2020

Annual Report

Supporting the Insurance Promise

Our Vision
To be the definitive national leader on matters related to insolvency and its consequences to policyholders and claimants protected by the state-based property and casualty guaranty fund system.

Our Mission
To bring the greatest possible value to the member state property & casualty guaranty funds and the state-based guaranty fund system in operational support, communications and public policy development.

Overview
Just like all organizations across the world, 2020 was an unprecedented year for NCIGF. Facing the global pandemic and being forced to find new ways to work, communicate and stay connected, 2020 brought challenges. NCIGF faced them head-on, finding opportunity for development, education and strengthening the mission to protect policyholders. NCIGF and its members continued to keep the property and casualty insurance promise.

A Message From NCIGF President
Roger Schmelzer.

Watch Video

A letter from NCIGF Board Chairman
Keith Bell.

Read the Letter

Key Accomplishments in 2020

Response to COVID-19:

In response to COVID-19, NCIGF initiated a series of "in-service" video conferences for guaranty funds on matters related to the virus and its impact on member guaranty funds. This was expanded to a full educational series for members since all in-person meetings were cancelled for 2020. NCIGF quickly leveraged the online video platform to maximize engagement and connection among members, offering sessions that included break-out chat rooms, entertainment and socializing as well as educational and relevant guaranty fund-related topics.

NCIGF, in service to its members, was able to minimize financial loss with meeting cancellations, having already positioned hotel contracts with force majeure clauses and other protective language. Valued partnerships and good will negotiations with venues, along with a strategy of monitoring local and state COVID-19 regulations with the timing of cancellation triggering force majeure conditions, and in a few cases rescheduling an event to a future year, enabled NCIGF to avoid paying sizeable (unbudgeted) cancellation penalties anywhere from 40% to 80% of anticipated hotel revenue.

Relationships with NAIC and Regulators:

Throughout 2020 NCIGF continued joint efforts with IAIR and educate regulators on the need for pre-liquidation planning. NCIGF continues to interface with the Financial Analysis Working Group (FAWG.) The confidentiality agreement with RFAWG has been renewed and new co-chairs of RFAWG have agreed to discussions with NCIGF and NOLHGA in between NAIC meetings to discuss issues of mutual importance between GFs and receivers.

NCIGF Accounting Manual Update:

In 2020 NCIGF published an update to the Accounting Guidelines Manual (Manual). Managed by members of the Accounting Issues Committee, the Manual is intended to provide accounting guidelines that are general in nature. The Manual is organized around the concept of “cycles” that exist within the operations of guaranty funds. Some of the cycles are readily recognizable by the accounting community while other cycles are specific to the unique aspects of guaranty fund operations.

Committee Structure:

In 2020 NCIGF implemented a new committee structure. Heavily vetted with several communication outreaches asking for feedback from the community, phase one was the adoption of a board-recommended amendment to the bylaws to create more flexibility in the board management of its committees. Phase two will include member communication/education and operation of the new committee structure by Q2 2021.

Updating the Members’ Site for Optimal Engagement:

NCIGF continued to work on increased transparency throughout 2020 by establishing a new forum on the Member's site to provide a dedicated channel for members to propose ideas to the NCIGF and have those ideas discussed by other members and staff. After gaining feedback from managers across the country, countless other updates have been implemented as well. These efforts launched new conversations, connections, shared project spaces and an overall sense that the site is the go-to location for news and information for NCIGF members, managers and staff. Since the most recent update, NCIGF has seen an 84% increase in the amount of time members are spending on the site. Additionally, the number of pages that users view on the site each time they login has risen 77% more page-views per visit. Increased engagement has also been obtained through open collaboration within the various forums around the site.

Data Security:

Data security continued to be a prime focus for NCIGF throughout 2020, and the need for education, resources and training will remain a top priority moving forward. In a continual effort to provide necessary and valuable resources to the members, NCIGF crafted an updated cyber security survey in October of 2020. The interconnectedness of the community has always been seen as a powerful source of shared knowledge; however, it is also a potential vector for attack. The purpose of the security survey was to help individual funds understand their cyber security posture and see areas where they could improve. All results were confidential and a plan, as well as a hub on the NCIGF member site, was created to help bolster those who needed additional support. The follow up and additional efforts to advise and assist funds is ongoing.

Subsidiary Report:

NCIGF’s subsidiary, Guaranty Support, Inc. (GSI), continued to expand its portfolio of clients in 2020. The bulk of GSI’s time was dedicated to insolvency data management services, working with receiverships in four states to deliver essential records to the guaranty funds. GSI also optimized cloud hosting solutions for guaranty fund claim systems, increasing those systems' scalability and cost efficiency. GSI implemented a custom voting application to assist guaranty funds with their board voting process to several more guaranty funds in 2020, with even more on the horizon. GSI also provided security analysis services in 2020, a service it intends to expand on in 2021.

NCIGF Public Policy Efforts:

In 2020 NCIGF collaborated with the NAIC Large Deductible Working Group and Receivership and Insolvency Task Force to add language to the Receiver’s Handbook that says the Large Deductible asset will inure 100 percent to the state guaranty fund to the extent of their claims payments. This has been the guaranty fund position since these products began to emerge in liquidations nearly 20 years ago. An ongoing disagreement among regulators and guaranty funds is close to final resolution. The disagreement concerns the disposition of the deductible asset – usually in the form of collections from policyholders and collateral drawdowns. Guaranty funds take the position that these recoveries should inure in full to the guaranty funds to the extent of their claim payments. Receivers often take the view that these amounts are general assets of the insolvent estate – meaning all creditors would take a proportionate share in accordance with the state’s priority distribution statute. The deductible amounts are quite often $100,000 or more making this an issue of much significance. During the past two years NCIGF has worked with the Large Deductible Working Group at the NAIC to develop guidelines on the matter. Most recently, the Receivership and Insolvency Task Force (RITF) adopted a recommendation for a guideline that would call for the deductible asset to flow in full to the guaranty funds to the extent of their claim payments. The “E” Committee approved this approach, and the matter will be taken up at Executive and Plenary at the Spring NAIC meeting. We expect the guideline to be adopted. If adopted the guideline will represent agreement among regulators and guaranty funds on a key issue, resolving 20 years of disputes and contentious litigation.

NCIGF New Board Member Mentor Program:

With several new NCIGF board members voted in for 2020, NCIGF developed a partnership plan, linking tenured board members with those who are newer, paving the way for important accomplishments throughout the year. This initiative will also help prepare board members for a seamless transition to in-person meetings when those can safely take place.

2020 Financials

Tabs show Financial Position, Statements of Activities and Statements of Cash Flows for the years ended December 31, 2019 and 2018 have been prepared on an accrual and consolidated basis.

Cash and Cash Equivalents and Investments as of December 31, 2020 were $3,904,481 an increase of $456,168 from December 31, 2019.
The Contingency Fund balance as of December 31, 2020 was $2,835,318, an increase of $231,115 from the prior year. The Contingency Fund balance as of December 31, 2020 and 2019 was 67% and 63%, respectively, of the 3-year average annual operating budget. The Contingency Fund is a board designated unrestricted fund accessible with board approval. The Contingency Fund, which is held in a separate account from the operating funds, is invested in CDs with staggered maturities of no greater than two years.
Net Assets as of December 31, 2020 were $2,791,144, an increase of $440,094 from the prior year.
Results (Excess Operating Income over Expenses) for the year ending December 31, 2020 were under budget by $556,750 (12.6%) primarily due to the COVID-19 pandemic. Members will receive a pro rata share of 50% of the surplus ($278,000) as a pandemic refund in 2021.
In 2020, Guaranty Support Inc. (“GSI”), a wholly owned subsidiary of NCIGF, completed its fifth full year of operation. GSI provides core data management and support services for members and receivers to support their claims handling functions. GSI also provides services that are determined to be beyond the core services it provides to members, receivers and other entities, to the extent that their activity is consistent with GSI’s board-approved mission. GSI had net income for the year ending December 31, 2020 and 2019 of $47,509 and 12,057, respectively.

Consolidated Statements of Financial Position December 31, 2020 and 2019

Consolidated Statements of Activities for the Years Ended December 31, 2020 and 2019

Consolidated Statements of Cash Flows for the Years Ended December 31, 2020 and 2019

2019-2020 NCIGF Board of Directors

*Resigned

Chair

D. Keith Bell

Senior Vice President
Corporate Finance The Travelers Companies, Inc.

Vice Chair

Chad G. Anderson

President
Western Guaranty Fund Services

*Jeffery C. Alton

Vice President, Finance
CNA Insurance Companies

Jenny L. Anzalone-Ackley

Deputy Director, Assessments and Guaranty Fund Reporting
Chubb NA Office of General Counsel

*Amanda L. Barbera

Executive Director
Indiana Insurance Guaranty Association

Michael D. Boge

State Counsel Section, Corporate Law
State Farm Insurance Companies

Katherine J. Evans

Vice President of Regulatory & Government Affairs
CSAA Insurance Group

J. Smith “Smitty” Harrison

Executive Director/Secretary
South Carolina Property & Casualty Insurance Guaranty Association

Larry E. Hinton

Senior Counsel
GEICO

Barbara Peterson Law

President & CEO
Guaranty Fund Management, Inc.

William M. Lynch

Vice President & Chief State & Local Affairs Officer, Public Affairs
Liberty Mutual Insurance Company

Joyce Hall Mellinger

Senior Vice President and Associate General Counsel
Zurich North America

David G. Nadig

Senior Vice President & General Counsel
Allstate Insurance

Christopher P. Roe

Senior Vice President Corporate and Government Affairs
CUNA Mutual Group

Bradley A. Roeber

Executive Director
California Insurance Guarantee Association

Arthur M. Russell

Executive Director
Mississippi Insurance Guaranty Association

Timothy M. Schotke

Executive Director
Illinois Insurance Guaranty Fund

Joseph Torti III

Vice President – Regulatory Affairs
Fairfax Inc.

*Cina D. Welch

Senior Vice President, Chief Risk & Compliance Officer
FCCI Insurance Group

John C. Wells

Executive Director
Louisiana Insurance Guaranty Association

Chad E. Wilson

Associate Vice President, Government Relations
Nationwide Insurance

NCIGF Staff

Roger H. Schmelzer

President & CEO

John A. Blatt

General Counsel, Director of IT Strategies & Corporate Secretary

Lynn Cantin

Meeting Planner

Amy J. Clark

Vice President & CFO, Director of Association Business Operations & Treasurer

Victor M. Gichina

Graphic Design Intern

Connor B. Inman

Business Systems Analyst

Nate T. Jennings

Software Engineer

Emily M. Jurey

Executive Assistant to NCIGF Management Team

Kevin C. Leap

Manager of Accounting and Administration

Lee Minnear

Systems Analyst

Ashley N. Rosenberger

Associate Legal Counsel

Jeremy A. Sebring

DevOps Engineer

Douglas P. Storz

Lead Software Engineer

Robin J. Webb-Reus

Communications & Member Support Manager