Insurance regulators urged to get serious with receivership database

Peter Gould is a policyholder and a realist who knows that insurers will sometimes fail. But he wants the comfort of knowing that regulators are at least learning from those receivership cases.

He’s not convinced they are.

Gould recently submitted a proposal for the “Improvement and expansion of the Global Receivership Information Database (GRID) system.” Maintained by the National Association of Insurance Commissioners, the GRID system is how regulators track insurers put into receivership.

The site tracks all insurance companies put into receivership past and present. There are 289 “open” receivership cases, and many more that have been closed. GRID is an impressive collection of facts, financial statements – provided by linked PDFs – and court orders, but seemingly without a purpose.

Gould and his wife, of Bloomington, Ind., are variable annuity owners counting on the guaranteed lifetime withdrawal benefits to provide "predictable and secure retirement income." Following a string of insurer failures earlier this year, Gould began researching the receivership process and commenting on regulator calls.

In just one example, PHL Variable Insurance Co. and its subsidiaries, Concord Re and Palisado Re, were placed into rehabilitation May 20 by order of the Superior Court of the State of Connecticut, Judicial District of Hartford.

“I asked [an NAIC staffer] where I'd find the post-mortem reports on each company in GRID,” Gould said. “Why it failed, what regulatory actions were taken to prevent the failure, how policy owners were hurt. [But] they don't do a deep dive analysis of each failure.”

In many cases, entries are incomplete since they rely on volunteer submission of information. The NAIC declined to comment on Gould's proposal.

The receivership process is a complex process, with regulators generally only required to submit a periodic progress report to the court. The process of unwinding the assets and liabilities of a failed insurer often takes years.

Suggestions to improve the system

Gould makes a lengthy list of suggestions to improve the GRID system. Most significantly, he wants the NAIC to make GRID reporting mandatory, rather than voluntary, and expand data collection to include all companies in suspension, supervision, and liquidation.

"I was astounded that they're not compiling details of all state regulator actions and pertinent details of each," Gould said. "How can they regulate if they're not tracking things in real-time, or close to it, identifying trends, and taking timely action nationwide? This data is important not only to NAIC and state commissioners but to all stakeholders."

The Goulds are not without knowledge about the retirement planning business. They ran a retirement plan benefits business for 35 years and personally invested in a 401(k) plan that offered annuities at a time when in-plan annuities were a rarity.

Gould's proposal is in the Receivership and Insolvency Task Force and will likely be discussed during a future call. The task force is slated to meet Nov. 18 at the NAIC Fall National Meeting in Denver.

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.