PACICC

Question 1

What is the mandate of the PACICC?

Answer 1

Manages a compensation plan designed to provide a reasonable level of recovery for unpaid claims of PC PHs in the event that an insurer becomes insolvent and cannot meet its financial obligations

Question 2

Describe Conditions that must be met before PACICC has financial responsibility in connection with an insurer’s insolvency

Answer 2

• Formal winding-up order

* Insurer must be a member of PACICC

Question 3

Describe the payment under PACICC

Answer 3

• Maximum claim recovery is currently $250K in respect to all claims from a single occurrence ($300K limit for personal property)
• Pays 70% of unearned portion up to max payment of $700 (UEPR not covered prior 1996)

Question 4

Give Exceptions to the PACICC compensation plan

Answer 4

1 - Life Insurance
2 - Distinctive classes of general insurance: aircraft, credit, crop, employer’s liab, D&O, certain E&O (except to malpractice which is included in PACICC), fidelity, financial guarantee, marine, mortgage, surety, and title insurance
3 - Where other compensation plans apply: Auto in MB and SK, BI in Qc

Question 5

Determine the assessment of a given participating insurer

Answer 5

= Total Amount * WP of a given participating insurer / WP of All participating insurers

Question 6

Briefly describe PACICC

Answer 6

Property And Casualty Insurance Compensation Corporation
• Non-profit organization
• Protect PHs from financial loss in insurer becomes insolvent
• All included cies must participate to PACICC

Question 7

Discuss Recovery by PACICC of Amounts Paid

Answer 7

A key principle of the Plan is that any amounts paid by PACICC are recovered by PACICC before any additional payment is received by the PH as to that claim (from a third party or the insolvent insurer).

PH is required to:
• Certify that he has exhausted any available claim against any solvent insurer with whom he has a policy that covers the same loss.
• Assign PACICC all of his right against the insolvent insurer

Question 8

Discuss Assessment Process in PACICC

Answer 8

• PACICC recovers the amount that it advanced to PHs of an insolvent insurer through assessments levied against part. insurers licensed in the part. jrdt in which the insolvent insurer was writing business
- Pro-rata between the total direct WP of the part. insurer in the relevant jrdt to the total direct WP of all part. insurers in the relevant jrdt
- Part. insurer is assessed as to each jrdt in which it is licenced and in which the insolvent insurer was also licenced
• Assessments are limited to the shortfall between amounts advanced by PACICC and amounts recovered by it from the insolvent insurer and third parties
• Pre-insolvency funding — establishment of a Compensation Fund of approx. $30M
• Max annual levy to pay in a particular jrdt is 1.5% of its direct WP
• BOD may decide from the Fund, but must be fully repaid with interest, with the relevant insurers being assessed for the appropriate amount
• BOD is also entitled to levy admin assessments for the admin expenses of PACICC

Question 9

Discuss Steps in procedure in an insolvency in PACICC

Answer 9

1 - Representatives of PACICC consult with the court appointed liquidator
2 - Discussion with the relevant Supt as to pre-selecting the liquidator. The firm that has been the auditor of the insolvent insurer is excluded from consideration
3 - PACICC have developed a model wind-up order
4 - Procedures established by the liquidator to settle the quantum of PHs claims are reviewed with PACICC
5 - PACICC does not stand in the shoes of the liquidator but it is generally the case that the co-operation between them is such that PACICC requires minimal staff resources