HISTORY
Description
of Services
One
of the first projects undertaken by the National Committee on Insurance Guaranty
Funds (predecessor to the National Conference of Insurance Guaranty Funds)
was the exploration of the possible utilization of regional organizations
of guaranty funds, designed to facilitate communication and the exchange
of ideas, and to promote efficiency and economy of operations.
When
the New England Association of Insurance Guaranty Funds ("NEAIGF") commenced
operations, it was contemplated that that association would provide assistance
to its six active members as needed.
The
New Hampshire Insurance Guaranty Association ("NHIGA") and the Maine
Insurance Guaranty Association ("MIGA") were the first of the six regional
guaranty funds to be called into action, the former to handle the Sutton
Mutual Insurance Company Insolvency, a New Hampshire domestic company,
in 1970, and the latter to handle the Maine Insurance Company insolvency,
a Maine domestic company, in 1971. The Massachusetts Insurers Insolvency
Fund ("MIIF") was activated to handle the Rockland Mutual Insurance
Company insolvency, in 1974, and the Summit, Associated Merchants and Interstate
Insurance Company insolvencies in rapid succession during the following
year. In 1976, the Vermont Property and Casualty Insurance Guaranty
Association ("VTPCIGA") was called into action to handle the Summit
and Southern American Fire Insurance Company insolvencies, and the Rhode
Island Insurers' Insolvency Fund ("RIIIF") was activated during the
same year to handle the Interstate Insurance Company insolvency.
In
mid-1975, the volume of activity handled by MIIF increased to approximately
Twelve Million Dollars ($12,000,000), and its members were assessed approximately
Ten Million Five Hundred Thousand Dollars ($10,500,000). At that time, MIIF
was being operated pursuant to an administrative service agreement with Insurance
Services Office which provided to MIIF the full-time services of a Manager,
Secretary and Bookkeeper, as well as part-time services of other staff as
needed. In addition, MIIF established its own Claims Office to handle the
several thousand remaining open claims, most of which were in litigation.
In
contrast to the heavy volume of claims being handled by MIIF, and the large
assessments of its member insurers necessary to cover same, the assessments
for the remaining New England funds ranged downward from approximately Five
Hundred Sixty Thousand Dollars ($560,000.00) for member insurers of NHIGA
to a minimal amount for member insurers of the Connecticut Insurance Guaranty
Association ("CIGA"), in 1975. In addition, while MIIF had available
the services of a number of full-time employees as well as part-time employees
as necessary, the other New England funds had no paid staff, despite the
fact that there existed several part-time administrative assistants. It was
in this context that MIIF extended invitations to the other regional guaranty
funds to attend meetings held in Boston in October of 1975 and May of 1976.
These meetings led to the drafting of a formal arrangement between MIIF and
each of the other five regional guaranty funds under which MIIF undertook
the responsibility of affording administrative and technical assistance to
the other funds upon request on a cost reimbursement basis.
This
agreement was executed by each of the New England guaranty funds after having
been presented to and approved by the Board of Directors of each fund at
their respective 1976 annual meetings. The arrangement essentially did little
more than formalize the cooperative agreement that had already developed
between MIIF, RIIIF and VTPCIGA, at the suggestion of common Board Members
of the respective guaranty funds. This cooperative arrangement and utilization
of the services of MIIF by RIIIF and VTPCIGA was well under way by the time
the formal agreement was presented to and approved by the respective Boards
of Directors of CIGA, MIGA and NHIGA at their 1976 annual meetings. In any
event, with the potential for a major insolvency lurking in the background,
it was not a difficult task to persuade the latter three guaranty funds to
enter the regional association. With respect to those jurisdictions in which
insolvency activity was at a minimum or non-existent, the value of the arrangement
to those guaranty funds lay in the fact that there was already in place an
experienced staff in a state of readiness, should the need to handle a new
insolvency arise.
Acting
through its Board of Directors, each member of NEAIGF was statutorily bound
to carry out certain obligations of insolvent insurers to their policyholders
and claimants. The applicable statutes did not condition the performance
of such obligations upon such performance being economically justifiable.
Therefore, the distribution among member insurers of the expense of disposing
of a relatively small number of claims could conceivably cost a guaranty
fund amounts far out of proportion to the expense that the handling of such
claims might cost a solvent insurer. However, this factor would be minimized
where the opportunity existed for larger associations, i.e., those which
have been compelled by circumstances to be prepared to handle one or more
sizable insolvencies, to offer, on an equitable basis to smaller associations,
the economies available through a sharing of facilities and expertise. In
this manner, NEAIGF operated for several years.
At
the joint annual meetings of the Boards of Directors of NEAIGF in 1979, the
members of the various Boards of Directors suggested that a more formalized
organization be considered. Despite the fact that, in the past, MIIF had
been the moving force, the other member funds decided that they should take
more responsibility for forging the future course of operations. At the 1980
joint annual meetings of the Boards of Directors, the Articles of Agreement
of Guaranty Fund Management Services ("GFMS"), were adopted by each of the
six member guaranty funds. As a result thereof, GFMS formally came into existence
on January 1, 1981, and, as a voluntary, non-profit, unincorporated association,
it received tax-exempt status from the Internal Revenue Service. During that
year, the District of Columbia Insurance Guaranty Association ("DCIGA")
expressed interest in becoming a member of GFMS. The Board of Directors of
DCIGA discussed this matter and authorized its Chairman to execute the Articles
of Agreement of GFMS, thus becoming a member. Accordingly, on January 1,
1982, DCIGA became the seventh member of GFMS. Likewise, in 1984, the Virginia
Property and Casualty Insurance Guaranty Association ("VAPCIGA") expressed
a desire to become a member of GFMS. Subsequent discussions among the members
of its Board of Directors resulted in its Chairman being authorized to execute
the Articles of Agreement of GFMS. Therefore, effective January 1, 1985,
VAPCIGA became the eighth member of GFMS.
DESCRIPTION
OF SERVICES
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Currently
GFMS employs professional, managerial, clerical and claims persons. Senior
Management includes: Paul M. Gulko, President and the person responsible
for bringing GFMS to its present position of leadership; James Winskowicz,
Senior Vice President-Claim Manager; Kathleen Lavin, Chief Financial Officer; Denise
Amigo, Vice President Unearned Premium and Reporting Services; Dimitar Kotzev,
Manager - Information Technologies; Linda Angelone, Associate Financial Manager;
Edward Mahoney, Counsel; Lawrence Daniels, Associate Claim Manager; and Joseph
Leary,
Associate
Claim
Manager.
The administrative
services provided by GFMS include:
1. Processing "covered
claims", including unearned premium;
2. Assisting
in negotiating with persons or organizations to act as claims servicing
facilities, if needed;
3. Assisting
in the preparation of contracts with claims servicing facilities, if needed;
4. Assisting
in the selection of claims, audit and other committees in liaison with
and guidance of the work of such committees;
5. Maintaining
a liaison with receivers and liquidators, domestic and ancillary, of insolvent
carriers and securing for the use of member guaranty funds appropriate
claims and coverage records, copies of summaries of applicable reinsurance
agreements and other material as appropriate;
6. Timely filing
of claims with receivers and liquidators of insolvent carriers;
7. Maintaining
liaison with insurance department personnel;
8. Handling
the preparation and mailing of notices of assessments as voted by the Boards
of Directors of member guaranty funds;
9. Handling
responses to such assessments and answering inquiries relative thereto;
10. Handling
deposits and recording assessments;
11. Assisting
audit committees;
12. Assisting
outside legal counsel in handling legal matters as necessary;
13. Developing
and carrying out investment programs as voted by the Boards of Directors;
14. Handling
such day-to-day operations and response to inquiries as may be authorized
by the Boards of Directors;
15. Assisting
in the preparation of draft legislative amendments for consideration of
the Boards of Directors;
16. Assisting
in the preparation of reports to the Internal Revenue Service as necessary;
17. Attending
meetings of the Boards of Directors and serving as recording secretary
as necessary;
18. Conferring
with and advising the Boards of Directors on any and all matters appropriate
to carrying out the responsibilities of member guaranty funds;
19. Preparing
all financial reports;
20. Preparing
communications with member insurers;
21. Issuing
checks on behalf of the member guaranty funds as appropriate;
22. Maintaining
claims and financial data in a computer system with on-line retrieval,
management reporting, and electronic transfer of data from and to liquidators
and other organizations.
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