Porter.Reg-2
Reading: Insurance Regulation, Insurance Institute of America, 2008. - Chapter 12 - Insolvency Regulation (including 12.12 - 12.17 only)
Author: Porter, K.
BA Quick-Summary: Porter 12 (Guaranty Funds)
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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 fundsassessments:
- most common processassessments:
- alternate procedureE (2015.Fall #9) policyholder services:
- method for providinginsolvency challenges:
- for multi-line insurer 2marketing ban:
- on guaranty fundsPorter.12-Insolvency E (2014.Spring #10) LOBs covered:
- by guaranty fundsassessments:
- calculate $-valuereimbursement limits:
- from guaranty fundssuccess / failure:
- of guaranty fundsE (2013.Fall #14) effect on stakeholders:
- of guaranty fundsfunding:
- 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.
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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
- LOB exclusions: [Hint: C-STORM]
- 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)
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