PACICC.Comp

Question 1

What is the purpose of PACICC? (Property and Casualty Insurance Compensation Corporation)

Answer 1

Protect policyholder in the event of insurer insolvency for unpaid claims and unearned premium

Question 2

Who administers this policyholder recovery ‘plan’?

Answer 2

Administered by the non-profit PACICC

Question 3

Who are the members of PACICC?

Answer 3

All licensed, participating insurers in a jurisdiction, with some exemptions (Ex: reinsurers)

Exclude: Auto in MB & SK, Auto BI in QC

Question 4

What triggers PACICC involvement? (2)

Answer 4

1. A formal winding up order must have been issued to insurer
2. Insurer must be a member of PACICC

• winding up : ordonance de liquidation

Question 5

Compare OSFI vs PACICC on their roles regarding insolvencies

Answer 5

OSFI: seeks to minimize PROBABILITY of insolvency

PACICC: provides reasonable recovery to policyholders AFTER insolvency

Question 6

Calculate PACCIC compensation

Answer 6

1. Unearned premium component = 70% x min(2500, unearned premium)
2. Indemnity component = min( loss - distribution - deductible, X)
   X = 415,000 for auto
   520,000 for pers prop
3. Recovery = (unearned premium component) + (indemnity component)

Question 7

Identify PACICC 3 funding methods

Answer 7

1. Assessment of participating (solvent) insurers :
   
   • % assessment is based on the %DWP/ total market WP in the juriduction; wiht a max. of 1.5% DWP
2. Compensation fund – borrow money from this fund (pre-insolvency funding)
3. 3rd party recovery

Question 8

Which 2 PACICC funding methods increase capacity?

Answer 8

1. Assessment of participating (solvent) insurers
2. Compensation fund (the compensation fund is funded by assessments)

Question 9

Who does PACICC assess?

Answer 9

Participating insurers in jurisdiction where the insolvent insurer was writing business

Question 10

What is the limit on what PACICC may assess in aggregate?

Answer 10

shortfall between:
→ amounts advanced by PACICC to policy holders
and..
→ amounts PACICC received from insolvent insurer & 3rd parties

Question 11

Formula for individual insurer assessment

PACICC

Answer 11

A = B x (C/D)
A = insurer assessment
B = total amount assessed by PACICC = Amount advanced - Recovery
C = DWP of insurer
D = total DWP of all assessed insurers

Question 12

What is the limit on individual insurer assessment?

PACICC

Answer 12

1.5% of DWP (Direct Written Premium)

Question 13

Briefly explain whether PACICC is well positioned financially to handle insurer insolvencies in the future.

Answer 13

Yes, because:
- OSFI MCT regulations minimize insolvencies
- PACICC can assess solvent insurers
- a compensation fund already exists
- doesn’t have to provide FULL compensation

Question 14

Evaluate the performance of PACICC according to criteria for evaluating government programs (3)

Answer 14

Is it insurance or welfare:
→ it is insurance (sort of) because members pay assessment fees

Is it necessary:
→ yes, otherwise policyholders may be unprotected if their insurer goes
insolvent

Is it efficient:
→ yes, costs are lower because there are no commissions or advertising costs

Question 15

Identify the 4 steps in the PACICC procedure under an insolvency

Answer 15

1. PACICC discusses selection of liquidator with superintendent
2. PACICC consults with court-appointed liquidator
3. Collect assessments from solvent participating insurers
4. Policyholders are compensated according to prescribed scheme

Question 16

Identify the role of claimants of the insolvent insurer under PACICC

Answer 16

File claim with PACICC for unearned premium and outstanding claims net of other sources of recovery.

Question 17

Identify the role of the solvent participating insurers under PACICC

Answer 17

Pay assessments to PACICC according to prescribed formula