States agree to help bail out failed insurer

December 04, 1991|By New York Times News Service

LOS ANGELES -- The California insurance commissioner said yesterday that enough states belonging to the insurance industry's guaranty association have ratified an agreement to guarantee the group's participation in the bailout of the failed Executive Life Insurance Co.

John Garamendi, the commissioner, said that the proposal had been ratified by members of the National Organization of Life and Health Guaranty Associations representing states with policyholders who in total hold 80 percent of the value of the company's life insurance policies.

Eighty percent was the threshold for approval. The most recent state to ratify the plan was Utah.

The five states with the most policyholders -- California, Texas, Florida, Illinois and Pennsylvania -- had ratified.

The proposal, enhanced from the group's original offer, calls for the guaranty association to make up most of the losses that would otherwise be suffered by Executive Life policyholders. The plan will ultimately cost the life insurance industry about $1.9 LTC billion, or $1 billion more than originally planned.

Mr. Garamendi also said that negotiations are progressing with the Internal Revenue Service, and a settlement announcement is expected soon.

The IRS has placed a $643 million tax lien against Executive Life.

The insurance company, which was seized by the state earlier this year, is being taken over by a French-led consortium that includes Altus Finance and an insurance company known as MAAF.

However, Mr. Garamendi's selection of the French investor group and other terms of the proposed resolution of Executive Life's failure must be approved by the state court overseeing the case.

Mr. Garamendi also said the state insurance department has asked the California state court in Los Angeles overseeing the Executive Life case to issue an order of liquidation, a step that would formally trigger claims under the state guaranty funds.

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