DEPARTMENT OF INSURANCE, FINANCIAL INSTITUTIONS AND PROFESSIONAL REGISTRATION P.O. Box 690, Jefferson City, Mo. 65102-0690 RE: Examination Report of Missouri Property and Casualty Insurance Guaranty . ..\ssociation for the period ended December 31, 2011 ORDER After full consideration and review of the report of the financial examination of Yiissouri Property and Casualty Insurance Guarant} Association for the period ended December 31, 2011, together \.\ith any written submissions or rebuttals and any relevant ponions of the examiner's workpapers, I, John M. Huff, Director. Missouri Department of Insurance, Financial Institutions and Professional Registration pursuant to secuon 374.205.3(3)(a), RSMo.. adopt such examination report. After my consideration and review of such repon, workpapers, and written submissions or Iebuttals. I hereby incorporate by reference and deem the following parts of such report to be my findings and conclusions to accompany this order pursuant to section 374.205.3(4), RSMo: summary of significant findings, subsequent events, company history, corporate records, management and control. ..fidelity bond and other insurance, pension. stock ownership and insurance plans. territory and plan of operations, grov:th of the company and loss experience. reinsurance. accounts and records, statutory deposits, financial statements. financial statement changes resulting from examination, and comments on financial statement items. Based on such findings and conclusions. I hereb~ ORDER. that the repon of the Financial Examination of Missouri Property and Casual[)· Insurance Guarant} Association as of December 31 . 2011. be and is hereby /illOPTED as filed and for Missouri Propert) and Casualty Insurance Guaranty Association to take the following actiun or actions, which I consider necessary to cure any ,iolation of law, regulation or prior order of the Duector re\<ealed by such report: ( 1) implement, and verify compliance with each item. if any, mentioned in the Comments on Financial Statement Items and/or Summary of Recommendations section of such report~ (2) account for its financial condition and affairs in a manner consistent with the Director"s findings and conclusions. -i~ed and official seal afILxed this 11th day of June. 2013. JP':~~ John M. Huff, Director Department of Insurance. Financial Insmutions and Professional Registration
Transcript
DEPARTMENT OF INSURANCE, FINANCIAL INSTITUTIONS AND PROFESSIONAL REGISTRATION
P.O. Box 690, Jefferson City, Mo. 65102-0690
RE: Examination Report of Missouri Property and Casualty Insurance Guaranty . ..\ssociation for the period ended December 31, 2011
ORDER
After full consideration and review of the report of the financial examination of Yiissouri Property and Casualty Insurance Guarant} Association for the period ended December 31, 2011, together \.\ith any written submissions or rebuttals and any relevant ponions of the examiner's workpapers, I, John M. Huff, Director. Missouri Department of Insurance, Financial Institutions and Professional Registration pursuant to secuon 374.205.3(3)(a), RSMo.. adopt such examination report. After my consideration and review of such repon, workpapers, and written submissions or Iebuttals. I hereby incorporate by reference and deem the following parts of such report to be my findings and conclusions to accompany this order pursuant to section 374.205.3(4), RSMo: summary of significant findings, subsequent events, company history, corporate records, management and control. ..fidelity bond and other insurance, pension. stock ownership and insurance plans. territory and plan of operations, grov:th of the company and loss experience. reinsurance. accounts and records, statutory deposits, financial statements. financial statement changes resulting from examination, and comments on financial statement items.
Based on such findings and conclusions. I hereb~ ORDER. that the repon of the Financial Examination of Missouri Property and Casual[)· Insurance Guarant} Association as of December 31 . 2011. be and is hereby /illOPTED as filed and for Missouri Propert) and Casualty Insurance Guaranty Association to take the following actiun or actions, which I consider necessary to cure any ,iolation of law, regulation or prior order of the Duector re\<ealed by such report: ( 1) implement, and verify compliance with each item. if any, mentioned in the Comments on Financial Statement Items and/or Summary of Recommendations section of such report~ (2) account for its financial condition and affairs in a manner consistent with the Director"s findings and conclusions.
-i~ed and official seal afILxed this 11th day of June. 2013.
JP':~~ John M. Huff, Director Department of Insurance. Financial Insmutions and Professional Regi strat ion
REPORT OF THE
ASSOCIATION FINAJ."lCIAL EXAl\,1lNATION OF
MISSOURI PROPERTY AND CASUALTY INSURANCE GUARANTY ASSOCIATION
ASOF
DECEMBER 31, 2011
TATE OF I\HSSOGRI
DEPARTl\,fE T OF INSURANCE, FINAN lAL L~STITl] IIONS AJ'ffi PROFESSIO AL REGI TRATIO
JEFFERSO . CITY, ~II OCR.I
TABLE OF CONTE:"iT
COPE Of E..XMIINA TIO . .................................................................................................................... 1
PERIOD COVERED ...................................... .................................... ................. .......... ................ ............. .. I
PROCEDL'RES ............................................................................................... ... .......... ......................... ...... I
SUl\,1l\1ARY OF SIG1 lfICANT FlNOINGS .......................................................................................... 2
IN OL \'E CIE ........................................................................................................................ ................ 5
A ESSl\tE T Al\1> REFUNDS ................................................................................................. ........... 5
FIDELITY BOND AJ\"D OTHER L'I URANCE ..................................................................................... 6
L I .\BILITIES ,\~D ~ET ASSETS ................................................... ............................................................... 8
STATE\IE'.\ T OF .A.CTlv ITIES .................................................................................... ................................. 9
VERIFIC.4TIO . ...................................................................................................................................... l l
Honorable John M. Huff, Director Mi ouri Department of [nsurance, Financial ln 1nutiofil and Profe ·sional Reei tration .._,
301 West High Street, Room 530 Jefferson City, Missouri 65101
Director Huff:
Jefferson City. Mbsouri May 10, 2013
ln accordance wilh your financial examination warrant. a full ~cope ru; oc,auon financial examination ha been made of the records. affair!) and financial condition of
Missouri Property and Casualty Insurance Guaranty Association
hereinafter referred 10 a "Lhe As!locia1ioa .. or .. MPCJGA'. It administrative office is located at 994 Diamond Ridge. Sui1e 102, Jefferson City. Mi oun. 65109, telephone number (573) 634-8455. The examination began on February 25. 20 13. and concluded on the above date.
SCOPE OF EXAMINATION
Period Covered
The prior full . cope financial examination of the Association ~ a\ made ~ of December 31. 2006, and wa conducted by examiner from Lhe State of Mi souri. The current full ·cope financial examination co" ered the period from January 1. 2007 through December 3 1. 2011. and wru; conducted by examiners from Lhe State of Mis-ouri . The examination al,o included Lhe material tran~act ioas and/or event occurring ~ub ·equent to December 31. 2011.
Procedure
This examination was conducted in accordance with the NA IC Financial Condit ion Examiners Handbook. except where practice , procedure and applicable regulation of lhe Mb\OUri Department of Insurance, Financial In titution., and Profe ionaJ Regi~tralion (DIFP) and rntute of the State of Missouri prevailed. The examinanon used mostly a sub~tanti\ e ba~ed approach to re I material as ets and significant liabilitie . Limited tesung of internal control \.\as performed due to the small ize of the As ociation' operat ions.
l\lPClGA - 12/31 /201 l Exam
The exammers relied upon infonnaLion upplied by the A~soc1at1on· independent auditor. William -Keepers. LLC. of Jeffer on City, Missouri. for ns audit covering lhe period from January 1, 20 11 through December 3 1, 2011. Areas in which the testing ancl results from the CPA workpapers \Vere relied upon in our examination included internal control identification. internal control wall'throughs. bank confirmations. inve tmcnt market \,alue te~ting. journal enrry te ting, unrecorded liability testing. and fraud ri k a s~smem.
'C Th-1ARY OF SIGNIFICA.~T FINDING
There were no material adverse findings, ignificant non-compliance issues. or material change to lhe financial tatemenh noted during the examination.
UBSEQUENT EVENTS
There were no significant ub equent event noted from December 31, 2011 through the date of thi'i report.
AS OCIATIO HISTORY
Genera]
MPCIGA was created on September 28. 1971. pur!'luant to Sections 375.771 to 375.779 of the Revised Statutes of Mi-;souri (RSMo), which i-; referred to as Lhc ··Missouri Property and Casualty lmurance Guarant) A ociation Act." The A ociation i'i a ta""{-exempt. non-profit legal entity established Lo CO\'er the claim on polic1e issued by insurers that ha\'e been determined to be insol\'ent by a court of competent jurisdiction in any tale. A ··covered claim·· of the Association. as defined by Section 375.772 (As1,ociation, Created-Definitions). require that the claimant or insured is a re ident of Mi ouri at lhe Lime of the insured event. or the insured prope11) from which the claim ari es i pern1anently located in Mi souri. The A ·sociation i authorized to a se . it member<. in order to fulfill its obligations.
Section 375.775 RSMo (As ociation. Powers and Duties) state that covered claims of Mi.v,ouri residents under an; pohc) (except for worker·~ compensation) i ued by an insolvent in~urer shall be paid up co the pohcy limit. not to exceed a maximum of S300.000 per claim. Worker' compensation cla ims are to be paid at the fu ll amoum of each claim. Covered claim, do not include those from any insured with a net wonh of greater than S25 million.
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MPCJGA - 12/31/2011 Exam
Membership
A of December 31, 2011. there were 923 companies licensed to sell property and casualty coverage in Missoun. Pursuant to Section 375. 772 RS Mo. all in urers with authority to transact propeny or cru.ualt) in~urance in Missouri are member-. of the A!o.sociation and mu t remain members of the Association a a condition of their authority Lo Lran-.act insurance in Mi oun. Sect ion 375.773 RSMo (Account , Type of Insurance-Applicability of Law) exempts the following type of direct insurance from the provisions of Sectio~ 375.771 to 375.779 RSMo: life. accident and sicknes . title, '>urety, disabilit), credit. mortgage guaranty. ocean marine. and a, e sment insurance v. rinen under the provi ionl> of Chapter 383 RS Mo (Malpractice Insurance).
Affiliation
The Association i jointly operated with the Mis ouri Life and Health Insurance Guaranty A !o>OCiation (MLH1GA). An agreement. dated May 8. 200 l between MPCIGA and ML HIGA pecifie the manner to allocate joint expen e~ between the two emitie . All jotnt expeme are
pa id initially by MLHIGA, which subsequently allocates expenses to MPCIGA. The allocation basi for joint expen es is in proportion to Lhe percentage of time spent by each employee on each entity' !o. bu~ine and affairs.
CORPORATE RECORDS
Section 375.776 RSMo (Board of Directors. Selection. Term~-Power~ and Duties) require that a Plan of Operation is lo be maintained by the A sociation t0 e tabli'ih various procedure~ for the Board of Directors. record keeping. and other operational matter5. A revie\, "'a made of the Plan of Operation for the examination penod. There were no amendments or changes during the penod under examination.
The minme, of the Board of Director · meeting . member b1p meeting-.. and committee meetings were reviev.-ed for proper approval of corporate tran acuons. In general. the minutes appear to properly reflect and approve the Association· major transactions and event for t.he period under examination.
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~IA.~AGE1\1ENT AND C01\1ROL
Board of Directors
The oversight of the A ociation · operation i performed by a Board of Directors that represent member insurers. Section 375.776 RSMo requires that the number of directors shall be seven. Thi statute also specifie. thal directors are co be elected by the member insurers of the A ociation. subject to approval by the Director of the Mi souri DIFP. The Board of Director elecced and s,erving. as of December 31, 1011. were as follows:
Name Charles Burhan D. Scott Forre t
David Monaghan
Joe Moseley
Rohen Schreiber
Michael VoiJe'i
Debra Wozniak
Committee
Principal Occupation and Business Affiliation As. i tam Vice President. Libeny Mutual Insurance Company Vice President of Claim . Cornerstone National Insurance Company Government Affair Coun el. American Family Mutual In~urance Co.
Vice Pre idem of Public Affairs. Shelter Insurance Companie,,
Vice Pre idem of In urance. Automobile Club Imer-lru,urance E~change
Manager. Farm Bureau Tov:n & Country Insurance Co. of Mi souri
Counsel. State Farm Mutual Amomobile Insurance Company
The Plan of Operation states that a Nominating Comminee will be taffed to recommend a ne,, director if a vacancy exi ts oa the Board of Directors.
Officers
The officer elected by the Board of Directors and sen ing, as of December 31. 2011, were a!i follows:
~ame ~ichael Voile~ Debra Wozniak Da"id Monaghan
Office Chairman of the Board Vice Chair Secretary and Treasurer
Al o serving in the non-elected po ition of Executive Director and Managing SecreLary 1s
Charles Renn.
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l\lPCIGA - 12/31/2011 Exam
L'1SOLVE JCIE
As of December 31. 201 l. the Association administered 50 open insolvencie!i. which included 30 in ol,encie \\-lth no open claims. No insolvencies occurred during the examination period that rcpre'iented a material amount of claims from Mis ouri policyholder . Below i'l a li::.ting of new in oh encies and clo ed in olvencie during the examination period:
New Insolvencies:
Insurance Company Lawrenceville Propeny and Ca ualty Company Park A,enue Property and C~ualt) In urance Co. Imperial Casualty and Indemnity Company Atlantic Mutual Insurance Company Centennial Insurance Company
Closed Insolvencies:
Insurance Companv S & H Insurance Company Ohio General Insurance Company Hamilton In urance Company lntemarional Indemnity In urance Company A-,. ociated Phy 1c1an ln urance Compan} PIE Mutual lnsurance Company Sable In urance Company
State of Domicile Virginia Oklahoma Oklahoma New York Nev. York
State of Domicile California Ohio Penm.ylvania lllino1 1lhn01 Ohio California
ASSESSivIENTS AND REFL'NDS
Liquidation Date 4/9/2008 11/ 18/1009 5/12/2010 4/27/2011 4/27/2011
Closed Date 4/30/2007 12/31/2007 5/15/2008 7/31/2008 12/9/2008 4/20/2010 7/26/201 l
A<:, e~ men~ are levied at the di cretion of the Board of Direcrors whenever funds are needed to pay claims and expenses. Asse smem::. are limited to l % of the net direct written premium of each member insurer. Per Section 375.775 RSMo, as essmenLS of member insurer are ba ed on the m urer' proportion of net direct ""riuen premium for the prior year for all Mb~ouri licen!)ed in~urers. A se ment~ require the approval of a majority of the Board of Director\. There were no a sessments of member insurer during the examination period.
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:\IPCJGA - L2/31/2011 Exam
Refunds ma} be i ued lo member in!")urer-, pursuant lo Section 375.775 RSMo. in an) year in which the As ociation's a set are projected to exceed liabilities for lhe upcoming year. Asse. srnents previously paid by member insurcr5 can be fully recovered through tax credits on premium tax return . Therefore. refunds are u~uall) is ued to the State of Mi,,ouri instead of member in urers. The As ociation refunded $8.000.000 to the State of Mis oun in 2007 mostly due to an exce s of net a ~ets for the iru.olvcnt Legion lm,urance Company. The Association refunded $ I 9,293.249 to the State of Mis ouri in 2010 due to the clo ing of the insolvency for P.I.E. Mutual Insurance Company and the exce net a,secs that had accumulated ince the in oh ency began in 1998.
FIDELITY B0::\1) A.~1) OTHER INSURA.~CE
The Association i a named insured on a business owner·s policy that cover · losses resulling from fraudulent or di ·honest act of an employee. The Mi ouri Life and Heallh In urance Guarant) A "sociation i also a named msured on this bond. The bond prov id~ co, erage with a liability limi1 of S500.000 and a S500 deductible. Th1 level of coverage complie ,v1th the suggested minimum coverage recommended by the NAIC Financial Exarniner·s Handbook.
The As ociation is also a named iru.ured on the following other in urance pohcie-.: commercial general liabihty. commercial exce.\s liabili1y. busine'>s personal propert,. and worker's compensation and employer· liabiluy.
EMPLOYEE BENEFITS
A of December 31. 201 I. MPCIGA and MLHlGAjoinll} employed ix employees located in an office in Jefferson Cily. Mis ouri. A variety of ,;tandard benefits are provided lo the employee . which include the following: medical insurance, health savings account. dental and , is ion benefit reimbursemenl. life insurance. disabilil}' in urance. and persona] time off (vacation/ ·ick leave). Employee are al-;o pro'- ided with a -+0 I (k) savings / retirement plan. which prm ide., for an employer contribution equal to 8% of annual alary each year. Benefit co ts for joint employee are allocated to MPCIGA purc;uant to an agreemem that is described in the Affiliation section of this report.
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ACCOUNT A-~ RECORDS
The Association's financial statement are reported using Generally Accepled Accounting Principl~ (GAAP). A change to the GAAP accounting basis wa~ made. effective January l, 2010. from the modified Cn!)h basi~ that was previou ly ~ed.
The CPA firm, Williams-Keepers. LLC, of Jefferson City. Mis ouri performed the audits of the A sociation'.., financial tatement for each year of the examination period.
The actuarial opinion regarding the As ociation' reserve for los e~ and lo adju tment expenses. as of December 31. 201 l. was issued by Alexander Laurie. FCAS. MAAA. of Towers, Wac on & Co .. in St. Loui , Mi ouri. Tower;. Watson & Co. performed the actuarial re, ie\l, of re erves for each year of the examination period.
~A1~CIAL TATEl\IEXTS
The following financial statements, with upponing exhibit . present the financial condition of the As ociation for the period ending December 31. 2011. Any examination adjw,tment to the amounts reported in the financial !o,latemenL'i and/or commems regarding uch are made in the Comments on Financial Statement Items. The failure of any column of number to add to it respective total i due to rounding or truncation.
There may ha,e been additional difference~ found in the course of thic; exammat1on, ,,hich are not \bown m the Comments on Financial Slalement Items ection. The e difference~ were deLermined to be immaterial concerning their effect on the financial statements. and therefore, were only communicated to the As ociation and noted in the workpaper-,.
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Assets as of December 31, 2011
Cash and Ca h Equivalents
Inve anent~
Account Receivable
Unbilled A. se sments
Computer Software
TOTALA SETS
MPCTGA - 12/31/2011 Exam
S -L487,264
82.919,2 16
396.628
32.9-+6.235
36.123
$120.785.466
Liabilities and et Assets as of December 31, 2011
Account!\ Payable
Due to Missouri L&H A ociation
Early Acee Liabilit}
Reserves for Los, e and LAE
TOT AL LIABILITIES Net Unrestricted As et
TOT AL LIABILITIES Al\l) NET Ui\11lESTRI CTED ASSETS
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S 93.522
40.886
71.791.347
30.501,097
$102,426,852
18.358,6U
$120.785,466
l\JPCfGA - 12/31/2011 Exam
Statement of Activities For the Year Ended December 31, 2011
The a sisLance and cooperation extended by the officer and the employee of Mis ouri Propeny and Casualty Insurance Guaranty Association during the course of this examination L'> hereby acknowledged and appreciated.
State of Mis..,ouri
Count}of ~
) ) )
VERIFICATION
I. T im L. Tum. on my oath swear that to the be t of my knowledge and belief the abo\'e examination rcpon i true and accurate and i! compri ed of only fact'> appearing upon the books. records or other document of Ml. ,ouri Propeny and C~uahy lfuurance Guarant) Association its agents or other per\on. examined or a ascertained from the testimony of iLS officers or agent or other person examined concerning it affairs and such conclusions and recommendation~ as the examiners find reasonably warranted from the facts .
T im L. Tunks. CPA. CFE Examiner-Ln-Charge Missouri DIFP
. ik -mtW. Sworn to and uh cnbed before me th1'> lJ da) of~- 2013 .
My Commission Expires 5/1/2016 Commission #12413452
L\CPCIGA - 12/31/201 1 Exam
SUPER VI IOI\"
The examination proce ha been moniLored and 1,upen,1sed by the undersigned. The examination report and supporting workpapers have been reviewed and approved. Compliance with NAIC procedur~ and guideline a · contained in the Financial Condition Examiner') Handbook has been confirmed.
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l!(dt:1~ Mark A. Nance. CPA. CFE Audit ~ tanager Missouri DIFP
