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Winding-up and exit from the market

Winding-up and exit from the market. Monica Lindeen Insurance Commissioner State of Montana. Resolution Plans & Banking Regulation in the US. Positive Aspects of Resolution Plans Address the risk of discontinuing critical operations and services

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Winding-up and exit from the market

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  1. Winding-up and exit from the market Monica Lindeen Insurance Commissioner State of Montana

  2. Resolution Plans & Banking Regulation in the US • Positive Aspects of Resolution Plans • Address the risk of discontinuing critical operations and services • Address the risk of derivative or counterparty actions • Address the risk of insufficient liquidity • Force Discuss on the risk that lack of cooperation could lead to ring-fencing of assets. • Bail In Concept in Banking • Banking Tied to the Real Economy • Insurance Should be Resolved Differently than Banking

  3. Tools For Crisis Management • Access to Data • Risk Based Capital-Ladders of intervention • Hazardous Condition/Supervision-Risk based intervention • Stay provision • Runoff • Portfolio transfers • Reduce expenses including commissions by specified methods • Increase capital • Suspend dividends • Withdraw from • Correct corporate governance deficiencies

  4. Resolutions Under State Law • Receivership governed by state law • Marshall the assets to provide continued coverage • Rapid resolution not appropriate for insurers • Ring fencing • Importance of laws to protect legal entity; despite push for group supervision • All policyholders in all jurisdictions must be treated the same

  5. Rehabilitation & Liquidation • Rehabilitation • Used to implement sale, claims runoff, or trigger liquidation • Rehabilitation plan • Termination of rehabilitation • Liquidation • Policies are cancelled • Proofs of claim filed and processed • Distribution to creditors according to priority • Termination of qualified financial contracts • Closure of estate • State Guaranty Funds

  6. Summary & Questions • NAIC currently Considering Resolution Plans On Certain Large Groups • Run on the Bank Covered By Broad Authority • Policyholder Benefits Protected As Opposed to Paid out In Cash • Protection of Monies Once Liquidated • Must Work Cooperatively in Resolving Companies in the same Group Together

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