FEATURED ARTICLES

1 IAIR’s President’s MessageBy Patrick Cantilo

4 Board Talk: Doug HartzBy Michelle Avery

7 Board UpdateBy Patrick Cantilo

8 View from WashingtonBy Charlie Richardson

9 Assuring Readiness: New UDS Data MapperStreamlines DataConversions for ReceiversBy Andrew Holladay

12 Introducing IAIR’s NewestMembers

14 August 2010 IAIR IssuesForum Recap By James Kennedy

15 Move over Sisyphus, HereComes the Liquidator By Kathleen McCain

19 The Perfect ReceiverBy Patrick Cantilo

20 Press Release21 IAIR Texas Training

Conference

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

To our great astonishment, the now-not-so-newadministration has not yet managed to turn the U.S.economy into a job manufacturing engine. Across thepond, the enlightened brains of the European Union arehaving no greater success with that continent’scollection of divergent and assertive financial systems.Where then, you may well ask, is the rash of insurerfailures with which we were threatened by the gods?The short answer is, behind that old shoe box on the topshelf of your hall closet, next to the space-saver zip-lockbag of old leisure suits and under the stack of collector’sedition Partridge Family LPs still in their shrink wrap.O.K. Not really. The truth is that a combination offactors has served to prevent the number of failures we

might have expected in another age.

First, credit must be given where it is due. The unrelenting efforts of stateinsurance regulators in the last two decades to modernize and enhance financialregulation have borne fruit. The implementation of risk-based capital, greaterfocus on regulation of insurer investments, and improved early warning systems,among other features, have combined to facilitate preventive measures while theystill can help. Second, the calamitous events of the late eighties and early ninetiesof that century not so long ago have sensitized industry captains to the need tohave more astute investment policies and better asset and liability matching.Third, and no less important, the ever more vigorous threat of federal regulationof the industry has induced state officials to devote titanic efforts to theimplementation of non-liquidation remedies for troubled companies. Not the leastof these is an array of permitted practices and other forbearance that has beendeployed with the intent of providing insurers at risk of failure time to weatherthe storm while the economy improves. And while the broader economy may notlook much improved on Main Street, the reality is that the scariest assets held byinsurers two years ago have recovered substantial value, enabling manycompanies to step back from the brink of disaster.

Patrick Cantilo

(continued on page 3)

Winter 2011 Volume 20, Number 1

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IAIR’s President’s Message (Continued)All that having been noted, there undoubtedlyremain a number of companies around the countryand the globe for whom the depth and breadth ofproblems may ultimately prove insurmountable.Many of these will be acquired or merged intobetter-heeled competitors. A few may be run-offsuccessfully. Others may be placed in innovativerehabilitation schemes the success of which willnot be known for some time. And a few will almostcertainly have to be placed in receivership andeven liquidation. Indeed, there have already beena few in this category, though not so many as to beextraordinary in number.

How does this affect IAIR? Of course, our corehistorical competence, the rehabilitation andliquidation of insurers in receivership, is less indemand than might have been expected. However,and this is the key point, for all the alternatives inuse to avoid formal proceedings, very much thesame skill sets are necessary as for our mission inyears past. It is in recognition of this important factthat your association has devoted itself tobroadening its scope. Recent changes in ourmission statement and the breadth of ourprograms should put us in good stead to enableour members to devote their unique andinvaluable talents to the resolution of thechallenges faced by the industry. What remains,perhaps most obviously, is to assure that stateofficials and others in this space understand theinvaluable assistance on which they can countfrom our members when facing the dilemma of aweakened insurer. Our current initiatives strive toaddress that need. We are becoming moreinvolved in the affairs of the NAIC and are re-invigorating our state training program. But weare also reaching out to department staff to assurethey understand our value and availability. Mostvisibly, our educational programs now incorporatepresentations on topics of perceptible applicability tothese alternative approaches to troubled insurers.

We have not, however, eschewed our traditionalroles. In early November, we launched theinaugural program in our new TechnicalDevelopment Series. The series was aimed atenhancing fundamental skills of insolvencypractitioners. This first program (at the Las VegasParis Hotel, November 5-6) was devoted to topicsin asset management and recovery. But it is worthemphasizing that much of what was addressed isof at least equal significance in the context ofalternative schemes for the management of

troubled insurers.

On other fronts, substantial efforts continue to bedevoted to the improvement of our web site, inmost respects our “public face.” Our resources aremuch more limited than our ambition, but withpatience and perseverance, this work is producingdemonstrable results. For this, particular thanks goto Alan Gamse who has been unrelenting forseveral years in his zeal to move us forward.

I am also very pleased to note that we have added,and are continuing to add, a number of new andhighly skilled members to our little group. Pleaseextend to them a warm welcome when you meetthem. Our Member Services Committee, ledskillfully by my friend Paula Keyes, continues itsefforts to add to our roles while enhancing memberbenefits. Please do not be shy about volunteering tohelp with these important tasks. As you have nodoubt observed, a new election for directors is uponus due to the unusual schedule of NAIC meetingsthis year. Resident alchemists Hank Sivley and DanOrth, among others, have worked hard to make thisboth a more transparent and a blind system. Nextthey will turn deferred tax assets into gold. By thetime you read this, indeed, new members may havebeen added to our Board as others complete theirservice. To those who leave after years of selflessdevotion to our common good, my heartfelt thanks.

On many fronts my crystal ball remains unreliable.Among these is whether I will remain yourPresident for next year. Should that not be the case,please permit me to close by thanking you for theopportunity to add my two bits to the direction ofthis extraordinary organization. Thanks especiallyto Maria Sclafani who heroically suffered my abusewhile laboring mightily to help us meet theinnumerable tests we face each day at IAIR. If Ireturn, rest assured I will continue devoting myenergies to the future success of this exceptionalgroup. In either case, I apologize to those I mayhave offended and thank sincerely those who havebeen so generous in their support and assistance. Iam now old enough to know that only one far moreskilled than your humble servant can makematerial progress without ruffling feathers. I optedto move forward rather than leave the plumageintact. You will judge whether this was a good call.

See you around the halls of IAIR.

Patrick

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He has a visiblepresence, always man -ag ing to be in 10 places at once, or soit seems. Doug canoften be found in the halls of NAICmeetings, greeting col -leagues from everycorner of the receiver -ship com munity andskillfully fostering thefree exchange ofdiverse views. I re -

cently took the opportunity to hear Doug’sperspective on the current state of the industry,as well as collect some lesser known tidbitsabout Doug’s personality.

Doug’s participation in IAIR dates back to theinaugural board meeting in Houston, Texas, at what was formerly known as the Society ofInsurance Receivers. Doug attended the 1991meeting with other founding members: MichaelMiron, Robert Deck, Ron Rosen and KarenWeldin Stewart. Doug joined the organizationbecause of its reach into the receivershipcommunity, the industry in which he had beenworking since 1987. He became an IAIR boardmember in 1993, subsequently was elected vicepresident for two years and served as presidentin 1997. Doug has remained active in theorganization over the years and recentlyreturned to the board for a term that expires at the conclusion of 2011. Upon completion of histime on the Board, Doug plans to continueadding value to IAIR through committeeleadership and participation.

During our conversation, Doug realized that in 16+ years of participation with IAIR he haslikely spent time on every committee. Hecurrently dedicates his time to leading the IAIReducation committee, a committee he co-chairs

with Texas Department representative, James Kennedy. Doug previously chaired thepublication committee and continues tocontribute to IAIR publications. He serves on thefinance committee and as the Board’s secondvice president, is currently a member of theexecutive committee. I have no doubtoverlooked a few, but as you can see, Doug’sinvolvement sets a high standard of mem bershipinvolvement and will hopefully encourage moremembers to get involved!

As we approach another annual meeting andboard election, Doug raises a familiar theme aswhat he believes is the largest challenge facingthe organization – changing direction withoutshifting objectives. Doug believes, as do manyothers, that the organization must shift, and“focus on conveying to our clients – thedepartment of insurance personnel, theexaminers, the decision makers – that the skillset of our people, the people that have workedon receiverships, are very useful to assistcompanies in evaluation of troubled companies,and to assist in strategies and planning to helpkeep companies out of receivership, especially aswe move to risk focused exams.” Withoutquestion, “this is the biggest issue in IAIR. If wedon’t shift, we will go the way of the buggiewhip makers.”

Doug was born in Boulder, Colorado and didn’tstray too far from home for his education. Heearned an undergraduate degree from theUniversity of Colorado in Denver where hestudied accounting. Doug went on to earn anMBA degree while juggling a full time job for theDepartment of Defense and attending lawschool at the University of Denver. Aftergraduation, Doug parted ways with the DoDand started at a bankruptcy firm in Denver withdreams of setting up a tax practice focused oninsurance companies – oh, did I mention thatDoug was also a CPA? Doug quickly identified

Board Talk: Doug HartzBy Michelle Avery

Doug Hartz

that wanted to spend his career in the insuranceindustry, in particular the challenging andrewarding area of receiverships.

Doug moved to Hugh, Alexander & Associatesuntil 1994 at which time he established anindependent consultancy using his diverse skillsand expertise in regulatory matters. Dougsubsequently held positions at the MissouriDepartment of Insurance and the NAIC. Dougfurther broadened his horizons while at theNAIC, spending time on issues related tosurplus lines, the international insurancedepartment, and the state accreditationprogram, in addition to receivership issues.

From there, Doug moved to Connecticut to workwith Hal Horwich at the Bingham McCutchenlaw firm. Doug was drawn to Bingham inparticular because of Hal’s focus on insurancecompany restructuring. Doug recently movedback to Kansas City to be closer to family andnow owns his own consulting company,Insurance Regulatory Consulting Group. Hedescribes the group’s approach as “a group ofone that will associate with anyone who can getthings done.” He has set out to take advantage ofthe wealth of resources in this industry by wayof assembling teams of professionals that workindependently but each bring unique resourcesto the table.

Doug cites his current engagement with CapitalAssurance Risk Retention Group, in which hehas successfully leveraged very few assets into amuch larger claim payment, as his proudestprofessional achievement. He has done so usinga team approach that includes Doug Hertlin(Ohio, local counsel) and the South CarolinaDeptartment of Insurance personnel. The teamhas achieved great results by implementing a rehabilitation plan designed to produce asustainable runoff while maximizing value to consumers using limited resources.

Doug currently lives with his wife of 30 years in Blue Spring, Missouri - a city not far from theKansas City metropolitan area. He is the proudfather of three sons, Nick, Chase and Montana,and two grandchildren, Claire and Mitchell.

In addition to learning quite a bit about Doug’scommitment to his colleagues and vision for thefuture, I learned a few other fun facts worthsharing:

Q: What is the last fictional book you readthat you would recommend to others?Doug’s initial reaction was to talkenthusiastically about the non-fiction workhe highly recommends, The Black Swan: TheImpact of the Highly Improbable by NassimNicholas Taleb. The work focuses onimprobable events, “black swans,” and therisks associated with those events. The bookpresents the reality that anything canhappen, and probably will an all too familiarstory to anyone working in the receivershipcommunity.Doug went on to describe J.R.R. Tolkien’slesser-known fictional treasures. Dougraved about The Lord of the Rings Trilogy - butyou would have to be a hobbit living in theancient world of Middle-earth to considerthat a lesser-known work. Doug moreeagerly conveys enthusiasm for Tolkien’sother works that deserve attention,including The Silmarillion.

Q: If you could have dinner with any threeother people in the world, dead or alive,fictional or non-fictional, who would youchoose? Why?Often the people identified in response tothis question are unrelated and wouldtherefore make for some awkward dinnerconversation. Doug however, picked quite atrio: Bill Maher, Jesus and Muhammad. Hewas most interested in listening to thediscussion they would have with oneanother, expecting the conversation to turnto humanity. Of most interest would be thesefigures’ perspectives on how society andindividuals have developed over time.He joked he would have to allow a fewminutes for the guests to attempt convertingeach other at the onset of the meal, perhapsover light hors d’oeuvres.

Board Talk (Continued)

To submit an article, please contact Maria Sclafani at mcs@iair.org. The deadline for the Spring 2011 issue is February 20, 2011.

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Visit the IAIR website at

www.iair.org for updates

and current Association

information and new

on-line enhancements..IAIR was founded in 1991 to provide anassociation to individuals involved withinsurance receiverships in order to receiveeducation, promote information exchange,and enhance the standards followed bythose who work in this position.

Q: What is your favorite sport? Team?Doug catches up on his favorite sport,football, on his couch on Sunday afternoons.Having lived in a few different places, Dougenjoys rooting for his “home” teams whichinclude Kansas City and Denver. He enjoys agood game and is happy when either teamcomes away with a “W.”

Q: What is your favorite leisure activity?There is no rest for the weary – Doug’sinterests aren’t particularly leisurely. Frombike riding to yoga, being outside, reading, orplaying an occasional computer game, Dougmanages to stay very active. Kansas City’sbeautiful fall weather – with temperatures inthe high 60s to low 70s – entices himoutdoors. Doug describes the season as apriceless time when he focuses on balancingwork and recreation.

Q: Where is the last placed you vacationed?The last vacation for the Hartz clan was to Grand Junction, Colorado for a familyreunion during July of this year. He describedvisiting Grand Junction as a childhood dream which he finally realized by takingadvantage of the national monument, analmost mini grand canyon, beautiful vistas,and amazing scenery that were in his words,“breathtaking!”

Q: What is your favorite NAIC/IAIRconference location?Without hesitation, Doug declares, “NewYork. What’s not to love?”He follows with a shameless plug for the 2011IAIR Insolvency Workshop by remarking thatNew Orleans is an interesting place to visit tosee first hand the city’s ability to survive andovercome adversity time and again. TakeDoug’s advice and book your trip now to theupcoming Insolvency Workshop scheduledfor January 19-21, 2011 at the Omni RoyalHotel.

Q: Give us one piece of information that mostpeople don’t know about you? Coming somewhat as a surprise, when Dougfirst graduated from high school it was hisintention to go into the performing arts –acting and piano playing. Shortly into suchpursuits he found himself drawn to businessand quickly gravitated to accounting after“something clicked.”

Board Talk (Continued)

Michelle 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.

trivial pursuits (thinking of making a board gameby that name), like world peace, saving theeconomy, and earning a paycheck (the last fastbecoming the more difficult). You will be pleased tolearn that the Board has largely contented itself withimplementing some of the many measuresdescribed in earlier editions of this amazing journal.That is to say, we could not come up with a bunchof crazy new ideas. With the new committeestructure firmly in place, we did however move onto the key tasks of developing a secret handshakeand building a new fort. However, I am not allowedto say anything more about that. We have alsotaken on ranks and are considering a new uniform.I like Mork’s but others prefer Devo’s.

Under the watchful eyes of Rear Admirals DeVitoand Gordon, we continue the very importantprocess of accrediting those of our members whohave demonstrated the requisite experience andexpertise. All who are qualified should embrace thisunique indication of sophistication and accomplish -ment by applying for accreditation. Under the firmhand of Oberst Curley, the Communications Com -mittee continues its mission of producing qualityIAIR publications while enhancing our marketingefforts. With a new program of “CorporateSponsors” in place, the challenge now is to recruitorganizations to support us financially in thatcapacity. Your contributions in that endeavor will besincerely appreciated. Stabshauptmanns Avery andLaGory would also be grateful for quality contri -butions for our newsletter and other publications.Comandantes Hertlein and Veed continue theirskilled leadership of our External Relations initia -tives, emphasizing affiliation with sister organiza -tions. Rear Admiral DeVito also continues to devotehis boundless energy to maintaining us on a firmfinancial footing during this difficult economicperiod. Please send him money! Lots of it! Soon!

With the insightful guidance of Chef de BataillonTyrell, the International Committee put on a verynice program in London addressing a number ofcurrent hot topics. I was fortunate to be able to attend

and strongly recommend that other U.S. members dothe same with future programs. They are well worththe effort. Thanks to the energetic efforts of PrimoMaresciallo Luogotenente Cass, we have hadexcellent issues forums for our first two nationalprograms, and the last promises to be at least asgood. Thanks Mike! Other Committee activities havebeen mentioned in the President’s message.

At the risk of being monotonous, I take thisopportunity to reiterate our standing invitation forall members to become actively involved in theorganization’s work through our committees. It isvery rewarding and can lead to great things. At aminimum you will develop or strengthen relation -ships that will be invaluable for years to come.

Looking forward, the Board will be focusing on the re-invigorated state training program.Exceptional seminars were provided to theWisconsin and Texas insurance departments forboth of which we have received many kudos.Sincere thanks to all who worked so hard to makethose successful, especially Evan Bennett, MarkFemal, Doug Hartz, and James Kennedy. We areworking on presentations to departments in otherstates, but I won’t divulge more until they are set.

The Board is also focusing on the next InsolvencyWorkshop, set for January 19, 2011, at the OmniRoyal Hotel in the Big Easy (New Orleans for thoseof you who have led a sheltered life). Largely bydefault, Doug Hartz and the author are taking thelead in organizing this important program. Likethe November Technical Development Seriesprogram in Las Vegas, the Workshop willemphasize net working opportunities and aud -ience participation to complement exceptionalsubstantive presenta tions. You could certainlymiss this program. But why on earth would you?

The Board respectfully invites every member toassist in recruiting new members and sponsors.The more we grow in both categories, the more wewill be able to do for the membership.

See you in Orlando and Austin.

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Board UpdateBy Patrick Cantilo

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significant financial companies whose impendingfailure could destabilize the economy. In mostcases, the FDIC and the Fed would recommend tothe Treasury Secretary that the company on thebrink be liquidated. Where the systemicallysignificant financial company is an insurer or its largest subsidiary is an insurer, therecommendation would be made by the Fed andthe newly created Federal Insurance Office(“FIO”).

Insurance companies will continue to be resolvedas they are now, even systemically significantones, assuming state regulators act timely. The state guaranty systems will also remain asthey are.

All in all, insurance receivers and the guarantyassociations fare awfully well under the new law,at least for now.

Keep in mind that the legislation requires the newFIO within Treasury to conduct a study on how toimprove and modernize insurance regulation, theresults of which will be reported to Congress nolater than January 2012. As part of the study, theFIO is charged with examining the potentialconsequences of subjecting insurance companiesto a federal resolution authority. The FIO isspecifically tasked with considering the effect ofany federal resolution authority on the operationof state insurance guaranty systems, includingthe loss of guaranty coverage if an insurancecompany is subject to a federal resolutionauthority. So Dodd-Frank asks big questions andpotentially opens the door for big changes.

While FIO is starting out small and has no realmoney yet, it could be an inflatable federal platformfor the future.

Recent Events

The studies of insurance by the FIO are theobvious starting point. Even now, Treasuryleaders are standing up and planning the staffingof FIO. For those of you curious about who the

Director will be and what he or she is likely to be interested in, go to the FIO Director job posting made in late September. Among thetechnical qualifications are: “extensive know -ledge of insurance company solvency laws andregulations: how insurance companies areconserved, rehabilitated, and liquidated; andknowledge of the State-based guarantee system.”

The new Financial Stability Oversight Counselheld its inaugural meeting on October 1, withMissouri Insurance Director John Huff part -icipating as a member.

The Administration’s keen interest in lifetimeincome products as a retirement vehicle has putthe spotlight on annuity products and guarantyassociation coverage for them. The DOL andTreasury held a joint hearing on September 14and 15, and Senator Kohl of the Senate AgingCommittee has asked the GAO to examine theguaranty system's track record when it comes to annuities.

The FDIC is boning up on insurance as it crafts itsregulations, and we need to make sure we don’tget boned in the process.

Chairman Barney Frank of the House FinancialServices Committee has made it clear on multipleoccasions that the federal charter debate, optionalor otherwise, will have its day in 2011, eventhough industry support for federal charteringhas slipped somewhat.

View from WashingtonBy Charlie Richardson

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.

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the means to quickly marshal and transferdigital claims data to the guaranty funds.

This paper explores the growing trend towarduse of electronic claims data and the inherentchallenges this trend brings to guaranty funds and receivers alike. It also provides an overview of the UDS Data Mapper, a new software application that will enablereceivers to streamline, simplify and speedthe conversion of digital claims data from the files of insolvent companies into the UniformData Standards (UDS) format.

UDS is an electronic communication protocolthat uses a series of defined computer fileformats to permit guaranty associations andreceivers to electronically exchange insolvency-related data. UDS encompasses loss claims,claim notes, payment histories, images,unearned premiums, closed claims, paymenttransactions and other financial informationsubmitted by the guaranty funds.

UDS traces its origins to 1990 when the NAICUDS Technical Support Group and later theNAIC UDS Financial Technical Support Group were established. These groups, whosemembers – claims, IT and financial professionals– came from the receiver and guaranty fundcommunities, over the years established UDSand spurred a growing acceptance and use of theprotocol and its secure counterpart, SecureUniform Data Standards (SUDS).

The UDS Data Mapper gives receivers andliquidators a way to easily, quickly andinexpensively convert digital data into UDSformat. The application provides a welcomesolution, especially for receiverships that mayhave limited IT resources or specific on-staffexpertise in Uniform Data Standards (UDS) orlack resources to retain outside UDS consultants.

A key advantage of the UDS Data Mapper is thatit frees receiverships – especially smallerreceiverships – from the need to spend initialtime and energy setting up an applicationinfrastructure and staff to manage UDS datatransfers for new insolvencies. Because the UDSData Mapper is designed for use by a typicalbusiness user (the application requires noprogramming expertise) it allows receivershipsto efficiently marshal and transfer data withavailable staff; this in turn expedites the payingof claims, which better enables the insolvencysystem to deliver on its mandate to servepolicyholders and claimants.

The National Conference of Insurance GuarantyFunds, (NCIGF) which has developed the DataMapper, will make it available to the receivershipcommunity at no cost when it is released later thisyear. The NCIGF will also provide ongoingtraining on the UDS Data Mapper to receivershipsthat opt to use the system.

Emerging Digital Data Requirements andthe Changing Face of Claims

Much has changed since the 2001 insolvency of the Reliance Insurance Company. Reliancerequired that an estimated 80,000 paper claimfiles in 1100 TPA locations be moved to theguaranty funds in truckloads.

Today we talk terabytes, not truckloads.

The insolvencies since Reliance increasinglyhave involved imaged files. Since Reliance therehas been a trend to rely on one-off solutions “onthe fly” to enable guaranty funds and receiversto manage the growing number of digital files.These solutions have included negotiatingaccess to receivers’ claims systems for theguaranty funds, the use of CD-ROMs to transmitdigital claims files and even printing out vastquantities of claims files from digital sources.

Assuring Readiness: New UDS Data Mapper Streamlines DataConversions for ReceiversBy Andrew Holladay

The proliferation of digital records in allindustries, including insurance, brings toguaranty funds and receivers alike a host of newchallenges that must be addressed if the currentinsolvency system is to continue to meet itspublic policy mission and successfully weatherincreased scrutiny from federal policymakersand other quarters.

Digital Data Transfer

One of the key lessons learned in several recentinsolvencies is that an insolvency’s chieftechnical challenge might well be determininghow to get data out of one system and intoanother; in other words, how to most efficientlyconvert receivers’ files into something useableby the guaranty funds.

In many respects, insolvencies are similar towhat companies experience in a corporatetakeover or merger: the disparate informationmanagement systems must be “married” tocommunicate with one another. In insolvencies,multi-state or otherwise, there are essentiallythree entities in the equation: the insolventcompany, the receiver and the guaranty fund(s).

From a data transfer standpoint UDS enables thereceiver to communicate with the guarantyfunds. UDS is the “consensus language”between the receivers and guaranty funds. A keybenefit of UDS is that it is well-understood bythe guaranty funds and receivers.

UDS also does a superior job of addressing a variety of claims scenarios. In addition, it is sufficiently flexible to contemplate thethousands of different claims systems of alltypes of property and casualty insurers.. Finally,UDS is the language that all the guaranty funds’claims systems speak, whether they are ISU,LightSpeed, CAPS or some other system.

The Inherent Opportunity in UDS

UDS presents much potential as a platform onwhich to build an efficient and secure digitaldata transfer solution. In seeking to realize thefull potential of UDS, including developing animaging solution, the opportunity inherent inthe protocol becomes clear; the guaranty fundcommunity can build on that opportunity toexpand the value of UDS to the guaranty fundsand receivers alike.

UDS is a mature, flexible and proven solution; inaddition, the UDS manuals do a good job ofdescribing the content of the files. The keyquestion remains: How can UDS be employed asa way to get an insolvent company’s data easilyinto UDS format?

The most important task in the early days of aninsolvency is the receiver converting the datafrom the insolvent estate to UDS format. Thistask usually involves multiple iterations of thereceiver creating UDS records, sending them tothe NCIGF via SUDS, the NCIGF validating therecords and sending the errors back to thereceiver to fix and resubmit them. When validUDS records are finally created by the receiver,the NCIGF splits the files up, creates header andtrailer records, and sends them to the relevantguaranty fund via SUDS for processing.

The value of UDS can be increased byrepackaging the protocol to deliver a moresimplified approach to receivers in marshallingvalid claims records early in an insolvency.

The UDS manual is essentially high-leveldocumentation of an algorithm for creating UDSrecords. The UDS Data Mapper uses this well-documented and well-understood algorithm togenerate valid UDS records. Specifically, theUDS records created include the most commonliquidator-to-fund records:

1. A Record: Loss Claims 2. F Record: Claim Notes 3. G Record: Payment Histories4. I Record: Images

The UDS Data Mapper: “No need toreinvent the wheel”

The UDS Data Mapper allows receivers toproduce, manage, modify, delete and distributetheir claims data to guaranty funds securely. Thehigh-level workflow is described below:

1. The receiver logs into the UDS Data Mappervia the Web.

2. The receiver uploads a CSV file of the rawclaims data to the system.

3. The receiver creates a visual map thatdescribes the relationship between theirclaims data and the UDS fields. In the eventdata is missing, the receiver can elect toprovide default values for the missing items.

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Assuring Readiness... (Continued)

4. The map is merged with the CSV file andproduces UDS records. Immediate feedbackis provided for any data that failed toproperly convert and import.

5. After the data is loaded into the system, thereceiver can easily browse and search foritems that require further review. The datacan easily be modified or deleted to correctany issues.

6. Once the receiver is satisfied with the state ofthe data, he or she can send the files to theappropriate guaranty association. Thisprocess creates the actual UDS files, putsthem in the guaranty association’s SUDSinbox and notifies both the guarantyassociation and the receiver via email thatthere are files to retrieve.

This process doesn’t in any way threaten datasecurity or have privacy implications becausedata isn’t flowing through the Web. Theapplication is simply a visual “wrapper” arounda process that happens entirely within SUDS. Itis not materially different from the process everyreceiver has to go through to create UDS recordsfrom raw claims dumps.

A key benefit of the UDS Data Mapper is that allthe heavy lifting and institutional UDSknowledge is captured in the application so that each receiver need not “reinvent thewheel” for every insolvency. While this is asimple concept, it has positive implications for speed of transfer of digital data.

Looking Forward

It is generally thought that receivers, not theguaranty funds, are the “prime keepers” ofinsolvency-related data. The fact is especiallysignificant in the early stages of an insolvencywhen the need is great to begin data transfer soclaims can be paid. One goal of the UDS DataMapper is to offer an overall digital data transfersolution in a way that respects receivers’primary responsibility of administratinginsolvencies.

Overall, providing support to the receivers in away that respects them as “keepers” of the datawill bring more overall efficiency – especiallyimportant now as federal policymakers heightenscrutiny of the insolvency system and itseffectiveness in serving policyholders. On theguaranty fund side, this support ensures thatour state organizations remain squarely “on-point” as the guaranty fund key entities, and theNCIGF remains what it has always been – aguaranty fund support organization.

Conclusion

The UDS Data Mapper gives a receiver —regardless of his or her “UDS proficiency” orfinancial resources to hire consultants – theability to quickly marshal and distribute digitalclaims data. In addition, it extends the inherentpower of UDS and re-purposes it as a morereceiver-friendly product, one that has thecapacity to address other tangential data issues,such as imaging.

Editor’s Note: A short demonstration of the UDSData Mapper can be viewed at:

https://www.udsdatamapper.com/site_media/demo/

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Assuring Readiness... (Continued)

Andrew Holladay is the ChiefInformation Officer for theNational Conference of InsuranceGuaranty Funds. The author canbe reached at 317-464-8179 or ataholladay@ncigf.org.

Susan E. GrondineSusan Grondine is Senior VicePresident, Chief Claims Officer andGeneral Counsel to R&Q USA, asubsidiary of the London basedRandall & Quilter InvestmentHoldings Group. She is responsible

for the direct and assumed claims and reinsuranceoperations of R&Q Reinsurance Company,Transport Insurance Company and GoldstreetInsurance Company, and oversees all legal mattersarising out of the US operations.

For over a decade, Ms. Grondine served as Senior Vice President and Counsel with HorizonManagement Group, the subsidiary of The HartfordFinancial Services Group responsible for managingthe discontinued operations of The Hartford. Sheprovided legal counsel to this run-off group whichincluded an excess and surplus lines insurer andtwo reinsurance companies.

Ms. Grondine is ARIAS Certified and has served on insurance and reinsurance arbitration panels as a party appointed arbitrator and neutral umpire.

Thomas W. JenkinsTom Jenkins is Partner at Locke LordBissell & Liddell, LLP. He hasdevoted his career to insurance law.

In addition to working on a broadrange of insurance regulatorymatters, Mr. Jenkins has developed

a unique focus in the area of insurance companyliquidations and rehabilitations. He hasconsiderable experience with guaranty associationsand serves as the general counsel to both the Illinoisand California property and casualty guarantyassociations and has represented numerous otherguaranty associations on special projects.

Mr. Jenkins serves on various insolvencycoordinating committees organized by the NationalConference of Insurance Guaranty Funds and sinceOctober of 2001 has served as Chair of the RelianceCoordinating Committee.

Deanna LudlamDeanna Ludlam is Principal of Receivership Manage -ment Interna tional (RMI), a consulting firm providingcustomized Conservator ship/Receivership manage -ment for State and Federal Agencies. Most recently RMIstaff has been involved with the management andliquidation of over 50 bank receiverships for the FederalDeposit Insurance Corporation (FDIC).

With over 20 years' experience in HR including

9 years with Cigna Corp., Ms. Ludlam and her teamprovide professionals in insolvency managementspecializing in liquidation and disposition of assets.These experts provide institution closing assistance,asset valuation, due diligence, marketing,investigation, litigation management, recovery ofreceivables as well as claims support services. Ourmission is to assist the client with the orderlytransition of business entities and their assets whilemaintaining value.  We draw from over 300professionals who have been involved in thecollections, consolidation and asset management ofover 80 institutions ranging from $10 million to $20billion in assets, managing all parts of the processfrom the pre-closing strategy and seizure throughtermination of the institution and final distributionto the shareholders.  We are happy to be a memberof IAIR and look forward to working with otherIAIR professionals in the future.

Andrew W. McCarthyAndrew W. McCarthy, a foundingmember of IAIR,  is Client ServicesManager for Randall & QuilterInvestment Holdings, plc, in the USAlocated in Providence, Rhode Island.With almost twelve years at Randall &

Quilter, Andrew has held several positions in seniormanagement, including responsibility for aninternationally based debt recovery team, reinsurancefunctions, commutations, and acquisitions andcollections for solvent and insolvent estates.

Mike PalmerMike Palmer has developed a broadlevel of expertise in the globalreinsurance market.  Mike currently is Head of Marketing and BusinessDevelopment with Randall & QuilterInvestment Holdings, plc, with

responsibility for the management and coordinationof the group's new business strategy and plans. He has been responsible in the past for resolvingreinsurance collection and finality issues, includingrecovery services in the U.S. and overseas markets.Mike has been impressed with IAIR’s reputation forputting on in depth seminars and conferences. He is looking forward to joining the association andbecoming involved with the active participation andnetworking opportunities.

Introducing IAIR’s Newest Members

12

James Pythian-AdamsJames Pythian-Adams is involved inthe full range of commercial andregulatory work relevant to LondonMarket insurance undertakings,whether insurance companies,Lloyd's managing agencies or

Lloyd's syn dicates. James's work includes advisingon a wide variety of their ongoing non-contentiouslegal and regulatory needs, such as large scalefacility agreements; e-commerce arrangements;syndicate, managing agency and branch setupwork; international licensing; exit solutions work(such as Part VII Transfers); Lloyd's, FSA and other compliance.

Daniel SavilleDaniel Saville is Legal Director ofReinsurance and Corporate Insuranceat Reynolds Porter Chamberlain. He advises on a wide range ofunderwriting and claims issues inrespect of direct and facultative

property and casualty risks, and in respect ofproportional and non-proportional reinsurance treatiesfor classes of business including property, catastrophe,casualty, marine, life and PA.  He also manages RPC'sonline reinsurance wordings service, ReWord, a uniquedatabase combining standard market clauses withlegal commentary, which won the 2008 BritishInsurance Award for Technology. His practice includesconsiderable non-contentious reinsurance work, suchas policy drafting and advising on reinsurance issuesarising from large corporate transactions.

Daniel decided to join IAIR primarily on VivienTyrell's recommendation, as he is working with her on various reinsurance and run-off projects.

Michael TerelmesMike Terelmes is Senior VicePresident of White Mountains ReSolutions, Ltd (Solutions), a divisionof White Mountains Insurance thatspecializes in the acquisition ofinsurance and reinsurance com -

panies in runoff. Mike joined White Mountains Ltd.in 2000 as a founding member of the Solutionsmanagement team. He has worked with stateinsurance departments, receivers and liquidators to provide exit solutions for companies inrehabilitation and receivership.

Prior to joining White Mountains, Mike served as areinsurance and audit manager for TravelersInsurance Company and as an audit manager withBank of America (formerly Shawmut Bank). Mr.Terelmes holds a Bachelor of Science degree inAccounting and is an active member of theAmerican Institute of CPAs, the Connecticut Societyof CPAs and the Insurance Accounting and SystemsAssociation.

In addition, Mike has over 20 years of accountingand auditing experience in the insurance andfinancial services industry specializing in statutoryand GAAP financial reporting, financial analysis,due diligence, modeling, strategic planning,management of commutations and collections and financial and operational auditing.

David Vacca, CPADavid Vacca is the Assistant Directorof the Insurance Analysis &Information Services Department atthe National Association of InsuranceCommissioners. He oversees supportservices to state insurance regulators

related to numerous working groups including theGroup Solvency Issues (EX) Working Group,Receivership and Insolvency (E) Task Force andReceivership Technology & Administration WorkingGroup. He is also responsible for maintaining andenhancing NAIC financial solvency and receivershiptools, providing financial solvency training toregulators and interested parties and monitoring andreporting on the US financial insurance industrytrends. He also serves as technical expert for federalregulator and international regulator financialrequests.

Prior to joining the NAIC, Mr. Vacca was a certifiedpublic accountant performing assurance andconsulting services for five years with the internationalaccounting firm, KPMG, LLP. His industry expertisefocused primarily on financial services, whichencompassed the insurance industry.

13

Introducing IAIR’s Newest Members (Continued)

14

Chief ExaminersRoundtable

A panel of insurancedepartmentexaminers, consistingof Stephen Johnson,Roger Peterson andRobin Westcott, wasmoderated by DavidVacca with the NAIC.The panel first dis -cussed how re ceiver -ships are viewed froman examiner’s per -

spec tive. All agreed that regardless of whether adepartment handled receiverships internally,through a separate division or using contractdeputies, receivership was a continuation of theregulatory process.

David Vacca then asked the panel to address therelative merits of rehabilitation and liquidation.The general consensus was that rehabilitationswere becoming more common. While manyrehabilitations do not restore the insurer as agoing concern, they can nevertheless bebeneficial, as they permit the Receiver to resolvematters that could cause greater difficulties in aliquidation. It was noted that a successful runoffcan avoid some of the costs and disruptionsinherent with a transition to liquidation.

Finally, the panel commented on the “walls andwindows” approach to regulation, and stressedthe significance of understanding the financialcondition of an insurer’s holding company andaffiliates.

Old Myths and New Realities of InsuranceReceivership Taxation

Michael Warren proceeded to dispel miscon -ceptions about federal taxes in a receivership.The change in rules in 2007 ended the ability ofinsurance receiverships to claim tax exemptstatus. As a result, receivers must now take tax planning into account throughout thereceivership.

Warren described the circumstances in which a receivership could have tax liability, andtechniques for dealing with tax issues. One of the more common problems occurs when the insurer is part of a group that files aconsolidated return. Warren discussed a numberof approaches to this dilemma. Finally, heoffered a preview of the future with the changesto 1099 filing requirements.

The presentation was an enlightening (if notsobering) discussion, providing much food for thought.

Reinsurance Recoveries in a ChangingMarket

A panel moderated by Colin Gray addressed thechallenges of collecting reinsurance. The panelincluded Steve Bazil, Evan Bennett, Steve Goate,Julian Porter and David Tiplady.

The panel started with a discussion of theproblems involved with identifying reinsurancerecoverables, including the existence of oldbalances on an insurer’s books and the lack ofdocumentation. The process can be exacerbatedby subsequent consolidations of brokers, whichcan also give rise to further offset issues.

The panel provided some practical tips forcollecting reinsurance and handling audits, andemphasized the importance of making personalcontact with brokers.

August 2010 IAIR Issues Forum Recap By James Kennedy

James Kennedy

15

Have you wondered about developments atliquidation offices across the country and whetherreceivers are doing their job? If so, then this is thearticle for you. Patrick Cantilo suggested that weresurrect the column that highlighted receiver’sachievements and asked me to assist. Thanks toeveryone for responding to my last minute emailrequesting information for the article.

I asked David Vacca for a statistic or two to startoff the article. He reports that a 2009 year endsurvey shows the following in progress claimsliability: $31 billion for run-offs, 9.4 billion inrehabilitation/conservation and 42.5 billion inliquidations. Here is how those statistics playout in four states.

California

Bob Fernandez, Estate Trust Officer and VP at theConservation and Liquidation Office in Californiareports that in 2010 there are twenty-three openestates in liquidation under management of theCLO. These open estates consist of nineteenproperty and casualty companies, one workers’compensation and three life/health estates. TheCLO’s 2010 goals are to close two estates (NationalAutomobile and Casualty Insurance Company andMunicipal Mutual Insurance Company) and todistribute $423 million. The CLO expects to makeEarly Access Distributions from Pacific NationalInsurance Company of $10 million and from theSuperior National Estates of $327 million; InterimDistributions from the Mission InsuranceCompany of $60 million and Sable InsuranceCompany of $15 million; and a Final Distributionfrom Citation General of $11 million.

Bob also provided further detail regardingmaterial developments at the CLO as follows:

Citation General Insurance Company

By court order dated August 18, 2010, CitationGeneral Insurance was authorized to release afinal distribution of all assets. All of theapproved creditors of the estate were paid 100%of the value of their approved claim, plus thepolicyholder class of creditors received the full

value of their claim and a substantial payment ofinterest. The total distribution was slightly in excess of $11,000,000 with individual checksmailed on September 2, 2010. The estate wasliquidated on August 24, 1995.

Mission Insurance Company

In a court order dated August 13, 2010, MissionInsurance Company was authorized to make adistribution to approved creditors. This distrib -ution will bring general creditors up to a dividendof 50%, creditors with an approved claim of $100 orless up to 100% as a final distribution and generalcreditors with an approved claim of $10,000 or lessto a final distribution percentage of 75%. The totaldistribution of $58,260,312 is scheduled forSeptember 30, 2010.

Superior National Insurance Companies

The CLO received $529 million from U.S. LifeInsurance Company, an American InternationalGroup subsidiary, in partial satisfaction of ajudgment affirming the Final Arbitration Awardin favor of the Superior National InsuranceCompanies. Pursuant to the terms of anagreement between the parties, $186 million ofthe payment went to the California InsuranceGuarantee Association. The balance of $343million was received by the estates for futuredistributions to Superior National InsuranceCompanies creditors pursuant to CaliforniaInsurance Code Section 1033. This success for theCLO follows nearly ten years of contentiousarbitration and litigation. The payment from USLife includes $185 million in interest due theduration of the disputes related to reinsurancecontract between U.S. Life and the SuperiorNational Insurance Companies. Barring anyobstacles, a distribution to the GuarantyAssociations is anticipated in the 4th quarter of 2010, and to all other approved policyholdercreditors in the 1st quarter of 2011.

Executive Life Insurance Company

The Opt-Out Trust receives approximately 33% of Executive Life Insurance Company ("ELIC")

Move over Sisyphus, Here Comes the Liquidator By Kathleen McCain

assets which are distributed to approximately27,300 former ELIC policyholders (“Opt-Outs”)who elected to terminate their policies. $211million of Altus Litigation Funds was distributedto Opt-Out policyholders in February 2006. Theremaining assets of the Opt-Out Trust consist of (1)distributions allocated to policyholders withwhom contact has been lost (funds which cannotbe distributed for lack of contact information willbe escheated to the last known state of residence),and (2) the settlement proceeds of MutuelleAssurance Artisinale De France (“MAAF”) (one-third of the recovery of a default judgment in thename of defendant, MAAF) which are availablefor distribution to Opt-Out policyholders. TheCommissioner intends to distribute the MAAFfunds in the third quarter of 2010. The Opt-OutTrust will remain open to effect distributions toOpt-Out policyholders of proceeds, if any, if theCommissioner is successful in the damages retrialof the Credit Lyonnais lawsuit. A date has not beenset for the retrial.

Golden State Mutual Life InsuranceCompany

The Los Angeles Superior Court approved thecomprehensive rehabilitation plan andassumption reinsurance agreements for GoldenState Mutual Life Insurance Company with IA American Life Insurance Company. Therehabilitation plan and assumption reinsurancetransaction will preserve and maintain the value,continuous coverage and contractual benefits forthe holders of in-force life, health and disabilityinsurance policies and annuity contracts issuedby Golden State Mutual. The rehabilitation planand agreements forming the plan provide thatholders of Golden State Mutual's in-force life,health and disability policies and annuitycontracts will become policy and annuitycontract holders of IA American under anexpress assumption of their policies and annuitycontracts as modified by an AssumptionEndorsement. As a result of this assumption, allclaims for contractual life, health and disabilityinsurance policy and annuity contract benefitswill be deemed satisfied by the assumption andIA American will be solely responsible to pay allclaims on the policies and contracts.

Ohio

Lynda Loomis, Chief Deputy Liquidator at theOffice of the Ohio Insurance Liquidator provided

information on Ohio’s material developments. Shereports that the vast majority of the liquidations inOhio are mature estates or limited/no asset estates.One of the Liquidator’s goals is to improveliquidations by administering each of these estatesin a more efficient manner in order to facilitatemaking one final distribution to claimants of each estate as soon as practicable. To that end, theLiquidator has closed six open estates since 2007.

At the beginning of 2010, the Office of the OhioInsurance Liquidator had 12 open estates. As ofSeptember 30, 2010, the Ohio Liquidator has 11open estates, with plans to close at least twoestates in March 2011 following a finaldistribution in 2010. The current open estatesconsist of six property & casualty estates (two ofwhich are workers’ compensation), one titleinsurer, and four life/health insurers.

In December 2009, the Ohio Liquidator completedthe 82.1412% final pro rata distribution to Class 2policyholder claimants in The P.I.E. MutualInsurance Company. As of September 30, 2010, theLiquidator filed motions requesting authority tomake final distributions and proceed to close theDayMed Health Maintenance Plan, Inc. and Ren -aissance Health Plan, Inc. liquidations. In October2010, the Liquidator is planning to make a finalpayment of 100% of the amount of each allowedclaim in Classes 1 through 4, and a final pro-ratapayment of 75.1260% of the amount of each allow -ed claim in Class 5 in the DayMed Health Main ten -ance Plan, Inc. liquidation, and to make a finalpayment of 100% of the amount of each allowedclaim in Classes 1 through 4, and a final pro-ratapayment of over 45% of the amount of eachallowed claim in Class 5 in the Renaissance HealthPlan, Inc. liquidation. The Liquidator is evaluatingthe potential for requesting authority to make finaldistributions and close three other open estates.

In December 2009, the Ohio Liquidator also com -pleted a $12,822,841 early access distribution toguaranty associations in the American ChambersLife Insurance Company liquidation proceeding.

In June 2010, the Ohio Liquidator completed a$11,174,619.74 pro-rata distribution to guarantyassociations on their Class 1 claims in the CreditGeneral Insurance Company liquidationproceeding and a $1,028,990.01 pro-ratadistribution to guaranty associations on theirClass 1 claims in the Credit General IndemnityCompany liquidation proceeding.

16

Move over Sisyphus, Here Comes the Liquidator (Continued)

Florida

Mary Schwantes, Director of Estate Manage mentand Deputy Receiver reports from Florida that asof October 1, 2010, there are 48 companies inreceivership in Florida – 41 in liquidation andseven in rehabilitation. The 48 estates include 33property and casualty companies, 10 healthmaintenance organizations, two workers’compensation self insurance funds, one medicalmalpractice self insurance fund, one warrantycompany and one title company.

During the most recent fiscal year (July 1, 2009 –June 30, 2010), the following seven companies wereplaced in receivership: National Title InsuranceCompany, First Commercial Insur ance Company,First Commercial Transportation and PropertyInsurance Company, American Keystone InsuranceCompany, Intercontinental Marine ServiceCorporation, Magnolia Insur ance Company, andNorthern Capital Insurance Company.

The Receiver distributed $12,597,515 in claimspayments and assessment returns. An additional$93,474,452 in early access payments weredistributed to Florida’s insurance guarantyassociations from the various receivershipestates and/or from the Florida HurricaneCatastrophe Fund. The following four re -ceiverships were closed: Nationwide PublicEmployees Trust, Unisource Insurance Com -pany, United States Employer Consumer SelfInsurance Fund of Florida and United BusinessOwners Self Insurance Fund.

In September 2010, joint efforts between theReceiver’s office and the Department’s Divisionof Insurance Fraud culminated in arrestsinvolving pre-receivership activity in threereceiverships. In early September 2010, Luis M.Espinosa, former president and CEO and ReneM. Cambert, former vice president and chiefoperating officer of First Commercial InsuranceCompany and First Commercial Transportationand Property Insurance Company were arrestedon eight first degree felony counts each for filing false or misleading financialstatements for both companies with the FloridaOffice of Insurance Regulation (OIR). Eachfelony count carries a potential 30-year sentence.The arrests occurred after the investigation bythe Division of Insurance Fraud’s Major CaseSquad revealed that regulatory reportingdocuments signed by both Espinosa andCambert were fraudulent, including quarterly

statements declaring the companies weremaintaining the minimum capital and surplus of$4 million required to meet Florida’s statutoryobligations as an insurance provider. Numerousdocuments filed indicated that the companieshad more reserve assets than they actuallypossessed and that worthless cash assets,totaling more than $10 million, impaired thecapital of both companies.

Kenneth Feldman, founder of Suncoast PhysiciansHealth Plan, Inc has been arrested on one first-degree felony charge for filing false financialstatements with the Florida OIR. Suncoast wasordered liquidated in August 2007. The FloridaDepartment of Financial Services (DFS) wasappointed as Receiver of the company, therebygiving DFS full access to the company’s records.Once in receivership, discrepancies in thepreviously filed company paperwork werediscovered. According to the DFS investigation,Feldman provided false information to OIR aboutthe company’s financial condition by shufflingmoney between his different companies to createthe appearance of a cash infusion in Suncoast. Inresponse to OIR’s demand that Suncoast depositfunds into its accounts in order to comply withminimum statutory requirements, in May 2007Feldman directed a “circular transaction” of funds -taking approximately $225,000 directly fromSuncoast’s account(s), he funneled the moneythrough the bank accounts of two other companiesunder his control, then had the same $225,000amount redeposited into Suncoast’s accounts. TheDFS’ Division of Insurance Fraud investigatorsfollowed the money trail which revealed the May2007 transactions and also revealed that Feldmanhad performed the same “circular transaction” withregard to funds in March and April of 2007. As aresult of the various trans actions, over $600,000listed as available cash or other liquid assets in thecompany's financial statements were, in fact,unavailable. If convicted, Feldman faces up to 30years behind bars.

Illinois

Suzanne Janak, Senior Manager, Estate StrategicPlanning at the Office of the Special DeputyReceiver in Illinois reports that the OSDcurrently manages 18 estates: 13 liquidations,two rehabilitations and three conservations. twoadditional estates, Alliance General InsuranceCompany and American Health Care Providers,Inc., closed earlier in 2010. The total cash and

17

Move over Sisyphus, Here Comes the Liquidator (Continued)

invested assets currently held on behalf of theestates under OSD’s control is $274 million. Todate, over $330 million has been distributed onthe 18 open estates.

Highlights of OSD’s 2010 estate activitiesinclude:

Alliance General insurance Company, In Liquidation, closed in early 2010. Allpolicyholder claims were paid in full. Generalcreditors received dividend distributionstotaling 66.99% of their allowed claims.

A rehabilitation plan was approved by theSupervising Court in April 2010 for Life ServicesNetwork Trust, In Rehabilitation. Under theterms of the rehabilitation plan policyholderpriority claims are currently being paid at therate of 70% on the dollar.

Pine Top Insurance Company, In Liquidation, a surplus lines reinsurance and excess insurancecarrier, has filed a petition for court approval ofa $20 million interim dividend to generalcreditors. Pending court approval, thedistribution will be made in October 2010. Anadditional $82.5 million in interim dividendswas previously distributed to policyholders andgeneral creditors. Significant remaining act -ivities include the marketing of the estate’sremaining uncollected reinsurance receivables.

Statewide Insurance Company, In Liquidationrecently distributed a 100% dividend on timely-filed policyholder and general creditor claims. Asecond bar date will be established for the finalpresentation of long-tail policyholder claims andthe settling of late claims.

United Capitol Insurance Company, In Liquid ationresolved all timely-filed uncontested claimsearly in 2010. The Liquidator is currentlyadjusting and adjudicating contested claims andcollecting reinsurance. The Special Deputyrecently posted his Good Faith Estimate (“GFE”)of the timing and amount of potentialdistributions on OSD’s website. The GFE is theSpecial Deputy’s projection of future dis -tributions and reflects the Liquidator’s com -mitment to keeping estate creditors in formedabout when they can expect to receive paymenton their claims. United Capitol’s GFE currentlyestimates a substantial distribution at thepolicyholder level will be made in 2010.

Legion Indemnity Company, In Liquidation is a surplus lines carrier that insured and cededcommercial and general liability risks. Its initialclaim evaluation was completed by year-end2009. Contested claims are currently beingadjusted, adjudicated and ceded to reinsurers. Apolicyholder distribution on timely-filed claimsis anticipated in 2011.

So, we are still pushing the boulder up the hill.Assets are being collected, policyholders aregetting paid and estates are closing. Move overSisyphus, here comes the Liquidator.

18

Move over Sisyphus, Here Comes the Liquidator (Continued)

Kathleen McCain is an insolvencyand reinsurance lawyer/consultantwho has just finished a long termproject for the Ohio InsuranceLiquidator. She is looking forwardto her next project whatever it maybe. Kathleen can be reached at kmmccain@earthlink.net.

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, PublicationsCommittee 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, ChairFrancesca Bliss, Phillip Curley, Esq., Richard J. Fidei, Douglas Hartz, Harold Horwich, James Kennedy, Paula Keyes, Dennis LaGory, Kenneth Weine, Ryan Wolfe

Officers: Patrick Cantilo, President, Harry (Hank) L. Sivley, 1st Vice President, Douglas Hartz, 2nd Vice President, Joseph DeVito, Treasurer, Alan Gamse, Secretary, Francine L. Semaya, Immediate Past President

Directors:Michelle J. Avery, Mary Cannon Veed, AIRC. Phillip Curley, Esq., Richard Darling, Bruce Gilbert, Patrick Hughes, James Kennedy, Paula Keyes, AIR, Lowell E. Miller, Daniel A. Orth, Kenneth M. Weine, AIR,

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

“Nobody loves me any more” lamented JoeReceiver as droves of companyemployees ran out the door of his newreceivership, leaving him high and dry.With crocodile tears in his eyes, hedialed his girlfriend on his nuclear-powered, fully automatic, business-card sized, jPhone 87G. “Honey, whatcan I do to keep the employees ofGargantuan Hole Life InsuranceCompany from leaving now that I’vebeen appointed receiver?” Smilingfrom across the city, the love of his lifelooked knowingly at her BlueberryFlame All-purpose Digital PersonalLife Manager and said confidently “There areproven techniques for retaining troubledcompany employees. Some may seem heartless(like your mother), but they are important. Letme explain.”

“First, tier your staff by criticality andreplaceability. Structure a retention programwith the more robust benefits for those youcannot afford to lose and few or no benefits forthose you really may not need. Conditioncontinued employment and benefits, in part, onstrict confidentiality of the retention program.Accept, however, that there will be leaks, andprepare to manage the resulting resentment.The best response is reasoned candor.

Second, as you design your program, considerthese competing approaches. On the one hand,you can offer incentives that accrue over time (inmeasures varying with criticality) but can onlybe ‘cashed-in’ upon involuntary separation

without cause. But note that, as they accrue,these may encourage departure. On theother hand, you may prefer to providesome benefits at the end of specifiedretention periods (like every sixmonths). Think also about preservationand funding of retirement and pensionplans.

Third, evaluate job functions andperformance and judiciously promotedeserving and critical employees.Remember these important principles.One: all other things being equal,bonuses are cheaper than raises. Two:

promotions without a raise can sometimes besincerely appreciated as recognition of value andeffort. Three: if negotiating with a buyer, have itfund part or all of the program. Four: have thecourt approve the plan as a rehabilitativemeasure that falls outside the limited wagepriority. Five: days-off and other fringe benefits(flex schedules, bigger offices, etc.) can becostless rewards that build loyalty. Finally, mostimportantly, be a good, sensitive, honest, andcaring manager.”

“Thanks my sweet” purred Joe into his paper-thin Banana communicator. “Where do youwant to go to dinner tonight?” With a growingscowl, his “sweet” replied “Anywhere otherthan your brother’s god-awful BBQ joint. I stillcan’t believe you made me eat the ‘South TexasSpecial’!” Stunned, he asked “What’s so badabout sautéed porcupine in a bed of chilled St.Augustine sod garnished with thinly slicedArizona Ash bark?”

19

The Perfect Receiver by Patrick Cantilo

Two insurance groups are joining to improve the skills of those helping troubledinsurers recover assets and those going after people who defraud insurancecompanies.

Members of the International Association of Insurance Receivers (IAIR) and theInternational Association for Asset Recovery (IAAR) will now be able to earn thecertifications of each association and participate in events.

The groups say their new partnership is aimed at helping insurance receivers andinsurance regulators and investigators improve their skill and credentials inrecovering fraud proceeds.

IAAR issues the Certified Specialist in Asset Recovery certification while

IAIR issues the Certified Insurance Receiver and the Accredited InsuranceReceiver credentials.

Both organizations conduct conferences and other training events. IAIR willconduct its Annual Insolvency Workshop in New Orleans on January 19-21, 2011.IAAR will hold its Cross- Border Asset Tracing and Recovery Conference in June2011 in London.

“Insurance receivers are entrusted by the courts to recover the losses suffered byvictims of crime and fraud,” said Patrick Cantilo, president of IAIR and partner atAustin, Texas firm, Cantilo & Bennett, LLP. “Our associations have converginginterests, and we know this alliance in training and certification will sharpen theskills of insurance receivers and asset recovery specialists.”

Certifications exist in fraud examination and anti-money laundering, but they donot extend to what IAR calls the “endgame” of all frauds, which is the recovery ofthe fraud proceeds, according to IAAR president Charles Intriago, a formerfederal prosecutor who also founded the Association of Certified Anti-MoneyLaundering Specialists.

20

Press Release

IAIR 2010 Committee Chairs

IAIR and the Texas Department of Insurancehosted a training conference in September, 2010.The two day conference featured presentationsby several IAIR members.

The first day of the conference involved TDIexaminers, analysts and attorneys. The topicsconsisted of an overview of the receivershipprocess, reinsurance, indicators of financialdistress and consequences of early detection,identification of hazardous affiliated trans -actions, and the impact of informationtechnology in receiverships.

The second day of the conference includedSpecial Deputy Receivers and others interestedin the receivership process. It began withremarks by Commissioner Mike Geeslin, and the

subjects involved an overview of thereceivership model act, identification ofaffiliated transactions, records retention issues,rehabilitation proceedings, receivership take -overs; enforcement of stays and injunctions,federal income taxation; and the role of a masterin receiverships.

Thank you to the many IAIR membersresponsible for planning and presenting theprogram and for volunteering their time. IAIRlooks forward to doing additional state trainingin conjunction with the departments ofinsurance in other states in the coming months.

21

IAIR Texas Training Conference

Executive CommitteePatrick Cantilo, Esq.

Strategic Planning CommitteeFrancine L. Semaya, Esq.

Operations CommitteeAlan Gamse, Esq.

Accreditation & EthicsJoseph DeVito Jim Gordon

Designation Standards(Subcommittee of A&E)

Daniel Watkins

Communications CommitteePhillip Curley, Esq.

Marketing Committee(Subcommittee of Communications)

Joe McDavittMaria Sclafani

Newsletter Committee(Subcommittee of Communications)

Michelle Avery

Publications Committee(Subcommittee of Communications)

Dennis LaGory, Esq.

External Relations CommitteeMary Cannon Veed, Esq. Douglas Hertlein

Guaranty Fund Committee(Subcommittee of External Relations)

Patrick Cantilo, Esq.Wayne Wilson

Finance CommitteeJoseph DeVito

Governance CommitteeHarry (Hank) Sivley

Audit Committee(Subcommittee of Governance)

Evan Bennett

By Laws Committee(Subcommittee of Governance)

Harold Howich

Elections Committee(Subcommittee of Governance)

Daniel A. Orth

Member Services CommitteePaula Keyes

Education Committee(Subcommittee of Member Services)

Douglas Hartz, Esq.James Kennedy

International Committee(Subcommittee of Member Services)

Vivien Tryell, Esq.

Membership Committee(Subcommittee of Member Services)

Kerby Baden Donna Wilson

www.iair.org

22

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

23

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 email at mcs@iair.org.

March

26-292011

Austin, TXHilton Austin and Austin Convention Center

August

30- September

22011

Philadelphia, PAMarriott Philadelphia Downtown

November

3-62011

Washington, DC Gaylord National Hotel and Convention Center

A Special Thanks To Our Corporate Sponsors for Their Continued Participation and Support!

GOLDSPONSORS

SILVERSPONSORS

PLATINUMSPONSOR

Cantilo & Bennett

Insurance Regulatory Consulting GroupRobinson Curley & Clayton

Arnstein & Lehr, LLCBarbagallo & Stuehrk LLCDeVito Consulting, Inc. Law Office of Daniel L. WatkinsLowell Miller Accountant, Inc.

Nelson Levine de Luca & HorstQuantum Consulting, Inc.Regulatory Technologies, Inc.Semmes, Bowen & Semmes P.C.Veris Consulting, Inc.