1. Association of Insurance Compliance Professionals June 25, 2019
OSD Overview
Association of Insurance Compliance Professionals
June 25, 2019

2. Agenda OSD Overview NAIC Responsibilities Statutory Authority
Organizational Structure
Corporate Governance
Functional Roles & Responsibilities
Mission
Recent Results
Types of Assignments
How Mission is Accomplished
NAIC Responsibilities

3. OSD Overview Statutory Authority
Under Article XIII of the Illinois Insurance Code, the Illinois Director of Insurance (“Director”) serves as the statutory conservator, rehabilitator or liquidator of financially impaired and insolvent Illinois domestic insurers, of unauthorized insurers, and as ancillary receiver of certain foreign or alien insurers doing business in the state. Illinois’ Office of the Special Deputy Receiver (“OSD”) assists the Director in performing her duties under Article XIII, as well as the employer for the personnel that assist the Director in these capacities

4. OSD Overview Organizational Structure
Director is the Statutory Conservator, Rehabilitator, Liquidator of Illinois domestic companies
Section 202 of the Code authorizes Director to appoint a Special Deputy and hire personnel to assist in fulfilling her receivership duties
Office of the Special Deputy Receiver first formed by Director in and incorporated as not-for-profit in 1991 serves as employment vehicle for personnel that assist Director in discharging these duties
Not-for-profit corporate form insulates Director, personally, and State of Illinois from employment liability, and facilitates banking, leasing, insurance, and other business operations

5. OSD Overview Corporate Governance
Direct report to Director as statutory Conservator, Rehabilitator or Liquidator
Board of Directors approved by Director approves annual operating budget and reviews annual audit reports
Report to IDOI Chief Deputy Director at bi-weekly IDOI executive meetings
Work closely with IDOI GC on significant pleadings and Deputy Director of Financial & Corporate Regulatory and staff on developing resolution plans for troubled cos.
Of counsel to Attorney General’s office at receivership case inception; counsel of record once judgment of receivership is entered
Supervising Court oversees receivership estate pursuant to statutory scheme
Annual independent statutory audit requirement
Kerber Eck & Braeckel current auditor
Copies of audits by statute provided to Governor, Auditor General & Legislative Leaders
Annual Auditor General review of auditor’s work papers

6. OSD Overview Since the creation of the office, OSD has developed resolution plans for the Director on 179 insurer receivership estates and company supervisions, and completed and closed 160 estates. OSD assignments have included receiverships and supervisions of the following types of insurance entities:
Property & Casualty Insurers
Mortgage Guaranty Insurers
Life Insurers
Insurance Exchange Syndicates
Accident & Health Insurers
Farm Mutual Insurers
Health Insurers
Unauthorized Insurers
Health Maintenance Organizations
Fraternal Benefit Societies
Burial Societies
Group Workers’ Compensation Pools
Religious & Charitable Risk Pooling Trusts

7. Functional Roles & Responsibilities of OSD Officers
Legal (GC)
Claims (GC)
Policyholder, UNderwriting and Corporate Services (GC)
Human Resources (GC)
Accounting & Financial Reporting(CFO)
Treasury (CFO)
Financial Examination (CFO)
Tax & Compliance (CFO & GC)
Reinsurance (CRTO)
Information Technology (CRTO)

8. OSD Overview Mission
Our mission is to achieve consumer protection through receivership resolution expertise and the execution of a resolution strategy appropriate to the unique circumstances of each troubled company estate, including maximization of asset recovery, fair disposition of claims, and timely delivery of assets to creditors

9. OSD Recent Results
Receivership estate distributions and associated expenses are single most important measure of success for the consumers
2018 distributions to consumers and other creditors totaled $262.7 M ($180 M direct, plus $82.7 M by GAs)
$2.5 B distributed to consumers and other creditors over past 10 years
OSD’s 2018 annual budget $9.7 M
2018 distribution to expense ratio was 3.8%
OSD’s “all-in” average hourly services rate about $100 per hour, including salary, benefits, taxes, rent, insurance, information technology

10. OSD Recent Results
In 2018 staff directly handled 26,000 consumer telephone calls
Recorded 21,000 proof of claim forms
Distributed 26,000 consumer notices
Administered or settled 860 policyholder claims
Processed and collected $34.2 of reinsurance collections
Drafted pleadings and covered court calls for 19 receivership cases
Prepared state and federal income tax returns for all 19 receivership estates and their subsidiaries

11. OSD Overview How Mission Is Accomplished
No Taxpayer expense
Not-for-profit
Minimize administrative expense
Maximize policyholder and creditor payouts
Economies of scale through employee utilization and time allocation between multiple estates
Development and retention of staff expertise
Leverage capacity through retention of legacy staff

12. How OSD Mission Accomplished
OSD staff count at 53 FTEs
19 pending receivership estates and 1 supervision
Office located in Chicago, IL
Supervising Court is Circuit Court of Cook County, IL
OSD professionals: Accounting & Finance, Claims, Legal, HR, IT, Policy Administration, Reinsurance and Tax
Retain employees of receivership estate as needed, particularly IT, (provides nice transition/attrition runway for company employees)
OSD IT outsourced to NTT Data
Investment of Estate Assets outsourced to Mesirow Financial

13. OSD & NAIC
OSD has participated as Illinois representative on the following NAIC task forces and working groups in recent years:
Receivership & Insolvency Task Force (RITF) (NAIC E-Committee)
Receivership Model Law Working Group (RMLWG)
Receivership Financial Analysis Working Group (RFAWG)
Receivership Large Deductible Workers Compensation Working Group