of ELNY being placed into rehabilitation, the flawed rehabilitation plan and the mismanagement of the estate leading to its inevitable failure. The article is not an assessment of the proposed restructuring plan to be considered by the court on March 15; rather it is a call for a review of the flawed receivership process that brought it to this point. Here is a link to the Publications page of my website to access this article, which is titled “The Trouble with ELNY: Or How The Receivership Process Has Failed Executive Life Insurance Company Of New York, Its Policyholders And Annuitants.”

[Note: This article, without endnotes, is also the cover article in the February 20, 2012 issue of Insurance Advocate magazine.]

Caesar:  [To the Soothsayer] The ides of March are come.

Soothsayer: Ay, Caesar; but not gone.
William Shakespeare, Julius Caesar, Act III, Scene 1

The Need for a US Syndicated Capital Facility for Insurance Risks

January 19, 2012

Last week AON announced it is moving its headquarters to London “to be closer to Lloyd’s” among other considerations.  Today Bermuda announced a 50% increase in new insurer registrations, with the largest jump in special purpose insurers. These recent headlines underscore the value to insurance risk bearers, investors and consumers of the flexibility that a strong, well-conceived syndicated capital facility can bring to the marketplace. How sad that the US has no domestic answer to these continued defections of market makers and investors. How sad that we do not have a single existing market for syndicated insurance capital that could compete to keep our domestic business home.

A plan exists to create such a market, of course (See New York Insurance Risk Exchange Plan) but it needs the spotlight of savvy and forward-thinking regulators and industry leadership to make it a reality.  The current market tightening and the widening search for intelligent capacity should signal that the time is now as never before for such a facility.