Life Insurers May Have to Share LTCI Issuer Failure Bills

Guaranty Associations

A state guaranty association is an insurance company organization that uses cash from member insurers to pay the claims when a member insurer fails.

Different states have different guaranty association rules, but, traditionally, many states have classified long-term care insurance as a health insurance line, even though the biggest LTCI issuers were known more for selling life insurance and annuities than for selling LTCI coverage.

In March, a state court judge in Pennsylvania ordered the liquidation of two issuers of LTCI coverage: Penn Treaty Network America and a sister company, American Network Insurance Company.

Guaranty associations began taking responsibility for the LTCI coverage issued.

Because of the way responsibility for LTCI issuer failures is allocated, many insurers organized as sellers of traditional indemnity health insurance have received large guaranty association assessments as a result of the Penn Treaty and American Network liquidations.

Many carriers that focus mainly on writing life insurance and annuities, and carriers organized health maintenance organizations, have received no Penn Treaty assessment bills, or assessment bills affecting only their small health insurance operations.

—Read Firm Proposes Long-Term Care Insurance Run-Off Program on ThinkAdvisor.

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