Difference between revisions of "Porter.Reg-2"

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'''Reading''': Insurance Regulation, Insurance Institute of America, 2008. - '''Chapter 12''' - '''Insolvency Regulation (<u>in</u>cluding 12.12 - 12.17 <u>only</u>)'''
  
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'''Author''': Porter, K.
  
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==Pop Quiz==
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[https://www.battleacts6us.ca/vanillaforum6us/categories/porter-reg-2<span style="font-size: 12px; background-color: lightgrey; border: solid; border-width: 1px; border-radius: 10px; padding: 2px 10px 2px 10px; margin: 0px;">'''Forum'''</span>]
  
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{| class='wikitable' style='background-color: navajowhite;
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|-
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|| '''BA Quick-Summary''': <span style="color: green;>'''Porter 12 (Guaranty Funds)'''</span>
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* Guaranty funds are state-established entities designed to '''cover claims of insolvent insurers''', funded by assessments from licensed insurers within the state.
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* These funds operate under the supervision of the '''state insurance commissioner''' to ensure policyholders receive their benefits, subject to certain limits.
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* Each state’s guaranty fund is governed by a board of insurer representatives and adheres to regulations like the NAIC's Post-Assessment Property and Liability Insurance Guaranty Association Model Act to manage and fund claims after insolvency.
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|}
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==Study Tips==
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This reading covers just 6 pages on the topic of guaranty funds. Recall that guaranty funds were introduced in ''[[Porter.12-Insolvency]]''. The wiki article is short and the old exam problems are pretty easy. You could probably get most of them right with just 30 minutes of study on this reading.
  
 
==BattleTable==
 
==BattleTable==
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Based on past exams, the '''main things''' you need to know ''(in rough order of importance)'' are:
 
Based on past exams, the '''main things''' you need to know ''(in rough order of importance)'' are:
  
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*
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* <span style="color: green;">'''assessments'''</span> - ''process, alternate procedure, calculation''
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*
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* miscellaneous facts about guaranty funds - ''purpose, operation, effectiveness, effect on stakeholders,...''
  
 
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: {| class="wikitable" style="width: 1000px;"
 
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! style="width: 175px;" | reference !! part (a) !! part (b) !! part (c) !! part (d)
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! style="width: 175px;" | reference !! style="width: 175px;" | part (a) !! style="width: 175px;" | part (b) !! style="width: 175px;" | part (c) !! part (d)
  
 
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| [https://www.battleacts6us.ca/pdf/Exam_(2017_1-Spring)/(2017_1-Spring)_(05).pdf <span style='font-size: 12px; background-color: yellow; border: solid; border-width: 1px; border-radius: 5px; padding: 2px 5px 2px 5px; margin: 5px;'>E</span>] <span style="color: red;">'''(2017.Spring #5)'''</span>
 
| [https://www.battleacts6us.ca/pdf/Exam_(2017_1-Spring)/(2017_1-Spring)_(05).pdf <span style='font-size: 12px; background-color: yellow; border: solid; border-width: 1px; border-radius: 5px; padding: 2px 5px 2px 5px; margin: 5px;'>E</span>] <span style="color: red;">'''(2017.Spring #5)'''</span>
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|| '''purpose''': <br> - of guaranty funds
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|| <span style="color: green;">'''assessments:'''</span> <br> - most common process
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|| <span style="color: green;">'''assessments:'''</span> <br> - alternate procedure
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| style="background-color: lightgrey;" |  
  
 
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| [https://www.battleacts6us.ca/pdf/Exam_(2015_2-Fall)/(2015_2-Fall)_(09).pdf <span style='font-size: 12px; background-color: yellow; border: solid; border-width: 1px; border-radius: 5px; padding: 2px 5px 2px 5px; margin: 5px;'>E</span>] <span style="color: red;">'''(2015.Fall #9)'''</span>
 
| [https://www.battleacts6us.ca/pdf/Exam_(2015_2-Fall)/(2015_2-Fall)_(09).pdf <span style='font-size: 12px; background-color: yellow; border: solid; border-width: 1px; border-radius: 5px; padding: 2px 5px 2px 5px; margin: 5px;'>E</span>] <span style="color: red;">'''(2015.Fall #9)'''</span>
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|| '''policyholder services''': <br> - method for providing
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|| '''insolvency challenges''': <br> - for multi-line insurer <span style="color: red;">'''<sup>2</sup>'''</span>
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|| '''marketing ban''': <br> - on guaranty funds
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|| ''[[Porter.12-Insolvency]]''
  
 
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| [https://www.battleacts6us.ca/pdf/Exam_(2014_1-Spring)/(2014_1-Spring)_(10).pdf <span style='font-size: 12px; background-color: yellow; border: solid; border-width: 1px; border-radius: 5px; padding: 2px 5px 2px 5px; margin: 5px;'>E</span>] <span style="color: red;">'''(2014.Spring #10)'''</span>
 
| [https://www.battleacts6us.ca/pdf/Exam_(2014_1-Spring)/(2014_1-Spring)_(10).pdf <span style='font-size: 12px; background-color: yellow; border: solid; border-width: 1px; border-radius: 5px; padding: 2px 5px 2px 5px; margin: 5px;'>E</span>] <span style="color: red;">'''(2014.Spring #10)'''</span>
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|| '''LOBs covered''': <br> - by guaranty funds
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|| <span style="color: green;">'''assessments:'''</span> <br> - calculate $-value
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|| '''reimbursement limits''': <br> - from guaranty funds
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|| '''success / failure''': <br> - of guaranty funds
  
 
|-
 
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| [https://www.battleacts6us.ca/pdf/Exam_(2013_2-Fall)/(2013_2-Fall)_(14).pdf <span style='font-size: 12px; background-color: yellow; border: solid; border-width: 1px; border-radius: 5px; padding: 2px 5px 2px 5px; margin: 5px;'>E</span>] <span style="color: red;">'''(2013.Fall #14)'''</span>
 
| [https://www.battleacts6us.ca/pdf/Exam_(2013_2-Fall)/(2013_2-Fall)_(14).pdf <span style='font-size: 12px; background-color: yellow; border: solid; border-width: 1px; border-radius: 5px; padding: 2px 5px 2px 5px; margin: 5px;'>E</span>] <span style="color: red;">'''(2013.Fall #14)'''</span>
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|| '''effect on stakeholders''':<br> - of guaranty funds
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|| '''funding''': <br> - compare approaches
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| [https://www.battleacts6us.ca/pdf/Exam_(2017_2-Fall)/(2017_2-Fall)_(01).pdf <span style='font-size: 12px; background-color: yellow; border: solid; border-width: 1px; border-radius: 5px; padding: 2px 5px 2px 5px; margin: 5px;'>E</span>] <span style="color: red;">'''(2017.Fall #1)'''</span>
 
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:: <span style="color: red;">'''<sup>2</sup>'''</span> The answer to this question about <u>national multi-LINE</u> insurers is essentially the same as a similar question about <u>multi-state</u> insurers from ''[[Porter.12-Insolvency]]''.
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| [https://www.battleacts6us.ca/pdf/Exam_(2017_2-Fall)/(2017_2-Fall)_(01).pdf <span style='font-size: 12px; background-color: yellow; border: solid; border-width: 1px; border-radius: 5px; padding: 2px 5px 2px 5px; margin: 5px;'>E</span>] <span style="color: red;">'''(2017.Fall #1)'''</span>
 
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[https://www.battleacts6us.ca/FC.php?selectString=**&filter=both&sortOrder=natural&colorFlag=allFlag&colorStatus=allStatus&priority=importance-high&subsetFlag=miniQuiz&prefix=Porter&suffix=Reg-2&section=all&subSection=all&examRep=all&examYear=all&examTerm=all&quizNum=all<span style="font-size: 20px; background-color: lightgreen; border: solid; border-width: 1px; border-radius: 10px; padding: 2px 10px 2px 10px; margin: 10px;">'''Full BattleQuiz]'''</span> <span style="color: red;">'''You must be <u>logged in</u> or this will not work.'''</span>
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| [https://www.battleacts6us.ca/pdf/Exam_(2017_2-Fall)/(2017_2-Fall)_(01).pdf <span style='font-size: 12px; background-color: yellow; border: solid; border-width: 1px; border-radius: 5px; padding: 2px 5px 2px 5px; margin: 5px;'>E</span>] <span style="color: red;">'''(2017.Fall #1)'''</span>
 
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&nbsp;&nbsp;[https://www.battleacts6us.ca/vanillaforum6us/categories/porter-reg-2<span style="font-size: 12px; background-color: lightgrey; border: solid; border-width: 1px; border-radius: 10px; padding: 2px 10px 2px 10px; margin: 0px;">'''Forum'''</span>]
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| [https://www.battleacts6us.ca/pdf/Exam_(2017_2-Fall)/(2017_2-Fall)_(01).pdf <span style='font-size: 12px; background-color: yellow; border: solid; border-width: 1px; border-radius: 5px; padding: 2px 5px 2px 5px; margin: 5px;'>E</span>] <span style="color: red;">'''(2017.Fall #1)'''</span>
 
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==In Plain English!==
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| [https://www.battleacts6us.ca/pdf/Exam_(2017_2-Fall)/(2017_2-Fall)_(01).pdf <span style='font-size: 12px; background-color: yellow; border: solid; border-width: 1px; border-radius: 5px; padding: 2px 5px 2px 5px; margin: 5px;'>E</span>] <span style="color: red;">'''(2017.Fall #1)'''</span>
 
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Guaranty funds were introduced in ''[[Porter.12-Insolvency]]''. The old exam problems above cover most of the other details you need to know. There are just a couple of other items you should be familiar with:
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| [https://www.battleacts6us.ca/pdf/Exam_(2017_2-Fall)/(2017_2-Fall)_(01).pdf <span style='font-size: 12px; background-color: yellow; border: solid; border-width: 1px; border-radius: 5px; padding: 2px 5px 2px 5px; margin: 5px;'>E</span>] <span style="color: red;">'''(2017.Fall #1)'''</span>
 
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:{| class='wikitable'
 
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| [https://www.battleacts6us.ca/pdf/Exam_(2017_2-Fall)/(2017_2-Fall)_(01).pdf <span style='font-size: 12px; background-color: yellow; border: solid; border-width: 1px; border-radius: 5px; padding: 2px 5px 2px 5px; margin: 5px;'>E</span>] <span style="color: red;">'''(2017.Fall #1)'''</span>
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| '''Question''': describe the <u>limitations</u> that guaranty funds may have on reimbursements to policyholders
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:: '''LOB exclusions''': [Hint: <span style="color: red;">'''C-STORM'''</span>]
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| [https://www.battleacts6us.ca/pdf/Exam_(2017_2-Fall)/(2017_2-Fall)_(01).pdf <span style='font-size: 12px; background-color: yellow; border: solid; border-width: 1px; border-radius: 5px; padding: 2px 5px 2px 5px; margin: 5px;'>E</span>] <span style="color: red;">'''(2017.Fall #1)'''</span>
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::* <span style="color: red;">'''C'''</span>redit, <span style="color: red;">'''S'''</span>urplus lines, <span style="color: red;">'''T'''</span>itle, <span style="color: red;">'''O'''</span>cean marine, <span style="color: red;">'''R'''</span>einsurance, <span style="color: red;">'''M'''</span>ortgage
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:: '''claims payouts and UEP refund''': have stated limits ''(except claims payouts for WC - WC has no limit)''
 +
:: '''deductibles''':
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::* claim deductible
 +
::* policy deductible
 +
::* large net worth deductible ''(a percentage of an insured's net worth)''
 +
:: '''trigger is required''':
 +
::* court must verify insolvency and have placed insurer in receivership
  
−
==In Plain English!==
+
The other item concerns insurer assessments. If
  
 +
: L = insurer liabilities eligible for recovery after insolvency
 +
: NWP<sub>A</sub> = NWP of insurer A ''(one of the remaining solvent insurers in state)''
 +
: NWP<sub>total</sub> = total NWP of remaining solvent insurers in state
  
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==BattleCodes==
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then:
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Memorize:
 
  
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:{| class='wikitable'
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|-
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| '''Formula''': &nbsp;&nbsp; assessment<sub>A</sub> &nbsp;&nbsp; = &nbsp;&nbsp; L &nbsp;&nbsp; x &nbsp;&nbsp; NWP<sub>A</sub> &nbsp;&nbsp; / &nbsp;&nbsp; NWP<sub>total</sub>
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|}
  
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Conceptual:
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Both the above items are covered in:
  
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: [https://www.battleacts6us.ca/pdf/Exam_(2014_1-Spring)/(2014_1-Spring)_(10).pdf <span style='font-size: 12px; background-color: yellow; border: solid; border-width: 1px; border-radius: 5px; padding: 2px 5px 2px 5px; margin: 5px;'>E</span>] <span style="color: red;">'''(2014.Spring #10ab)'''</span>
  
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Calculational:
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[https://www.battleacts6us.ca/FC.php?selectString=**&filter=both&sortOrder=natural&colorFlag=allFlag&colorStatus=allStatus&priority=importance-high&subsetFlag=miniQuiz&prefix=Porter&suffix=Reg-2&section=all&subSection=all&examRep=all&examYear=all&examTerm=all&quizNum=1<span style="font-size: 20px; background-color: aqua; border: solid; border-width: 1px; border-radius: 10px; padding: 2px 10px 2px 10px; margin: 10px;">'''mini BattleQuiz 1]'''</span> <span style="color: red;">'''You must be <u>logged in</u> or this will not work.'''</span>
  
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==POP QUIZ ANSWERS==
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[https://www.battleacts6us.ca/FC.php?selectString=**&filter=both&sortOrder=natural&colorFlag=allFlag&colorStatus=allStatus&priority=importance-high&subsetFlag=miniQuiz&prefix=Porter&suffix=Reg-2&section=all&subSection=all&examRep=all&examYear=all&examTerm=all&quizNum=all<span style="font-size: 20px; background-color: lightgreen; border: solid; border-width: 1px; border-radius: 10px; padding: 2px 10px 2px 10px; margin: 10px;">'''Full BattleQuiz]'''</span> <span style="color: red;">'''You must be <u>logged in</u> or this will not work.'''</span>

Latest revision as of 21:36, 29 June 2024

Reading: Insurance Regulation, Insurance Institute of America, 2008. - Chapter 12 - Insolvency Regulation (including 12.12 - 12.17 only)

Author: Porter, K.

Forum

BA Quick-Summary: Porter 12 (Guaranty Funds)
  • Guaranty funds are state-established entities designed to cover claims of insolvent insurers, funded by assessments from licensed insurers within the state.
  • These funds operate under the supervision of the state insurance commissioner to ensure policyholders receive their benefits, subject to certain limits.
  • Each state’s guaranty fund is governed by a board of insurer representatives and adheres to regulations like the NAIC's Post-Assessment Property and Liability Insurance Guaranty Association Model Act to manage and fund claims after insolvency.

Study Tips

This reading covers just 6 pages on the topic of guaranty funds. Recall that guaranty funds were introduced in Porter.12-Insolvency. The wiki article is short and the old exam problems are pretty easy. You could probably get most of them right with just 30 minutes of study on this reading.

BattleTable

Based on past exams, the main things you need to know (in rough order of importance) are:

  • assessments - process, alternate procedure, calculation
  • miscellaneous facts about guaranty funds - purpose, operation, effectiveness, effect on stakeholders,...
reference part (a) part (b) part (c) part (d)
E (2017.Spring #5) purpose:
- of guaranty funds 		assessments:
- most common process 		assessments:
- alternate procedure
E (2015.Fall #9) policyholder services:
- method for providing 		insolvency challenges:
- for multi-line insurer 2 		marketing ban:
- on guaranty funds 		Porter.12-Insolvency
E (2014.Spring #10) LOBs covered:
- by guaranty funds 		assessments:
- calculate $-value 		reimbursement limits:
- from guaranty funds 		success / failure:
- of guaranty funds
E (2013.Fall #14) effect on stakeholders:
- of guaranty funds 		funding:
- compare approaches
2 The answer to this question about national multi-LINE insurers is essentially the same as a similar question about multi-state insurers from Porter.12-Insolvency.

Full BattleQuiz You must be logged in or this will not work.

  Forum

In Plain English!

Guaranty funds were introduced in Porter.12-Insolvency. The old exam problems above cover most of the other details you need to know. There are just a couple of other items you should be familiar with:

Question: describe the limitations that guaranty funds may have on reimbursements to policyholders
LOB exclusions: [Hint: C-STORM]
  • Credit, Surplus lines, Title, Ocean marine, Reinsurance, Mortgage
claims payouts and UEP refund: have stated limits (except claims payouts for WC - WC has no limit)
deductibles:
  • claim deductible
  • policy deductible
  • large net worth deductible (a percentage of an insured's net worth)
trigger is required:
  • court must verify insolvency and have placed insurer in receivership

The other item concerns insurer assessments. If

L = insurer liabilities eligible for recovery after insolvency
NWPA = NWP of insurer A (one of the remaining solvent insurers in state)
NWPtotal = total NWP of remaining solvent insurers in state

then:

Formula:    assessmentA    =    L    x    NWPA    /    NWPtotal

Both the above items are covered in:

E (2014.Spring #10ab)

mini BattleQuiz 1 You must be logged in or this will not work.

Full BattleQuiz You must be logged in or this will not work.

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