Hi everyone --
Here are some sample questions I made up on Wilcox. Have fun!
Alice
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Questions on Wilcox
True/False
1. The purpose of Wilcox?s paper is not to compare the Guaranty
Association concept with the original legislative intent, but rather to
examine possible ways to correct the many technical flaws.
2. Proceeds of a typical insurance liquidation typically yield less than
50 cents on the dollar.
3. In Professor Kimball?s model bill, only claims reported to the insurer
prior to the date of liquidation, or within the 30 day statutory period
after that date, would be eligible for coverage by the guaranty fund.
4. According to Wilcox, only about one claimant in 100 presents a claim
that reaches the coverage cap, leaving 99% of otherwise eligible claimants
covered for virtually 100% of their claim.
5. Professor Kimball originally thought that major commercial insureds
should be covered by the guaranty fund.
6. The ISO study of 1985 concluded that no one insolvency could exhaust
national guaranty fund capacity.
7. A related study by the Alliance of American Insurers concluded that no
one insolvency could impair local capacity.
8. According to Wilcox, per-state capacity problems have been few and
temporary.
9. The GAO?s review of guaranty fund operations failed to uncover any
problems in timeliness of claims payments.
10. Every state guaranty association is a member of the National Committee
of Insurance Guaranty Funds.
11. Non-economic losses are typically not covered by guaranty funds.
12. Lack of uniformity in maximum benefit levels has not been a
significant problem in multistate insolvencies.
13. According to Wilcox, Hurricane Andrew led to 8 insolvencies.
14. According to Wilcox, the costliest year for insurers in terms of
guaranty fund assessments was 1992.
Essay
1. Name 3 lines of business excluded from guaranty fund coverage because
they "present problems quite distinct from those of property and liability
insurance".
2. Name 3 lines of business excluded from guaranty fund coverage because
their primary purpose is to provide protection for investment and financial
risks.
3. Give examples of times when states? guaranty fund capacity has been
exhausted. What were the consequences?
4. Give 4 possible causes for delays in payments to claimants through the
guaranty fund system.
5. Name 7 structural and coverage aspects in which there is a high degree
of uniformity among guaranty funds from one jurisdiction to another.
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Answers on Wilcox
True/False
1. The purpose of Wilcox?s paper is not to compare the Guaranty
Association concept with the original legislative intent, but rather to
examine possible ways to correct the many technical flaws.
F, p.371
2. Proceeds of a typical insurance liquidation typically yield less than
50 cents on the dollar.
T, p.372 -- although this is just the liquidation. The guaranty fund makes
up the bulk of the difference for most claimants.
3. In Professor Kimball?s model bill, only claims reported to the insurer
prior to the date of liquidation, or within the 30 day statutory period
after that date, would be eligible for coverage by the guaranty fund.
F, it?s incurred as opposed to reported. The grace period is in fact 30
days though.
4. According to Wilcox, only about one claimant in 100 presents a claim
that reaches the coverage cap, leaving 99% of otherwise eligible claimants
covered for virtually 100% of their claim.
F, it?s one claimant in 1000 rather than 1 in 100, p.389.
5. Professor Kimball originally thought that major commercial insureds
should be covered by the guaranty fund.
T, p.389. He later backed down from this.
6. The ISO study of 1985 concluded that no one insolvency could exhaust
national guaranty fund capacity.
T, p.390
7. A related study by the Alliance of American Insurers concluded that no
one insolvency could impair local capacity.
F, p.390
8. According to Wilcox, per-state capacity problems have been few and
temporary.
T, p.390
9. The GAO?s review of guaranty fund operations failed to uncover any
problems in timeliness of claims payments.
T, p.393
10. Every state guaranty association is a member of the National Committee
of Insurance Guaranty Funds.
T, p.394
11. Non-economic losses are typically not covered by guaranty funds.
F, they are covered in about 92% of funds.
12. Lack of uniformity in maximum benefit levels has not been a
significant problem in multistate insolvencies.
T, since so few claims reach the cap -- even though only about 75% of
states match or exceed the $300,000 cap, p. 396
13. According to Wilcox, Hurricane Andrew led to 8 insolvencies.
T, p. 398 -- notice that Musulin says 12.
14. According to Wilcox, the costliest year for insurers in terms of
guaranty fund assessments was 1992.
F, 1987. 1992 was costliest in terms of catastrophe loss but by far the
highest assessments to the industry were in 1987, p.400.
Essay
1. Name 3 lines of business excluded from guaranty fund coverage because
they "present problems quite distinct from those of property and liability
insurance".
a) title
b) warranties and service contract insurance
c) ocean marine
d) governmental insurance, p.390
2. Name 3 lines of business excluded from guaranty fund coverage because
their primary purpose is to provide protection for investment and financial
risks.
a) fidelity
b) surety
c) financial guaranty, p.390
3. Give examples of times when states? guaranty fund capacity has been
exhausted. What were the consequences?
Rhode Island and Maine exhausted their WC funds but were able to transfer
money from other accounts.
Florida reached capacity after Andrew; South Carolina reached capacity
after Hugo;
Hawaii and Puerto Rico have also reached capacity after natural disasters.
Louisiana has also reached capacity. But in each case the necessary funds
were made available through various means.
4. Give 4 possible causes for delays in payments to claimants through the
guaranty fund system.
a) slowness on the part of the associations
b) difficulties in determining which guaranty fund is responsible
c) delays on the part of the liquidation staff in locating, examining,
and distributing claims files
d) "the sorry state of the company records stemming from its death
throes" (poetically put), p.393
5. Name 7 structural and coverage aspects in which there is a high degree
of uniformity among guaranty funds from one jurisdiction to another.
a) adoption ? all jurisdictions have adopted guaranty funds
b) covered lines ? all jurisdictions cover as many or more lines of
business as called for in the model
c) workers comp ? about 93% of states adopted the NAIC approach
d) unearned premium ? about 82% of states meet or exceed the NAIC
suggested coverage
e) covered insurers ? virtually all states have provisions substantially
similar to NAIC model
f) non-economic losses ? covered in about 92% of states
g) UDS (uniform data system?) ? adopted by all states, with 80% in
compliance as of 1994, p.396-397