Regulators Say Conseco's Insurance Units Are 'Solid'

Although there is not case law on the issue, he continues, the findings of the privileged memorandum suggest the insurance entities assets would not be accessed.

What regulators also could not say for sure was whether, in the event of a regulatory seizure of any Conseco entity, state guaranty funds would cover all product lines.

At press time, the National Organization of Life and Health Insurance Guaranty Associations, Herndon, Va., could not be reached for comment.

Although there are "walls around the insurance companies," Thomas asserts, there is "a lot of hysteria from people who think it is one big company."

"At this point, I would say that the companies are solid," says Jack Messmore, deputy director of the financial division for the Illinois insurance department. Before any dividend or surplus notes can be upstreamed to a parent company of an insurer, the insurance department in that state must approve, he adds.

Lee Jones, a representative with the Texas department, adds that before any insurance company is sold, state regulators must approve. Currently, Texas maintains that each of the insurance companies has sufficient capital and surplus, Jones continues. "Everyone is hoping and praying that Conseco will right itself."

"Conseco has been really good about reaching out to regulators," says Beth Vecchioli, deputy director of insurance services with the Florida department.

As of the last quarterly filing with the department, all 12 Conseco units operating in the state are in good standing and Florida does not expect non-compliance when the second quarter filing is made, Vecchioli adds.

If, theoretically, an insurers parent filed for bankruptcy, the insurance companies could not legally be picked apart, she says.

During conversations with management, Florida was told there is no plan to sell any of the insurance operations or to move books of business, she adds.

"Each company on its own is in stable financial condition," says John Charlton, a representative of the Ohio department. There are risk-based capital laws that need to be met by insurers and if RBC fell below required levels, that is when Ohio could stop business from being written in the state, he continues.

Reproduced from National Underwriter Life & Health/Financial Services Edition, August 19, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.