Porter.Reg-2

This syllabus reading is actually a portion of Porter Chapter 12, Insolvency Regulation (12.12 - 12.17). It covers details of guaranty funds.

The CAS syllabus lists pages 12.12-12.17 as a separate syllabus entry under the topic of Government & Industry Programs. The other pages from Porter Chapter 12 are covered in Porter.12-Insolvency and are considered part of insurance regulation.

  Forum

  Formula Summary:   Porter.Reg-2

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 statekholders,...

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 insurer'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

NWP_A = NWP of insurer A (one of the remaining solvent insurers in state)

NWP_total = 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.