Featured articleS1 iair’s President’s Message

By Patrick Cantilo, Esq., CIR-ML

4 Board talk: richard darling, cir-MlBy Michelle Avery, CPA& Francesca Bliss

6 the Perfect receiverBy Patrick Cantilo, Esq., CIR-ML

7 Board updateBy Patrick Cantilo, Esq., CIR-ML

8 View from WashingtonBy Charlie Richardson, Esq.

9 in Memoriam:Gary Hernandez &commissioner alfred W. Gross

12 introducing iair’s NewestMembers

16 iair 2012 insolvencyWorkshop Program

20 Getting Your reinsurance act together By Kathleen M. McCain, Esq.,CIR-ML & Evan D. Bennett

25 congratulations to iair'sNewest cir designees

26 the iair Web Site is Beingupdated!By Alan Gamse, Esq.

27 iair technical developmentSeries 2: Reinsurance PhotoGallery

28 Job OpeningInternational Association of Insurance Receiversc/o The Beaumont Group, Inc.Maria Sclafani, Executive Director3626 Tremont Avenue, Suite 203Throggs Neck, NY 10465Tel: 718-892-0228 • Fax: 718-892-2544www.iair.orgmcs@iair.org

On May 27, 2011, Gary Hernandez passed away unexpectedly. Many of us first met Gary when he servedin the California Insurance Department, leaving in 1997 asDeputy Commissioner and Chief of Enforcement to joinwhat is now SNR Denton in which he led the firm’sinsurance regulatory practice. You will find more aboutGary at page 9, but I want to convey here my ownexpression of sadness and sincere condolences to Teri andGary’s family and friends. In an age characterized bywidespread derision for our profession, Gary stood tallamong those who exemplified the honor andsophistication that still earns profound respect for at least

some lawyers. A kind and gentle man, he leaves us a legacy of good humor, friendshipfor its own sake (not for what “value” it may bring), and practical observations bornof a deep understanding of our industry.

On the day of his 65th birthday on July 28, 2011, recently-retired Virginia InsuranceCommissioner Alfred W. Gross passed away after a very challenging illness. Beforeretiring last year, Commissioner Gross, among his many duties, chaired - for years -the NAIC’s Financial Condition (E) Committee, parent of the Receivership andInsolvency Task Force. Among many accomplishments, he was key in shepherdingIRMA to adoption. The mark of a good man is that he leaves the world a better placethan he found it. Al exemplified this accomplishment in too many ways personallyand professionally to attempt to inventory in these few words. All who knew him -casually or well - recognized at once that here was an extraordinary man whoseexceptional insights and intelligence never dulled an abiding humility and kindnessthat made each of us strive to be better. His compassion, wit, encyclopedic knowledgeand admirable patience enabled him to forge solutions to the most challengingproblems in very diverse arenas with a grace that belied the difficulty of the trials hefaced without complaint. Those of us fortunate enough to have known him invariablyadmired his understated grace as much as his exceptional intelligence. Describedoften as a scholar, linguist, philosopher, or professor, he was not just a great man, butan extraordinary friend. The void his passing leaves simply cannot be filled. Please seepage 10 to read more about Al.

Patrick Cantilo, Esq., CIR-ML

(continued on page 3)

Summer 2011 Volume 20, Number 2

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iair’s President’s Message (continued)Amazingly, 2011 is more than half behind us.Tempus fugit indeed! Had you fallen asleep inDecember only to wake this week, we at IAIRwould have much to tell you. In January, weinvaded the “Big Easy” with another exceptionalInsolvency Workshop, justly dubbed “Peering intoIAIR’s Crystal Ball.” We considered generalindustry forecasts as well as tax developments, thechanging regulatory environment, emergingrehabilitation techniques, changes in the guarantyfund system, and a host of other issues. To ourcollective astonishment, New Orleans proved to bean entertaining venue —‘nuff said. In June, weheld our second Technical Development Series(“TDS”) program in Las Vegas, this one focused onreinsurance. As was true of our first in this serieslast year, this program was of truly exceptionalquality, with a very impressive group of presentersfrom industry and our community. In keepingwith the nature of these programs, there was arobust opportunity for audience participation andinteraction within the larger group. This time, wealso compiled a very practical compendium ofreinsurance materials, some from the programitself, others more in the nature of basic references.Those will soon be available for purchase inelectronic form. For more information, visit ourwebsite at www.iair.org.

Also reminiscent of the first TDS program last yearwas the disappointment of light participation fromamong our membership at the June program. Whilesome of us strive hard to provide quality resources toour members, including exceptional programs, thislack of support will eventually eliminate our zeal indoing so. I take this opportunity, therefore, to makean important point. Many of our members havelamented the declining number of opportunities forprofessional engagements, due in no small part to thescarcity of receiverships. IAIR leadership have beenworking hard to address this compelling interest ofour membership by broadening the scope of ourorganization and implementing a number of initi -atives to address two important goals: enhancing theskill level of our members to give them an advantagein the competition for existing work and providingrobust networking opportunities that will facilitatefinding new work. These efforts require a tremen dousamount of uncompensated work from orga nizersand participants. It is demoralizing to see so few ofour members avail themselves of these op port unities.As those who skip these programs lament how littlework they are getting, I would say only that theAssociation is trying to help, but these efforts areunderappreciated at these members’ own peril.

Among other measures to continue enhancing thevalue of IAIR membership, one that particularlystands out is the revamping of our web site. Kudos,in particular, to Alan Gamse and Maria Sclafaniwho have worked tirelessly with our expert, RonFamiano, to create a new site structure that is trulya “next generation” for our web site.

There are other measures in the works as well.Early in their development, some are focused onenhancing national recognition of our exceptionalcredentialing process as the regulation of theindustry becomes more centralized and the DoddFrank Wall Street Reform and Consumer ProtectionAct (DFA) may require that commissioners engagequalified receivers and turnaround specialists onshort notice. Suffice it to note, in this regard, thatstates will find themselves in need of a standing listof qualified receivers and that IAIR is logicallydevoting itself to the mission of having itscredentials become an integral part of this process.Of course, this highlights once again the value ofundergoing the credentialing process. Further, weare in the process of developing a program forrecognition of greater achievements in our field,including recognition for participation in theInsolvency Workshops, TDS, and other higher-level programs. In short, IAIR is at long last well onits way to becoming the nationally-recognizedcredentialing organization for insurance receivers.

As I bring these comments to a close, I note thatthe future of IAIR must recognize the verysignificant changes that are taking place in theregulatory and industry communities we serve.The leadership of the Association recognizes theimplications of these changes and strives toenhance the relevance of our organization, bothin the debate surrounding the new environmentand as the preeminent resource for theindispensable talent that will have to usher in thenew order. I encourage each of you to become anactive participant in these endeavors. My finalword here is to tip my hat to all those who havedone so much this last year to help IAIR turn thecorner. When we look up in another year or twoand are amazed at how far we have come in sucha short time, let it be remembered that it was notmagic that got us there; it was the unrelentingand selfless efforts of the small cadre of memberswho have tirelessly pulled us to this new plateau.I need not name names; we all know who you are.Thank you.Patrick

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people involved inreceiverships thatneeded help.” Dickrealized that theorganization provideda way to share thatexpertise with oneanother and wanted tobe part of that process.Dick is currently amember of theGuaranty Liaison aswell as the Accred -itation and Ethics

committees, however, he is quick to point outthat over the course of his almost twenty years ofmembership in IAIR, he has been involved in allfacets of the organization at some point in time.

During his term, Dick believes the organizationneeds to focus on providing meaningful reasonsfor members to belong and continue to grow itsmembership base. He believes this can be donethrough generating widespread acceptance ofIAIR's AIR and CIR designations, as well asfocusing on recapturing its roots as areceivership organization.

Dick has been self-employed since 2003,specializing in receivership administration andsupervisions exclusively for regulatory agencies,with the occasional private clients. Dickadministers all facets of receiverships andsupervisions from a CEO perspective, fromtakeover to closing. He also assists guarantyfunds/associations where needed but will notoppose regulatory agencies.

Early on in his career, Dick was on the inside ofthe insurance industry, as a personal linesunderwriting manager. Unfortunately, in 1981,his company was liquidated along with SecurityCasualty Company, because of inadequatereinsurance reserves. While his resume was outon the street, the then Special Deputy Receiver in

Illinois asked him to stay on. As a group, theystarted CRL (Conservations, Rehabilitations,Liquidations), which, in 1983, morphed into theOffice of the Special Deputy (OSD) as it’s knowntoday. Dick was with the OSD in Chicago forover twenty years in various capacities,including as the Chief Operating Officer.Throughout that experience, he gained per -spective regarding receivership manage-ment;running well over 120 estates for that office,utilizing a staff of up to 250, and an averageoperating budget of $40 million. There was aperiod of time during which the OSD took on anew estate every 90 days on average.

In total, Dick has handled 147 receiverships andsupervisions (gasp) over the years as either theSpecial Deputy Receiver or Chief OperatingOfficer. Very impressive. Dick views becomingone of the most experienced insurance receiversin the United States as his biggestaccomplishment along with sharing hisexperience through mentoring others in thefield, including attorneys and practioners.

An Illinois native, Dick currently lives in St.Charles, a western suburb of Chicago, with hiswife Kathleen and their two children, Karenaged 19, a junior at DePaul University, andMikell aged 15, a freshman at St. Charles NorthHigh School.

Q. What is the last fictional book you read thatyou would recommend to others?Dick prefers non-fiction and to give yousome idea of just how seldom he readsfiction, the last good book he read was TheGodfather, which he got through in onesitting. And how many years ago was thatyou ask? 1983.

Q. If you could have dinner with any threepeople in the world, dead or alive, fictional ornon-fictional, who would you choose? Why?Dick would certainly be in for some

Board talk: richard darling, cir-MlBy Francesca Bliss and Michelle Avery, CPA

He has been an active member of the organization since 1992 and recently returned to the board foranother three years after a bit of a hiatus. Dick originally joined the organization because he “thought itwas a good opportunity at the time based on the mission of IAIR” and in his view “there were a lot of

Richard Darling, CIR-ML

interesting dinner conversation and I’m surecould learn a lot from his selectedcompanions which include Bill Gates,Warren Buffett and Eliot Ness. Dick isinterested in hearing how Bill Gates is able tolive so successfully in the spotlight. Giventhe industry, Dick naturally chose WarrenBuffett to provide some personal per -spectives on the insurance industry. And, asa bit of an outlier, Eliot Ness, because Dick isa student of Chicago mob history. Dick’sfather worked with many interestingcharacters from that era of the 1920’s – 30’sand, although not mob related, was knownas the “duke” when he was a young man.

Q. What is your favorite sport? Team?Dick stays loyal to his Chicago roots as aCubs fan, despite their lack of success and,although he seldom gets there, thinksWrigley Field is a great place to watchbaseball. In addition, he used to be a Bearsfan because his father knew Football Hall ofFamer, George Halas. Dick was a loyal fanand went to every Home game from 1951 –1986. He laments, however, that after theywon the Super Bowl, managementdestroyed a team that could have won threeor four Super Bowls - and then the NFLstrike happened - and he hasn’t watched orbeen to a game since.

Q. What is your favorite leisure activity?Dick has an acre of land and loves spendingtime gardening. However, given his travelschedule, it’s hard to find the time to keep upwith it; but when he is home, it keeps himquite busy.

Q. Where is the last placed you vacationed?Dick hasn’t taken a vacation since he went toItaly’s beautiful Amalfi Coast in 1991. Dick,you must stop working so hard – yourgarden needs to be weeded and you need abreak!

Q. What is your favorite NAIC/IAIRconference location?Kansas City, of course – from a true NAICpurest - because it is convenient andinexpensive; and, San Antonio as a closesecond, because of the number of hotelswithin walking distance, and the wonderfulrestaurants on the River Walk.

Q. Give us one piece of information that mostpeople don’t know about you? Dick was the Illinois junior skeet shootingchampion (under age 18), and had dreams ofdoing that in the Olympics, but it turned outto be way too expensive to pursue. Dick wasalso on the state championship diving teamin high school.

To find out more about the details of Dick'sprofessional history, visit his web site athttp://insurancereceiver.com. Thank you, Dick,for taking time to discuss your background andinvolvement with IAIR.

Board talk (continued)

5Michelle Avery, CPA is an Executive VicePresident and Managing Director at VerisConsulting, Inc. within the firm’s forensicaccounting practice. Michelle has extensiveexperience assisting clients in causation anddamage assessments related to failedproperty/casualty and life and healthinsurance companies. Michelle is a Boardmember of IAIR and a member of theAICPA’s NAIC/AICPA Working GroupTask Force. Michelle can be reached atmavery@verisconsulting.com.

Francesca Bliss has recently retired from years of dedicated service tothe New York Liquidation Bureau where she worked on countlessestates, most notably Frontier Insurance Company.  She now spendstime sailing with her husband and dog and remains active in theinsurance industry through her new venture with Holly Bakke,Strategic Initiatives Management Group, and her continuedinvolvement with IAIR and NAIC.

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In this space I have presumptuously offered myviews on how one might improve one’sperformance as a receiver. Today I turn to whyone might want to do so. Obvious answersabound, of course, but I will focus on only onepoint: it will make you rich and famous.

As little children in Bayonne, NJ, andWillimantic, CT, respectively, one day long ago,Barney Frank and Chris Dodd, though separatedby four years of age and 122 miles as the crowflies, had the same apparition and were left withthe same vision. Interrupting theirnormal daily activities (kick thegarbage can for one, sandlot waterpolo for the other), a wondrousgenie in a three-piece suitmaterialized before each and toldhim: “Someday you will changecompletely how receivers are chosenfor large insurers.” With that, thegenie gave each a large three-scoopice cream cone and an inflatablecampaign manager and disap-peared, never to be seen again.Many years later, cleverlyconcealing it in a Wall Street reformand consumer protection bill,Barney and Chris gave form to theirdream. Buried in Section 203 is aformula for what amounts to federalappointment of a receiver for an insurer namedSifi.1 At a minimum, this clever creation willrequire that state insurance commissioners beready at a moment’s notice to appoint a receiverfor Sifi. In this environment, don’t you want tobe on the FDIC’s and the commissioners’ shortlists for such appointments?

Undoubtedly, at least two major considerationsare likely to influence the selection of Sifi’sreceiver: politics and credentials. As to the first, I

have only one recommendation: if it matters toyou, write big checks to the right people. Hereare two things I cannot tell you (because Ihaven’t the slightest idea): how big a check andto whom. As to the second, however, I cancertainly throw in my two bits (try to stop me!).Credentials will be important for many reasons Ineed not spell out here.

So, “what credentials and where do I get them?” youask. In a nutshell, you want to appear to be themost qualified for the job. That means a

combination of having done a lot ofrelevant neat stuff before and havinga lot of nice certificates interspersedwith the Van Halen and Whitesnakeposters on your wall. Here’s wherewe can help. We make lots of neatcertificates and are planning to addmore to our selection. If my effortsand those of my brethren and sistrenbear the desired fruit, the single mostimportant indicia of achievementand qualification as an insurancereceiver will be IAIR accreditation.Already we have a well-developed,robust, and seasoned program forachieving designation as a certifiedor accredited receiver in life orproperty and casualty receiverships

(or both). We are also in the process ofdeveloping an enhancement to our accreditationsystem that will recognize completion ofadvanced training, such as our new TechnicalDevelopment Series programs. Details will bemade available soon. Bottom line: take ad -vantage of IAIR’s credentialing resources. Wellplayed, they will make you rich and famous.

1 Systemically Important Financial Institution.

the Perfect receiver By Patrick Cantilo, Esq., CIR-ML

To submit an article, please contact Maria Sclafani at mcs@iair.org orMichelle Avery at mavery@verisconsulting.com.

Having spent a lot of time devising andimplementing measures for the improvement ofour Association, it’s good to see some of theresults taking form. Our Board has been hard atwork but doing so quietly. The results, however,are tangible. Our web site is much improved,although it will improve even more in the weeksto come. Our Insolvency Workshop in NewOrleans was another great success, and we wereable to take advantage of that wonderful citywithout major casualties (“All present andaccounted for, sir!”). The meeting in Austin wasalso rewardingly successful, and (being myhome city) I was particularly pleased that manywere able for the first time to get to know “TheLive Music Capital of the World.” Indeed, myfirm, Cantilo & Bennett, even provided livemusic for the NAIC Dance, in the form of TheEggmen, voted Austin’s best cover band the lastseveral years. And we held our second TechnicalDevelopment Series program, this one focusedon reinsurance, to great acclaim. I am pleasedthat this new series seems to be well on its wayto being another regular offering of theAssociation for our members’ benefit. As weapproach the November NAIC meeting, weanticipate another great Issues Forum to followthe very high quality program we had in Austin.

But all this is not to say that we are withoutchallenges. Based perhaps on the mistakenimpression that the decrease in the number oftraditional receiverships has lessened therelevance of our Association, our membershipnumbers are lower than we would like them tobe. But recent and imminent developments inour corner of the world will soon make IAIRmembership and accreditation particularly

important, and tangible advantages will inure tothe benefit of those who have remained activeand supportive members throughout. No doubt,due in part to the diminished condition of theglobal economy, financial support for IAIR hasalso declined somewhat. The Board continues tostrive to engender sponsorships and to makethem more valuable. Your help in these twoendeavors, more members and more sponsors,will always make a difference and be sincerelyappreciated.

In addition, IAIR continues to be an organizationwith a small number of whose members do thevast majority of the work for the benefit of theentire membership. We would love to see moremembers joining and becoming active in ourvarious committees and subcommittees. Thestrength and importance of IAIR will always bethe product of the collective efforts of itsmembers. We have an unusual opportunity tomaster our changing world and lead rather thanfollow the trek into receiverships 2.0. How wellwe capitalize on this opportunity will guide inlarge part how well many of us do individuallyas the new normal takes hold.

All in all, 2011 is proving to be a promising yearfor IAIR. The Board sees many excitingopportunities but continues to face thechallenges produced by recent events. Likemany of my girlfriends, we know exactly wherewe want to spend a lot of money. All we aremissing is a lot of money. But we are on a goodpath, and all we really need is a little more pushfrom our members to gather the speed necessaryto approach escape velocity. Would you roll upyour sleeves and contribute to that push?

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Board updateBy Patrick Cantilo, Esq., CIR-ML

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We have federal agencies going wild withimplementation and execution of Dodd-Frank;we have a new Federal Insurance Office and anew Director who took office in June; and, wehave initiatives at the federal and the state levelto make sure that the receivership and guarantysystems can continue to do their jobs forinsurance consumers regardless of the size andcomplexity of the task in this new world order.

As you think about all this, here are the basicsabout Dodd-Frank. A 15-person FinancialStability Oversight Council (“FSOC”), with threeinsurance seats and chaired by the TreasurySecretary, will identify large, interconnectedfinancial companies that are systemicallysignificant. (This may well include insurancecompanies and insurance holding companies,although most observers contend that few – if any – insurers are systemically significant.)Once identified, these large financial companieswill be subject to stringent regulation by theFederal Reserve Board. Looks like a new “too bigto fail” list, and most insurance companies hopethey will escape that designation because of the impact on the capital they will be required to hold.

Title II of the legislation creates a new resolutionmechanism for liquidating systemicallysignificant financial companies whose failurecould destabilize the economy. While the FDICwill be appointed receiver of and liquidate mosttypes of financial companies, insolvent insurers(including any that are systemically significant)will remain subject to state receivership andguaranty association processes.

The legislation also establishes a FederalInsurance Office (“FIO”) in the Department ofthe Treasury with limited authority over all linesof insurance other than health. It will give a newfederal focus to all things insurance. Amongother responsibilities, the FIO will monitor theinsurance industry for regulatory gaps that

could lead to systemic risk. Illinois InsuranceDirector, Mike McRaith, is the new FederalInsurance Director taking office June 13. He willsit on FSOC, but be non-voting like MissouriDirector John Huff, appointed to FSOC for atwo-year term by the NAIC. Director McRaithwill eventually have a 15-person advisorycommittee helping him, half of whose memberswill be state regulators. The President appointedin June, and the Senate now must confirm, thevoting insurance member of FSOC - RoyWoodall, whom many of you know well, to a six-year term.

The action in the financial services arena,including the insurance sector, in all those areasis hot and heavy at both the federal and statelevels. Insurance companies will continue to beresolved as they are now, even systemicallysignificant ones, assuming state regulators acttimely and don't trigger the FDIC's backupauthority. The state guaranty systems will alsoremain as they are but have to fit within the newframework.

All in all, insurance receivers and the guarantyassociations fare awfully well under the newlaw, at least for now. Cheese to our macaroni.

To meet the responsibilities placed on the statereceivership and guaranty systems, the NAIChas initiatives well underway. The new Dodd-Frank Receivership Implementation WorkingGroup and Receivership Financial AnalysisWorking Group are at the center of the NAIC'sDodd-Frank readiness.

Those new initiatives of the NAIC inimplementing Dodd-Frank and in monitoringnationally significant insolvencies are vitallyimportant. All of us are obviously veryinterested in what is done by the NAIC to dealwith situations in the receivership sphere thatcan give state procedures a black eye in thispolitical, legal, PR and economic environment.

View from WashingtonBy Charlie Richardson, Esq.

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Finally, we should not lose sight of the studiesthat the FIO will be undertaking soon. Dodd-Frank calls for FIO to complete and deliver toCongress, by January 2012, a major study of U.S.insurance regulation that could provide impetusfor future legislation. In particular, FIO isrequired to report on, among other things, thefeasibility of regulating only some lines ofinsurance at the federal level, the ability of thefederal government to provide robust consumerprotections (probably including discussion of apotential federal safety net), and theconsequences of subjecting insurance companiesto federal resolution, including safety netconsequences. What data points will FIOconsider in reaching its conclusions?

Like it or not, the federal government’s newinflatable platform in insurance can land on topof and sink the state-based receivership andguaranty systems if we aren’t prepared, armedand ready to protect consumers. We have to becareful. We have to be good. Really careful andreally good. We’re up to the task!

View from Washington (continued)

Charlie Richardson is a Partner at the law firmBaker & Daniels in Washington, D.C. wherehe chairs the insurance and financial servicespractice group. Charlie assists insurancecompanies and others with all types ofcorporate, federal legislative, regulatory, publicpolicy and compliance matters. He practices inthe area of insurance company rehabilitationsand liquidations.

Gary Hernandez, nat-ionally recognized insur-ance regulatory lawyerand community servant,passed away unexpect-edly on May 27, 2011 atthe age of 52.

Gary Anthony Hernandezwas born February 15th,1959 in Merced, Cali-fornia to Rosendo andMargaret Hernandez,

who predeceased him.

While growing up in Merced, he attended MercedHigh School where he participated on the varsitywrestling team and served as president of theschool’s Key Club. In his senior year, he waselected Governor of the Key Club California,Nevada and Hawaii District.

Gary earned a scholarship to the University ofCalifornia, Berkeley where he was a member of thevarsity wresting team and Sigma Chi Fraternity.

After receiving his BS degree in 1981, he attendedlaw school at University of California Davis,serving as the student speaker at his commence -ment. He took that opportunity to point out to theadministration and gathered dignitaries that hewas only one of four minority students in the classof 1984.

In 1990, Gary joined the California Department ofInsurance, where he served as Deputy Com -missioner for Enforcement, before going into privatepractice at Long & Levit. In 1997, he joined the law

firm of SNR Denton (formerly Sonnenschein)becoming the founding chairman of the Firm’sInsurance Regulatory practice. The global growth ofthe practice and depth of the team’s talent is a testament to the vision Gary beganimplementing 15 years ago. A prolific writer andspeaker active in virtually every professional settingand organization relevant to the insurancecommunity, he never missed an opportunity tosupport and mentor his colleagues and friends.

Gary’s commitment to the community was amonghis highest priorities. Named one of the MostInfluential Hispanics of the United States, he servedon the board of directors of the California CoastalConservancy and as a founding trustee of theUniversity of California, Merced Foundation.Additionally, he served as a long time board memberof both the Latino Community Foundation and SanFrancisco Legal Aid Society. His many civic honorsincluded being named California Attorney of theYear in 2004 and one of the 50 most influentialminority lawyers in America.

Gary is survived by his wife Teri, with whom hespent 23 extraordinary years, his sister BarbaraHammond and his nephew, Noah.

His leadership, mentoring, warmth, passion andgenerous spirit will be remembered by all withwhom he shared his time. May he rest in peace,secure in the knowledge that he will be deeplymissed by his family and friends.

Donations can be made in Gary’s name to California Rural Legal Assistance, Inc.(www.crla.org) or a charity of your choice.

IN MEMORIAM: GARY HERNANDEZ

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IN MEMORIAM: ALFRED W. GROSS

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Kelly Cruz-BrownKelly Cruz-Brown is a share-holder at Carlton Fields, P.A.’sTallahassee office. She is ex-perienced in insurance regulatorymatters. She has represented in -surers, reinsurers, and third parties

in receivership and liquidation mattersincluding challenges to receivership orders,receiver investigations, assessments, portfoliotransfers, acquisitions, and suits by receivers torecover assets. In her free time, Kelly enjoysjewelry making and reading. She is also a certifiedZumba fitness instructor and teaches classes at alocal com-munity center in Tallahassee.

John DoakJohn Doak was sworn in as the12th Insurance Commissioner ofOklahoma on Jan. 10, 2011, takingthe next step in a distinguishedcareer deeply grounded in pro-viding insurance options and

coverage to Oklahomans. After graduating fromthe University of Oklahoma, John established hisown branch for the Farmer’s Insurance Agencyin Tulsa, and over the next six years wouldreceive numerous awards and commendationsfrom Farmer’s for his office’s success. John leftFarmer’s Insurance to work in the executivelevel of the insurance industry at firms such asMarsh, Aon Risk Services, HNI Risk Services,and finally at Ascension Insurance, where heserved as senior vice president of acquisitions.

John is a former board member for the TulsaRonald McDonald House, the Tulsa Opera, andDillon International Adoption Agency. He also has served as a member of the OklahomaGovernor’s Round Table for Business Develop -ment. John and his wife, Debby, live in Tulsawith their children, Zack and Kasey.

Steve GoateSteve Goate is the Head of R andQ Broker Services, which incorp-orates Reinsurance SolutionsLimited (RSL). RSL providesinsurers, reinsurers and regulatorswith a wide range of tailored

administrative, consulting and technologysolutions. Steve has over 30 years experience in

the London and international markets and is amember of the Association of Run-offCompanies (ARC) and a member of theInternational Association of Claim Professionals(ICAP). He is also Deputy Chairman of theAssociation of Insurance and ReinsuranceService (AirSP).

Dennis J. HayesDennis J. Hayes, effective July 1,2011, has been appointed as theChief Executive Deputy Directorof the New York State InsuranceFund. Prior to this summer, Mr.Hayes was Special Deputy

Superintendent of the New York LiquidationBureau (NYLB), having been appointed inAugust 2009. He oversaw the administration of32 estates in liquidation and six companies inrehabilitation. A graduate of St. John’sUniversity School of Law, Mr. Hayes has beenwith the Bureau since 1996. He was in privatepractice prior to that where he specialized ininsurance, reinsurance and regulatory matters.

Frederick G. HeeseFred Heese has been the ChiefFinancial Examiner and Directorfor the Division of InsuranceCompany Regulation of theMissouri Department of In -surance, Finance and Profes sional

Registration since May 2007. Fred has been withthe Department overseeing financial analysisand examinations for over twenty five years.Fred is a CPA and a Certified FinancialExaminer. Fred has been active in the NAIC andhas served on various Task Forces and WorkingGroups for many years. He is also an activemember of the AICPA and the Society ofFinancial Examiners and currently serves on theSOFE’s Board of Governors. Most recently, Fredhas lead the Department’s efforts to implementthe “Risk Focused” financial examinationapproach in an effort to better concentrateresources on priority areas. As Division Director,Fred also oversees Taxation, Admissions andCaptives. Fred has also overseen manyreceiverships over the years for the MissouriDepartment and has had considerableexperience dealing with troubled companies.

introducing iair’s Newest Members

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Lori JonesLori Jones has been a partner in theDC law firm of Scribner, Hall &Thompson, LLP since 1997 and withthe firm since 1992. ScribnerHallrepresents both life and property/casualty insurance companies on

federal income tax issues. Her practice includesadvising various state insurance departmentsregarding tax issues facing insurance companies inrehabilitation or liquidation proceedings. Prior tojoining the firm, Lori was an attorney in the Office of Chief Counsel at the IRS, where she specialized in the federal income tax issues arising in financially-troubled companies in general.

Her interests outside of the office include hikingand cross-country skiing.

Andrew KlivanAndrew Klivan is President andPrincipal of NRC LLC, an insuranceaccounting and consultancy withoffices in New York, Paris,Stockholm and Sarasota, FL. Hiscompany designs, directs and

coordinates insurance and reinsurance audits,develops and implements commutation strategiesand manages risk portfolios. He has testified asboth a fact and expert witness on numerousoccasions. He has served on the NAIC AdvisoryCommittee on Reinsurance and assisted in thepreparation of the section of the NAICRehabilitators & Liquidators Handbook related toreinsurance, auditing and recoveries.

Wanda LaPrathWanda LaPrath is a Sr. Manager ofRegulatory Insurance Services atDixon Hughes, located in theirWest Virginia location. She hasexper ience in administration ofexam operations and staffing, as

well as performing the planning, supervision,review and report writing for financial andmarket conduct exams for HMOs, life insurance,property & casualty and title insurancecompanies. When she is home, Wanda splits hertime between Arizona and New Mexico. Sheenjoys her grandsons and reading. Wanda is anavid hockey fan and tries to go to games everychance she gets.

Jacob MillerJacob Miller, of counsel withQuerrey & Harrow, Ltd.,concentrates his practice in generallitigation, governmental liability,and governmental relations. Mr.Miller previously served as counsel

to the Speaker of the Illinois House ofRepresentatives and worked with the State ofIllinois Capital Development Board and theOffice of the Governor of Illinois. Through hiswork with governmental entities, Mr. Miller hasdeveloped incisive negotiation skills and athorough understanding of legislative process.

Andromeda MonroeAndromeda Monroe is anAssociate at the law firm ofColodny, Fass, Talenfeld, Karlinsky& Abate, where she practicesinsurance regulatory law. Ms.Monroe’s experience with troubled

companies includes, as a former regulator andlater as in-house counsel, negotiating withreceivers and providing legal advice in regard toinsolvent cedents and reinsurers, voluntarysupervision, run-off of reinsurance blocks and theacquisition of unprofitable business frominsurers. Her current practice includes advisinginsurers on financial compliance and solvencyrequirements. In her spare time, Ms. Monroevolunteers with the Humane Society of BrowardCounty and, through the Alpha Kappa AlphaSorority and other groups, participates incommunity projects related to social justice forand human rights of children.

John MorrisJohn is a consulting actuary in thePhiladelphia office of Pricewater-houseCoopers. John has over 30years of actuarial experience morethan 20 of which have been withPwC. He is involved in many areas

of the life insurance and annuity consultingpractice with a primary focus on statutory and USGAAP financial reporting issues. John also hasextensive experience in insurance companyrehabilitations, demutualizations, reinsurancetransactions and mergers & acquisitions. John’srehabilitation experience includes working for

13

introducing iair’s Newest Members (continued)

various state insurance departments assisting inthe rehabilitation of life insurance companiesincluding Executive Life, Fidelity Bankers Life,Mutual Benefit Life, Confederation Life andprojects with NOLHGA. John is a Fellow of theSociety of Actuaries and a Member of theAmerican Academy of Actuaries. He is an activemember of the Academy's Committee onQualifications and Life Valuation Subcommittee.

Michele OshmanMichele Oshman, a shareholder atQuerrey & Harrow, Ltd.,concentrates her practice ininsurance coverage, reinsurance,and complex defense litigation.Ms. Oshman represents the

Illinois Office of the Special Deputy Receiver inrelation to resolution of claims against distressedinsurers and negotiating and litigation with thereinsurers of the distressed companies. She is amember of the Armadillo Club and volunteers atthe Mission of Our Lady of the Angels inChicago.

Pierre J. RiouPierre J. Riou is a partner with thelaw firm of CANTILO & BENNETT,LLP in Austin, TX. He hashandled a wide range of insurancere ceivership legal matters, fromthe initiation of receivership to

liquidation or rehabilitation, including in hiscapacity as counsel in administrative, regulatory,corporate and litigation matters to the DeputyReceiver of a multi-state hospital liabilityinsurance reciprocal and to the Deputy Receiverof a multi-state life insurance company. His firstcareer was as a deck officer on U.S.-flagmerchant vessels, and he follows with interestthe developments in the countries whose portshe visited, including recent events in Somalia,Egypt and Côte d’Ivoire. His other personalinterests include nutrition, exercise, theoutdoors, gardening, reading and cooking.

Joel SanderJoel Sander is the AssistantCommissioner of Finance with theOklahoma Insurance Department.Prior to joining the OklahomaInsurance Department, Joel wasthe Finance Officer for the Tulsa

County Clerk’s Office and holds severaldesignations. In addition, he is an AdjunctProfessor in Governmental Accounting andAccounting Information Systems. Joel isinvolved in various community servicesorganizations and enjoys professional andcollegiate sports.

Laura Lyon SlaymakerLaura Lyon Slaymaker is ProjectDirector at the PennsylvaniaInsurance Department, Office ofLiquidations, Rehabilitations andSpecial Funds. In that capacity,she manages a wide variety of

administrative and substantive projects,coordinating comprehensive status reports on allPennsylvania companies in liquidation, re -viewing and analyzing proposed agreementsand liquidation and rehabilitation plans. She hasalso served as Trial Attorney for the Office of theUnited States Trustee, representing the FederalGovernment’s interest in bankruptcy cases byreviewing bankruptcy petitions and appearingin Federal Court in Chapter 7 and 11 cases,preventing fraud and abuse, and analyzing datasubmitted by debtors. Prior to that, Laura was ashareholder in the law firm of Blakinger, Bylerand Thomas, specializing in bankruptcy law for12 years. Residing in Lancaster, Pennsylvania,Laura is an advocate of historic and farmlandpreservation.

Terry SmithTerry Smith has been in publicaccounting since 1979. He is agraduate of The University ofTulsa with a Bachelor of Science inAccounting. His experienceincludes national and small public

accounting firms and crosses a wide variety ofindustries. Terry is also a licensed Health andLife agent, Certified Financial Planner and an

14

introducing iair’s Newest Members (continued)

Associate Member of the Association of CertifiedFraud Examiners. In addition, Terry is a co-founder of Redbud Physical Therapy.

Michael StillmanMichael Stillman is the ManagingShareholder of Querrey &Harrow, Ltd., a 72-year-old lawfirm headquartered in Chicago.He works with troubled com-panies through the Illinois Office

of the Special Deputy Receiver. Mr. Stillman alsohandles litigation matters and serves as anarbitrator under the Illinois Supreme CourtMandatory Arbitration Program. Mr. Stillmandevotes a significant amount of time to hiscommunity, currently serving on the Board ofDirectors of Brother Rice High School, as atownship trustee, and on the board of a localhospital. He also previously served as Presidentof the board of education for another local high school.

Richard VeedRichard Veed has over thirty years of experienceexclusively focused on the insurance industry.He is the President of Realtime Services, whichwas formed in 2003 to provide operations,marketing and technology support to theinsurance industry. Prior to founding Realtime,Richard founded, financed and managednumerous ventures in the insurance industry.These ventures have introduced the following tothe insurance industry: the most advancedtechnology for real time insurance new businessprocessing and underwriting, a comprehensiveonline underwriting data resource, electronicsignature methodology, and an innovativeinsurance direct response marketing company.Richard’s wife, Mary, is also a member of IAIRand their three children are pretty much out ofthe house. Richard was born and raised inNebraska and is a huge Husker fan. He alsoenjoys baseball and roots for both the White Soxand Yankees. When not at work in Chicago, theVeeds enjoy relaxing at their lake cottage onWhitewater Lake in Wisconsin.

15

introducing iair’s Newest Members (continued)

The Insurance Receiver is intended to providereaders with information on and provide aforum for opinions and discussions ofinsurance insolvency topics. The viewsexpressed by the authors in the InsuranceReceiver are their own and not necessarilythose of the IAIR Board, NewsletterCommittee or IAIR’s Executive Director. Noarticle or other feature should be considered aslegal advice.

The Insurance Receiver is published quarterly by the International Association of InsuranceReceivers, c/o The Beaumont Group, Inc.3626 East Tremont Avenue, Suite 203 Throggs Neck, NY 10465Tel. (718) 892-0228. Email: mcs@iair.org. Maria Sclafani, Executive Director

Newsletter committee:

Michelle Avery, CPA, ChairFrancesca Bliss, Phillip Curley, Esq., Richard J. Fidei, Douglas Hartz, Esq.,CIR-ML, Harold Horwich, CIR-ML, James Kennedy, Esq., Dennis LaGory, Esq.

Officers:

Patrick Cantilo, Esq., CIR-ML, President, Douglas Hartz, Esq., CIR-ML, 1stVice President, Patrick Hughes, 2nd Vice President, Joseph DeVito, CPA, AIR,Treasurer, Alan Gamse, Esq., Secretary, Francine L. Semaya, Esq., ImmediatePast President

directors:

Michelle J. Avery, Mary Cannon Veed, Esq., AIR, C. Phillip Curley, Esq.,Richard Darling, CIR-ML, Bruce Gilbert, James Kennedy, Esq., Dennis LaGory,Esq., Christopher Maisel, AIR, Lowell E. Miller, Daniel A. Orth, Vivian Tyrell, Esq.

legal counsel:

William Latza, Esq. and Martin Minkowitz, Esq., Stroock & Stroock & Lavan LLP

WEDNESDAY, JANUARY 18, 20126:00 – 7:30 pm Opening Night Reception

THURSDAY, JANUARY 19, 20128:00 – 8:30 am Registration & Continental Breakfast

8:30 – 8:45 am Welcome and Introduction to Day 1

8:45 – 9:35 am The Yin and Yang of the Two Guaranty Systems (NCIGF and NOLHGA)

9:35 – 10:25 am Early Guaranty Association/Guaranty Funds Involvement: Perk or Peril?

10:25 – 10:45 am Networking Break

10:45 – 11:35 am Reinsurance: Rights, Reporting, Recoveries & Resolution

11:45 – 1:15 pm Luncheon - Speaker Topic: Status of Federal Insurance Legislation

1:30 – 2:20 pm Challenges of Changing Lines of Business

2:20 – 3:10 pm Networking Break

reSerVe

earlY tO

GuaraNtee

YOur

reSerVatiON

at tHe

GrOuP rate!

International Associationof Insurance Receivers

January 18 – January 20, 2012

the Westin San diego400 West Broadway

San diego, ca  92101

SAV E T H E DAT E

iair 2012 iNSOlVeNcYWOrkSHOP

?The Nuances and Perceptions BetweenReceivers and the Guaranty Systems.

?Do you know what you don’t know?Do you know what you don’t know?

16

PLATINUM SPONSORSCANTILO & BENNETT, L.L.P.

GOLD SPONSORSInsurance RegulatoryConsulting GroupRobinson Curley & Clayton

SILVER SPONSORSArnstein & Lehr, LLC

Barbagallo & Stuehrk LLC

DeVito Consulting, Inc.

A SPECIALTHANKS TO OUR

CORPORATESPONSORS FOR

THEIR CONTINUEDPARTICIPATION AND SUPPORT!

FitzGibbons & Company, Inc.

Law Office of Daniel L. Watkins

Lowell Miller Accountant, Inc.

Quantum Consulting, Inc.

Regulatory Technologies, Inc.

Scribner, Hall & Thompson, LLP

Semmes, Bowen & Semmes, P.C.

Veris Consulting, Inc

For sponsorship opportunities, please contact:Maria Sclafani718-892-0228mcs@iair.org or mcs@thebeaumontgroup.com

3:10 – 4:00 pm Policy and Claims Administration: The Devils Deal with Details and Dilemmas

4:00 – 4:50 pm The Latest on Legislation, Litigation and Loopholes (Legal Update)

6:00 – 7:30 pm Cocktail Reception

FRIDAY, JANUARY 20, 20127:45 – 8:30 am Continental Breakfast

8:30 – 8:40 am Recap & Introduction to Day 2

8:40 – 9:40 am Getting to the Light at the End: POCs, Asset Distributions and Estate Closing Issues

9:40 – 10:00 am Networking Break

10:00 – 11:00 am Dodd-Frank Impact: The Final “You Don’t Know What YouDon’t Know”

11:00 – 11:30 am Program Wrap-Up

17

CONTINUING EDUCATION CREDITCourse Description: IAIR’s 2012 Insolvency Conferencewill address the current economic and political climate as well as insurance/reinsurance issues and recent legalissues that will affect the industry.

Course Level: This program is intended for intermediateand advanced level insurance receivers and those workingwith troubled companies. There are no advancedpreparations or prerequisites required, as this course willprovide live delivery of materials and updates building onthe knowledge and experience of the participant.

IAIR Continuing Education Credit: This program isapproved for 8.0 hours of continuing education credit towardIAIR's CIR and AIR designations in accordance with IAIR'scontinuing education policy to maintain certification status.

CPE Continuing Education Credit: TheInternational Association of InsuranceReceivers (IAIR) is registered with theNational Association of State Boards of

Accountancy (NASBA) as a sponsor of continuingprofessional education on the National Registry of CPESponsors. State boards of accountancy have final authorityon the acceptance of individual courses for CPE credit.Complaints regarding registered sponsors may beaddressed to the National Registry of CPE Sponsors, 150Fourth Avenue North, Suite 700, Nashville, TN 37219-2417.Web site: www.nasba.org. In accordance with thestandards of the National Registry of CPE Sponsors,CPE credits will be granted on a 50-minute hour.

CLE Continuing Legal Education Credit: Though theprogram may qualify for continuing legal education credit inmost states, participants will need to make their own filings.Upon request, IAIR can certify attendance and content.

18

registration information

Hotel Information *Group Rate Single/Double Occupancy $159.00 (Plus applicable tax)Westin San Diego Cut-Off Date for Group Rate: December 28, 2011400 West Broadway For Reservations Call: 1-888-627-9033San Diego, CA 92101

Hotel Policy: *All room rates are subject to local taxes and resort fees. Check with the hotel directly for all cancellations and/or change policies.

*NOte: To be guaranteed the group rate, hotel reservations must be made no later than December 28, 2011. Group Rate Subject to Availability.

Not Included in Registration Fee Hotel Accommodations, Personal Transportation To/From the Conference

Dress Code Business Casual

REGISTRATION DEADLINE January 9, 2012

Cancellation Policy Refunds less a $100 administration fee through January 9, 2012. 25% of the amount paid will be refunded after January 9, 2012.

Substitutions are welcomed.

Refund requests and cancellation Maria Sclafani, IAIR Executive Directormust be submitted in writing to: 3626 East Tremont Avenue – Suite 203

Throggs Neck, NY 10465Phone: 718-892-0228 – Fax: 718-892-2544mcs@iair.org or mcs @thebeaumontgroup.com

REGISTRATION FEES

EARLY BIRD REGISTRATION Prior To/Including: November 4, 2011Member: For Profit $ 700.00Member: Not-For-Profit $ 550.00Non-Member: For Profit $1050.00Non-Member: Not-For-Profit $ 800.00Spouse/Guest $ 150.00(Includes Food and Beverage Functions)(IAIR Members are Not Eligible for Spouse/Guest Rate)

REGISTRATION Registration: November 5 - January 9, 2012Member: For Profit $ 750.00Member: Not-For-Profit $ 600.00Non-Member: For Profit $1100.00Non-Member: Not-For-Profit $ 850.00Spouse/Guest $ 150.00(Includes Food and Beverage Functions)(IAIR Members are Not Eligible for Spouse/Guest Rate)

LATE REGISTRATION Registration Fee After January 9, 2012Add $ 100.00

19

EARLY REGISTRATION – Prior to/Including November 4, 2011Member: For Profit $ 700.00 Non Member: For Profit $1050.00Member: Not-For-Profit $ 550.00 Non Member: Not-For-Profit $ 800.00

Registration: November 5 - January 9, 2012Member: For Profit $ 750.00 Non Member: For Profit $ 1100.00Member: Not-For-Profit $ 600.00 Non Member: Not-For-Profit $ 850.00**Spouse/Guest $ 175.00 **Guest (Spouse): $ 175.00

Late Registration: Registration Fee After January 9, 2012: ADD $ 100.00

Total Amount Due $ ______________

**Spouse/Guest Fee Includes Welcome Reception, Continental Breakfast, Luncheon, Thursday Reception.Please note an additional on-site administrative fee of $50 will be added to all on-site registrations.

ALL REGISTRATION FEES MUST BE RECEIVED IN ADVANCE OF THE CONFERENCE.Registration Deadline: January 9, 2012TO REGISTER ON LINE TO REGISTER BY MAIL MAIL TOVisit: www.iair.org Make Checks Payable To: IAIR IAIR, C/O The Beaumont Group, Inc.

Fed. I.D No.: 510335737 3626 East Tremont Avenue, Suite 203Mail Check and Registration Form Throggs Neck, NY 10465

Registrants Information

NAME SPOuSE/GuEST NAME

ORGANIzATION NAME

ADDRESS

CITY STATE zIP

PHONE FAx EMAIL

DIETARY RESTRICTIONS SPECIAL NEEDS

Payment by Check: Checks should be made payable to IAIR (Fed. I.D. No. 51-0335737) and mailed to: IAIR, C/O The Beaumont Group, Inc., 3626 East Tremont Avenue – Suite 203, Throggs Neck, NY 10465Payment by Credit Card Please charge my credit card: $ ______________ American Express VISA MasterCard

Account No. __________________________________ Exp. Date ____/____/____ Security Code________

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SIGNATuRE

registration form

20

Among other issues, Troubled Company ishaving problems collecting reinsurance.Troubled Company’s largest reinsurer has quitpaying claims following an audit, claiming thatTroubled Company misrepresented the businessand financial solvency of the company. Otherreinsurers are asking questions about billings andsuggesting they will not pay until “support” isprovided.

The company has a new reinsurance accountingsystem but only the last couple of months ofactivity is in the system. Consequently, TroubledCompany is behind in billing reinsurers. Severalof the treaties and accounting records are missing;others are difficult to read and could use a freshreview.

A significant amount of the business written byTroubled Company was written by agents andmost of the claims are handled by third partyadministrators. Additionally, Troubled Company’sreinsurance manager and several staff haverecently left the company. The InsuranceCommissioner is considering what action to takeand asks you to review Troubled Company’sreinsurance program and provide her withrecommendations. Because she knows thereinsurance recoverables are a large asset, she hasasked you, a reinsurance expert, to help sort this out.

After meeting with the Insurance Commissioner,you head off to Troubled Company with a goodidea of some of the things you expect to findwhen you get there. You are not worried; youhave seen it before and have a plan to get yourarms around the problem. The ultimate goals ofyour plan are to identify all of the reinsurancetreaties and salient documents and to collect thereinsurance balances and/or commute withTroubled Company’s reinsurers.

are You left High and dry by the FormerManagement?

Does Troubled Company’s scenario soundfamiliar? Although reinsurance recoverables arecommonly an insurance company’s largest asset,many companies do not have their reinsuranceprograms adequately in order. Management oftenthinks that the reinsurance contracts runthemselves and if a reinsurance intermediary isinvolved that the intermediary is taking care ofeverything. Too frequently, it is not until theauditors, state examiners or reinsurers pay a visitto the company that the problems with thereinsurance programs come to light. No matterhow much they strive to administer theirprograms, the company staff is often too involvedin their day-to-day operations to organize thereinsurance treaties and other salient documentsnecessary to understand the reinsuranceprogram. Additionally, management may nothave had a “hands on“ approach to thereinsurance area. This can lead to the inability tocollect reinsurance and may become a key factorin the failure of the company.

Given the scenario presented by the InsuranceCommissioner, you can expect to find problemswith the reinsurance program when you get toTroubled Company. Common problems include:

1. poorly organized files 2. missing treaty documents and information 3. undocumented transactions4. problems with recoverables and reporting 5. misunderstandings of how the reinsurance

contracts operate As you are reviewing Troubled Company’sreinsurance program to respond to theCommissioner, you will likely find that you aretrying to put together pieces of the program fromincomplete records. Additionally, the people who

Getting Your reinsurance act together

Organizing Reinsurance in Receiverships and Troubled Companies:

Protecting Your Largest Asset by Getting a Handle on It: A Brief Checklist

By Kathleen M. McCain, Esq., CIR-ML and Evan D. Bennett

it’s a dark and stormy night!! (really)

have the best understanding of the reinsuranceprogram may not be at the company, either becauseof personnel turnover or because the program wasmanaged more by the reinsurance intermediariesrather than the company’s own staff.

At the end of the day, what will you need to do toorganize, collect and possibly commute the re -insurance that is present? At a minimum, you willneed to obtain and, most importantly, quickly under -stand the key ingredients of the reinsurance area:

1. types, forms and characteristics of the rein-surance treaties and facultative certificates

2. claims 3. actuarial4. premium process 5. cash position

You will need to get prepared for the likelyreinsurance audits that will be taking place. You willhave to identify problems and potential issues andquantify and triage them. As a receiver, you will needto identify what are the strengths and weaknesses ofthe company’s position. As you delve further into theproject, do not be surprised if documentation iscomplex and missing.

As time may be of the essence – especially to obtainthe needed cash balance with supportingdocumentation for sending to the reinsurers, and/oranalyzing what is needed to pay the cedents onassumed business – obtaining additionalexperienced/knowledgeable personnel may beneeded. Reinsurance is a complex area. When acompany becomes “troubled” or a receivershipbecomes imminent, there is often a loss ofknowledgeable personnel and you cannot expect theremaining personnel to instantly become “experts.“

the - Not for the Faint of Heart - checklist: (Not all inclusive)

The following is a brief checklist to assist you inworking in a troubled company or receivership’sreinsurance area. However general this checklistmay be, it is not meant to be treated as a typicalchecklist whereby one merely obtains thedocuments or material and checks it off. It isspecifically designed for those brave souls whoreally want to ascertain what the reinsurance areain the company is about. In other words, you willhave to obtain, research, outline, understand andact on what is found. We hope this is a helpful toolfor it is derived from both our experiences, whichwithout going into detail is a heck of a lot!

1. Find the Contracts and Related Documents;Do You Know Where the Treaties Are?The first thing to do is gather the reinsurancefiles. There are lots of places to look todetermine what reinsurance is or was in placeat the company. You may need to look in manyplaces and talk to several people to find all thedocuments because the reinsurance treaties,certificates, addenda, correspondence andrelated documents are likely not maintained inone place. Try not to use jargon when askingcompany personnel for files because they maynot be familiar with reinsurance or reinsuranceterms. For instance, ask them for corre -spondence files related to the reinsurancecontracts rather than asking for reinsuranceplacement files.Some suggested steps for locating the rein-surance contracts and related documents are:

Interview key people regarding the rein-surance program and contracts to helpdetermine the reinsurance that is or was inplace at the company. For example:• Talk to company reinsurance personnel

about the reinsurance program.• Contact the reinsurance intermediaries.• Talk to senior management because not

all of the reinsurance contracts may bein writing or in neat notebooks orcomputer files.

• Talk to the company lawyers becausethey may have been involved indrafting the contracts or other keydocuments.

• Talk to the claims personnel becausethey often provide notice of the claimsto the reinsurers.

• Talk to the actuaries about theirunderstanding of the reinsuranceprogram.

Review company filings, audits andreports to assist in understanding thereinsurance in place. For example:• Review the company’s Annual

Statement including the Notes.• Obtain Schedule F and Schedule F

workpapers and review for reinsuranceceded and assumed.

• Review the company’s balance sheet forreinsurance recoverables, fundsdeposited, funds held and provision forreinsurance.

21

Getting Your reinsurance act together (continued)

• Review the Insurance Departmentfinancial examination reports andmarket conduct reports.

• Review the external audit reportsand/or internal control reviews by thecompany’s outside auditors.

• Review the company’s internal auditreports, if any exist.

• Review reinsurance layoff sheets.

Review the company’s reinsurance filesand related documents to assist inunderstanding the reinsurance that is orwas in place. For example:• Gather the reinsurance files; this may

include contracts, addenda, endorse-ments, correspondence, invoices, billings,notices, accounting records, claims filesand intermediary records.

• Review correspondence/treaty placementinformation with reinsurers andintermediaries.

• Inventory all treaties (ceded and as-sumed) and addenda and endorsement.

• Read the reinsurance contracts andprepare synopses of each. Possibly useExhibit C and D from the NAICFinancial Examiner’s Handbook @2009

1

to assist you in the prepara-tion ofreinsurance and reinsurance contractreview templates.

2. Review and Understand the ContractsOnce the files have been collected, it isimportant to review and understand thereinsurance contracts and how the companydealt with them. An understanding of thecontracts and the company’s course of dealingwith them will help identify potential issuesand lessen the chances of later surprises. Donot be shocked if your understanding of howthe contracts should operate or be accountedfor is different from the way the company didit. Also be prepared to find that certaincontract terms may be ambiguous or subject todifferent interpretations by the company andthe reinsurer. Also, there may be things thatthe company did in the normal course ofdealing with the contracts that are notincluded in the contract terms. Preparingdiagrams or pictorial representations of thereinsurance contracts and the lines of businessreinsured can help determine if there are any

gaps in the reinsurance and whether there aremissing contracts and related documents.Failure to identify reinsured policies can resultin non collection of reinsurance recoverables.

Suggested Steps for reviewing the contracts:

Write up a narrative illustrating yourunderstanding of the entire program.Have a peer review the narrative to make sureit makes sense – there can be differinginterpretations of reinsurance terms.Prepare pictorial representations of the reinsur-ance structure – this will help to determine if thereare/were any gaps in reinsurance.Review each contract to identify any featuresthat may significantly affect the collectabilityof reinsurance – for instance, look for cut-throughs or unauthorized reinsurance orfronting arrangements.Determine whether there are any loss portfoliotransfers, assumption agreements or otherfinancial reinsurance arrangements.Do not forget to ask about intercompanyreinsurance arrangements.

items to include in the Narrative of eachreinsurance contract:

Determine the lines of business reinsured bythe contracts.Review the company retention andreinsurance limit.List the reinsurers and their participations.Ascertain whether the contracts have beenexecuted by the reinsurers.Review the contract exclusions. Determine if the contracts include arbitrationand insolvency clauses.Review the contract termination procedures.Ascertain whether there are any commutationclauses, sunset clauses and the dates forreporting per the clauses.Determine whether the company has madeany reports in accordance with the sunset andcommutation provisions.Determine whether the contract is lossesoccurring or risks attaching.Determine whether there are any specialsettlement procedures.Determine whether there are any noticerequirements to reinsurers and whether thecompany has prepared the notices. For example,

22

Getting Your reinsurance act together (continued)

review the notices of large losses that aregenerally prepared by claims personnel. Failureto provide required notice to reinsurers mayresult in the inability to collect reinsurance.Determine if there is any MGA involvement.Determine if there are any clauses related tocommissions, either ceding or contingent.Ascertain how the premium is calculated andif the contract is experience rated.Determine whether there are minimumpremium or deposit premium requirements

3. Get a Handle on the CashA key area of concern at any troubled company iscash. In reviewing the reinsurance program, it isessential to understand the reinsurance cash flow,the reinsurance collateral requirements and thereinsurance recoverable collection procedures.Generally, you need to know what balances areowed, who has the cash or collateral and how toget it. Some steps to achieve this goal are:

Find the collateral held – cash, trust funds,funds held and determine who is holdingthe funds.Review the collateral agreements anddetermine the responsibilities and oblig -ations of the company and what the re -quirements to use collateral are.Reconcile cash with bank statements –determine the cash in hand. Ascertain if the intermediary is holdingfunds.Locate original letters of credit anddetermine if they are evergreen.Determine if the collateral is sufficient.Understand the collection procedures –perform a walkthrough. Determine if there are any cash callprovisions in the reinsurance contracts.Determine whether the companyreconciles with the reinsurance inter -mediaries and how frequently. Determine whether the intermediary isallowed to offset amounts owed to the rein-surers with balances owed to the company.Determine if there are any amounts indispute.

4. Review and Understand the Business Subjectto the ContractsAnother important step in getting your armsaround Troubled Company’s reinsurance prog-ram is to understand the company’s business

and what business is subject to the reinsurancecontracts. You will likely need to interviewseveral people in different departments at thecompany and may need to interview outsideconsultants and other third parties. Personnel tointerview and steps to gain an understanding ofthe business include:

Interview operational/underwriting per-sonnel about their involvement in theplacement process.Interview IT personnel to ascertain how thereinsurance is/was set up on any system.Interview accounting personnel and ascertainhow the accounting system handlesreinsurance; perform a limited walkthroughof the system using one or two quarters ofreinsurance data (see below).Interview claims personnel regardingclaims issues and problem claims,underlying claims litigation, coverageissues and claims systems. Interview actuaries to understand reservesand reserving philosophy. Interview legal, both in house counsel andoutside counsel, regarding problem claimsand claims litigation, problem books ofbusiness and disputes with reinsurers. Alsoask about prior commutations (within thepreference period) and whether there arecontinuing obligations of the companypursuant to the commutations. Review reinsurer audit reports if any existand were given to the company. Review internal audit reports related to thebusiness written and company operations.

5. Review and Understand the Reporting andAccounting for the ReinsuranceIt is also essential to understand the premiumand other reporting requirements of the contractsand how the company accounts and reports tothe reinsurers and/or the intermediaries. Oftenwhen a company is in trouble, reinsurers quitpaying or slow pay and may begin demandingsupport for billings where they did not do sobefore the company began having financialproblems. One needs to understand how thereinsurance flows and evaluate the differentsystems used by the company. This will assist indetermining whether the reinsurance trans-actions are recorded timely and are properlyvalued, classified and correctly recorded.

23

Getting Your reinsurance act together (continued)

Suggested areas to review include:Gain an understanding of the policy/premium processing flow. Perform walkthroughs of the reinsurancefunctions – these are essential to understandingthe reinsurance process and are key in areceivership or troubled company.Determine whether there are policy andpremium registers or bordereaux.Review the accounting and reportingprocesses and procedures.Determine what computer systems, if any, thecompany uses for accounting and reporting; donot be surprised to find that reports and theaccounting are maintained in spreadsheets.Ascertain how the losses subject to the treatyare identified. Determine whether loss bordereaux areprepared and/or claim reports prepared inconnection with the billings to reinsurers.Determine how offsets are identified and ifthey are applied in the billings to reinsurers.Obtain support for the ceded business prior tosending out requests for payment to thereinsurers.Review collection procedures currently in useand make modifications if necessary.Get in touch with your intermediaries andother third parties.Establish your own relationship with theintermediaries.If assuming the reinsurance, contact the cedentand/or reinsurance intermediary to confirmterms/status. Perform periodic reconciliations with the inter-mediaries to ascertain that what was sent to themis correctly and timely passed to the reinsurer(s).

6. Monitor the Reinsurers’ Status on a PeriodicBasisFinally, because the reinsurance recoverable maybe the company’s largest asset, it is important toknow who the company’s reinsurers are and whattheir current financial condition is. While there isno guarantee that the reinsurers will remainsolvent and willing and able to pay the company’sclaims, you can improve your odds of collectionby gaining a thorough understanding of thereinsurers and potential issues that may impactpayment of claims or commutation.Suggested steps for the review of thecompany’s reinsurers are:

Identify all reinsurers and whether therehave been corporate/name changes.Determine if there are any unauthorizedreinsurers. Identify any fronting arrangements.Identify the intermediaries involved witheach reinsurer.Determine the collateral requirements forunauthorized reinsurers.Review the financial condition of reinsurers.Determine whether there are anyreinsurers that are slow in paying claims ornot paying claims.

conclusion

Now that the reinsurance area is better organizedand your plan addresses the steps to collect thereinsurance recoverables, commute with thereinsurers, and work with any cedents from whomyou have assumed business, you should be able tosleep better at night. Your company might betroubled but its reinsurance program should bebetter functioning. Now that you know andunderstand Troubled Company’s reinsuranceprogram, you can begin to build an effectivereinsurance administration program that willeither serve the company, if it is to continue inexistence, or prepare the receiver to deal withpotential reinsurance problems before they arise.

© 2011 by Kathleen M. McCain and Evan D. Bennett

1 NAIC © 1976-2009 National Association of Insurance Commissioners. All rightsreserved.

24

Getting Your reinsurance act together (continued)

Contact Evan Bennett at (773) 230-0554 / (312) 980-3353EBennett@blackmankallick.com.

Contact Kathleen McCain at (213) 509-7636 kmmccain@earthlink.net

25

cONGratulatiONS tO tHe

FOllOWiNG iNdiVidualS WHO HaVe

SucceSSFullY BeeN aWarded

iair’s PreStiGiOuS deSiGNatiONS.

darwin k. Johnson, air,cFe,rPa,cBM,cir-P&cDKJ Group, Inc.

Gordon i. Macrae, ca,cFe,cir-P&cZolfo Cooper(Cayman) Ltd.

WE APPLAuD YOuR ACCOMPLISHMENTS

26If you have recently visited the IAIR Web Site(www.iair.org), you have seen the big changesresulting from our updating project. We think theseefforts will make the site much more useful as aresource and easier for both IAIR Members andnon-Members to use.

As an example of the functionality, note how theIAIR Meeting Schedule for our Novembermeetings can be downloaded right from the upperleft side of the Home Page. And you can registerfor meetings from a Home Page link right underthe schedule link! Even better, though, theregistration page features buttons that will let youdownload the individual IAIR events as scheduleditems on your Outlook Calendar.

Now the “hard part”! You joined IAIR to get yourname and qualifications as an insurance insolvencypractitioner publicly listed for IAIR Members andothers visiting the site to see. But if your profile isnot up-to-date, you will not get the full benefit ofyour IAIR Membership. Potential clients andemployers will not be able to find you if yourcontact information or your new qualifications aremissing. Make sure your profile is current by

add your thumbprint!

We Need Your Help!

the iair Web Site is Being updated!

updating it now on the IAIR Web Site. It’s so easyto do! Just do the following:

● Log in by hitting the “Member Login” buttonon the top right side of the home page. (YourUsername and Password is contained on thebottom of each email you receive from ourIAIR Administrator, Maria Sclafani).

● Look at the upper menu ribbon across thetop of the page and click on “MemberHome” to get the drop-down menu.

● Click on “Change Profile” on the drop-downmenu, and your complete profile will appear.At this point, the profile may be updated,supplemented, or corrected.

● Make sure you click on the button “UpdateProfile” when your changes are complete.

While on the Site, look around at some of ournew features and content. And there will be moreto come!

Alan Gamse, Esq.Chair, IAIR Operations Committee

27

iair technical development Series 2: Reinsurance Photo GalleryJune 10-11, 2011MGM Grand Hotel, las Vegas, NV

PreSideNtOHiO iNSuraNce GuaraNtY aSSOciatiON

The Ohio Insurance Guaranty Association (OIGA) is seeking a wellqualified candidate to fill the position of president. The OIGA is a non-profit, insurance industry supported organization which handles and paysthe insurance claims of Ohio policyholders if their insurer becomesinsolvent. It also provides similar services under contract for two otherguaranty associations, including the Ohio Life & Health InsuranceGuaranty Association.

This is the chief executive officer position, reporting to the Board ofDirectors. The president is responsible for supervising staff in carrying outthe duties of the association and maintaining adequate professionalstaffing during times of varying work activity levels. Ability to effectivelycoordinate activities with other state guaranty funds through nationalinsurance guaranty organizations and with insurance liquidators isessential. Some travel required. Offices are located in Columbus, OH.

Candidate must possess substantial insurance and management experiencein an insurance company or related setting such as regulatory, legal orconsulting. Desired, but not required, is a background in law or accountingand/or substantial supervisory claims experience in property casualty andlife & health claims. Prior experience in an insurance guaranty fund orinsurance liquidation setting is a plus.

Salary and benefits package is comparable to local insurance industrystandards for positions of similar responsibility.

Send resumes to: OIGA, 1840 Mackenzie Dr, Columbus, OH, 43220.

28

JOB OPENING

29

The IAIR Sponsor Program offers three levels of participation:

Each level of participation includes the value-added benefits described below reducing the effectivecost of the sponsorship.

• Credit against IAIR dues for up to two representatives ofSponsor (value up to $750).

• Credit against IAIR Workshop registration fees for up to threerepresentatives of Sponsor (value up to $1,650).

• One representative of Sponsor to serve on IAIR Board ofAdvisors, consisting of past IAIR presidents and IAIRPlatinum Sponsors.

• IAIR will post sponsors’ logos at the bottom of the IAIRHome Page in a “Thank You to Our Sponsors” area.Additionally, a tab at the top of the IAIR Home Page will be labeled “IAIR Sponsors” and will link to a page wheresponsors will be grouped by category as Platinum, Gold or Silver. That page will display for each sponsor thefollowing: the sponsor’s logo, its name or trade name, a brief

description of the services it provides and a link to a pagedesignated by the sponsor on the sponsor’s web site.

• Speaker role annually for a representative of the Sponsor (orits designee) at one of the IAIR Issues Forums or an IAIRWorkshop, or an article in the Receiver, IAIR to have finalapproval on speaker/author and topic.

• Two full page ads each year in Receiver magazine (currentvalue $1100).

• Space on a materials table for Sponsor at all IAIR events.• Recognition of Sponsor on the IAIR website, in each issue ofthe Receiver, and at all IAIR events.

• These value-added benefits reduce the effective cost to theSponsor by 47% to $4,000.

• Credit against IAIR dues for one representative of Sponsor(value up to $375).

• Credit against IAIR Workshop registration fee for onerepresentative of Sponsor (value up to $550).

• IAIR will post sponsors’ logos at the bottom of the IAIRHome Page in a “Thank You to Our Sponsors” area.Additionally, a tab at the top of the IAIR Home Page will be labeled “IAIR Sponsors” and will link to a page wheresponsors will be grouped by category as Platinum, Gold orSilver. That page will display for each sponsor the following:the sponsor’s logo, its name or trade name, a brief

description of the services it provides and a link to a pagedesignated by the sponsor on the sponsor’s web site.

• One full page ad each year in Receiver magazine (currentvalue $550).

• Space on a materials table for Sponsor at all IAIR events. • Recognition of Sponsor on the IAIR website, in each issue ofthe Receiver, and at all IAIR events.

• These value-added benefits reduce the effective cost to theSponsor by 37% to $2,525.

• Credit against IAIR dues for one representative of theSponsor (value up to $375).

• A 10% discount on IAIR Workshop registration fee for onerepresentative of the Sponsor (value of at least $55).

• IAIR will post sponsors’ logos at the bottom of the IAIRHome Page in a “Thank You to Our Sponsors” area.Additionally, a tab at the top of the IAIR Home Page will be labeled “IAIR Sponsors” and will link to a page wheresponsors will be grouped by category as Platinum, Gold or

Silver. That page will display for each sponsor the following:the sponsor’s logo, its name or trade name, a briefdescription of the services it provides and a link to a pagedesignated by the sponsor on the sponsor’s web site.

• Space on a materials table for Sponsor at all IAIR events. • Recognition of Sponsor on the IAIR website, in each issue ofthe Receiver, and at all IAIR events.

• These value-added benefits reduce the effective cost to theSponsor by 29% to $1,070.

We invite you to join iair's corporate Sponsor Family

GOLDSPONSOR

SILVERSPONSOR

PLATINUMSPONSOR $7,500 annually

$4,000 annually

$1,500 annually

iair 2011 committee chairs

30

article one heading to go here

by Joe Smith

Executive CommitteePatrick Cantilo, Esq., CIR-ML

Strategic Planning CommitteeFrancine L. Semaya, Esq.

Operations CommitteeAlan Gamse, Esq.

Accreditation & EthicsJoseph DeVito, CPA, AIRJim Gordon, CIR-PC

Designation Standards(Subcommittee of A&E)

Daniel Watkins, CIR-ML

Communications CommitteePhillip Curley, Esq.

Marketing Committee(Subcommittee of Communications)

Phillip Curley, Esq.Joseph McDavitt

Newsletter Committee(Subcommittee of Communications)

Michelle Avery, CPA

Publications Committee(Subcommittee of Communications)

Dennis LaGory, Esq.

External Relations CommitteeMary Cannon Veed, Esq., AIRDouglas Hertlein

Guaranty Fund Committee(Subcommittee of External Relations)

Patrick Cantilo, Esq., CIR-MLWayne Wilson

Finance CommitteeJoseph DeVito, CPA, AIR

Governance CommitteeDaniel A. Orth, III

Audit Committee(Subcommittee of Governance)

Evan Bennett

By Laws Committee(Subcommittee of Governance)

Harold Howich, CIR-ML

Elections Committee(Subcommittee of Governance)

Daniel A. Orth, III

Member Services CommitteeDouglas Hartz, Esq., CIR-MLDonna Wison

Education Committee(Subcommittee of Member Services)Douglas Hartz, Esq., CIR-MLJames Kennedy, Esq.

International Committee(Subcommittee of Member Services)

Vivien Tyrell, Esq.

Membership Committee(Subcommittee of Member Services)

Kerby Baden Donna Wilson

www.iair.org

If you are interested in participating as an IAIR sponsor, advertiser or wish to receiveinformation about IAIR membership or committee participation, please contact Maria Sclafani, Executive Director at our administrative office: 718-892-0228 or via emailat mcs@iair.org.

NAIC Fall Meeting

November

3-62011

Gaylord NationalHotel and Convention

CenterWashington, DC

2012 InsolvencyWorkshop

January

18-202012

The Westin San Diego 400 West Broadway

San Diego, CA 92101

NAIC SpringMeeting

March

3-62012 Hilton

New Orleans New Orleans, LA

NAIC SummerMeeting

August

11-142012 Atlanta

Marriott Marquis Atlanta, GA

NAIC Fall Meeting

Nov/Dec

29-22012

Gaylord NationalHotel and Convention

Center Washington, DC