Trade Group: Mich. Enacts Positive Reforms to Guaranty Fund Coverage

Michigan recently enacted a series of positive reforms to the Michigan Property Casualty Guaranty Association Act that among many things adds a large deductible provision which clarifies the rights of the receiver and guaranty association in dealing with collateral and reimbursement issues for insolvent insurers, according to national trade group, the Property Casualty Insurers Association of America (PCI).

“Many of the reforms, including the large deductible provision, are based on the National Conference of Insurance Guaranty Funds (NCIGF) model act,” according to Michael Koziol, assistant vice president and counsel for PCI. “With these reforms, Michigan joins other key states such as California, Illinois, Pennsylvania and Texas in ensuring that the guaranty fund’s exposure on large deductible policies will be the same as what it would have been for the insolvent insurer. This change means that the guaranty fund, which will be paying the claims for the insurer, will be reimbursed for the deductible amount the guaranty fund pays rather than it being used to enrich the estate of the insolvent insurer.”

The reform package includes 13 bills, House bills 6223 through 6235. Taken as a whole, the package does the following: strengthens the current early access provisions under the current act; adds a large deductible provision that is patterned very closely to the NCIGF model; permits the guaranty association to receive confidential information regarding a supervision proceeding; gives the guaranty association the right to obtain claim records in the custody of a third party administrator; gives the guaranty association the two-part trigger language embodied in the NCIGF model – that is an order of liquidation with a finding of insolvency, and, adds new net worth language excluding first-and third-party claims of insureds with net worth of $25 million or more.

“While Michigan has had a net worth provision for some time, this language more closely follows the NCIGF model and will be beneficial for Michigan and other states which may have claims in a Michigan insolvency proceeding,” said Koziol. “It also highlights the direction and approach that state legislatures are taking on this issue. With five major states embracing a similar approach, we would encourage the National Association of Insurance Commissioners to take note and incorporate these developments into their deliberations on the large deductible.”

PCI is composed of more than 1,000 member companies and its members write over $194 billion in annual premium, 40.1 percent of the nation’s property/casualty insurance.

Source: Property Casualty Insurers Association of America

Related Bills:
MIH6223 – Michigan Bill – Provides for General Amendments to the Michigan Property Casualty Guaranty Association; MIH6224 – Michigan Bill – Provides for General Amendments to the Michigan Property Casualty Guaranty Association; MIH6225 – Michigan Bill – Provides for General Amendments to the Michigan Property Casualty Guaranty Association; MIH6226 – Michigan Bill – Provides for General Amendments to the Michigan Property Casualty Guaranty Association; MIH6227 – Michigan Bill – Provides for General Amendments to the Michigan Property Casualty Guaranty Association; MIH6228 – Michigan Bill – Provides for General Amendments to the Michigan Property Casualty Guaranty Association; MIH6229 – Michigan Bill – Provides for General Amendments to the Michigan Property Casualty Guaranty Association; MIH6230 – Michigan Bill – Provides for General Amendments to the Michigan Property Casualty Guaranty Association; MIH6231 – Michigan Bill – Provides for General Amendments to the Michigan Property Casualty Guaranty Association Relating to Claims of an Insolvent Insurer; MIH6232 – Michigan Bill – Provides for General Amendments to the Michigan Property Casualty Guaranty Association Defining an Insolvent Insurer; MIH6233 – Michigan Bill – Provides for General Amendments to the Michigan Property Casualty Guaranty Association Regarding Actions to Obtain Claims Information; MIH6234 – Michigan Bill – Provides for General Amendments to the Michigan Property Casualty Guaranty Association; MIH6235 – Michigan Bill – Provides for General Amendments to the Michigan Property Casualty Guaranty Association