The New Jersey Safety Net
of the New Jersey Property-Liability Insurance Guaranty Association THE NEW JERSEY SAFETY NET NJPLIGA was established in 1974 to provide statutory benefits to insureds and claimants of insolvent propertycasualty insurance companies. A safety net is provided to New Jersey policyholders and claimants when they find themselves without certain types of insurance coverage. Reimbursement of insurance carriers handling certain excess medical benefits (EMBs) paid on PIP claims is also a responsibility of NJPLIGA. NJPLIGA works in conjunction with its Board of Directors, member companies and the New Jersey Department of Banking and Insurance (NJDOBI) to satisfy its statutory responsibilities. NJPLIGA also administers the following statutory entities: Workers Compensation Security Fund (WCSF). The WCSF was created in 1935 and administers the claims of insolvent workers compensation insurance carriers arising from the coverage of risks located or resident in New Jersey. In January 2010, responsibility for the administration of the WCSF was transferred to NJPLIGA. New Jersey Surplus Lines Insurance Guaranty Fund (NJSLIGF). NJSLIGF was established in 1984 to provide statutory benefits to the policyholders and claimants of insolvent surplus lines insurance carriers. At year end, surplus lines membership totaled 196 eligible insurers. Unsatisfied Claim and Judgment Fund (UCJF). In 1952, the UCJF was established to pay the damages of uninsured claimants who were injured in an accident with an uninsured motorist. Since 2004, stranger pedestrian PIP claims are also covered by the UCJF. NJPLIGA also services claims on behalf of the New Jersey Medical Malpractice Reinsurance Association and provides third party administrator (TPA) services pursuant to its statutory authority. Page 1 of 19
NJPLIGA CLAIMS AND FINANCIAL ACTIVITY Page 2 of 19
Statements of Assets, Liabilities and Fund Balance Modified Cash Basis December 31, 2014 2013 ASSETS Cash and cash equivalents $ 31,061,383 $ 38,421,953 Investments, at cost 220,438,975 208,432,541 Assessments receivable due from member companies, net of allowance of $752,608 in 2014 and $861,559 in 2013 - - Due from affiliated funds 2,049,511 867,515 Property and equipment, net of accumulated depreciation and amortization 1,047,018 837,139 Other assets 159,778 200,189 Total assets $ 254,756,665 $ 248,759,337 LIABILITIES AND FUND BALANCE Employee benefits payable $ 23,351 $ 4,828 Funds held under TPA contracts 214,147 392,987 Total liabilities 237,498 397,815 Fund balance 254,519,167 248,361,522 Total liabilities and fund balance $ 254,756,665 $ 248,759,337 Page 3 of 19
Statements of Assessments Charged and Collections, Expenses and Fund Balance Modified Cash Basis Year Ended December 31, 2014 2013 Assessments charged and collections: Members' assessments charged, net of refunds $ 131,349,343 $ 124,806,305 Net investment and interest income 1,425,915 1,362,431 Interest income received from affiliated fund 16,566 19,608 Distributions collected in connection with insolvency proceedings (including interest thereon) 20,753,670 1,471,683 Large deductible recoveries 1,750 29 Fund transfer from State of New Jersey TPA 876,728 718,288 Total assessments charged and collections 154,423,972 128,378,344 Expenses: Claims paid 2,749,888 13,296,354 Claims paid Excess Medical Benefit 139,073,647 115,933,863 Claims paid TPA 778,999 618,875 Claims expense paid 1,157,402 1,550,282 Claims expense paid Excess Medical Benefit 997,172 565,637 Claims expense paid TPA 64,579 36,257 Premium refunds paid 780,189 553 Administrative expenses paid direct 11,599,354 10,051,754 Administrative expenses reimbursed and due from other Funds (10,851,357) (9,286,356) Administrative expenses charged Excess Medical Benefit 1,781,496 1,822,148 Administrative expenses charged TPA 134,958 71,610 Total expenses 148,266,327 134,660,977 Excess (deficiency) of assessments charged and collections over expenses 6,157,645 (6,282,633) Fund balance at beginning of year 248,361,522 254,644,155 Fund balance at end of year $ 254,519,167 $ 248,361,522 Page 4 of 19
DISBURSEMENTS - NJPLIGA In 2014, the total losses paid by the Association on insolvency, EMB and TPA claims combined was $142.6 million and total loss adjustment expenses (LAE) were $2.2 million. NJPLIGA s indemnity payments on insolvent estates totaled $2.7 million with $1.2 million of LAE. Figure 1: NJPLIGA Disbursements on Estates, left, shows the top ten estates with the largest disbursements since the inception of the organization. NJPLIGA is also responsible for the runoff of EMB claims. In 2014, EMB expenditures averaged $11.7 million per month totaling $140.1 million for the year in reimbursements to member companies and the organization on PIP claims. RECEIPTS - NJPLIGA Distributions from insolvent estates totaled $20.8 million in 2014. At the May 21, 2014 Annual Meeting/Board of Directors Meeting, the NJPLIGA Board of Directors reviewed the funding needs of the organization to satisfy insolvency and other statutory obligations. The Board determined that an assessment of member companies was necessary and authorized a 0.9% assessment. A total of 483 member companies were billed $131.3 million. BALANCES AND RESERVES - NJPLIGA At year end, the NJPLIGA fund balance was $254.5 million with combined reserves of $316.8 million including insolvency reserves of $75.9 million, and a two year EMB reserve of $240.9 million. INSOLVENCY ACTIVITY The primary function of the organization is the management of the claims of insolvent property-casualty insurance companies. In 2014, 31 insolvent estates were administered by NJPLIGA with 4 estate closures. Page 5 of 19
WCSF CLAIMS AND FINANCIAL ACTIVITY Page 6 of 19
Statements of Assets, Liabilities and Fund Balance Modified Cash Basis December 31, 2014 2013 ASSETS Cash and cash equivalents $ 13,866,297 $ 14,588,877 Investments, at cost 129,247,769 113,893,944 Assessments receivable due from member companies, net of allowance of $154,640 in 2014 and 2013 - - Total assets $ 143,114,066 $ 128,482,821 LIABILITIES AND FUND BALANCE Due to affiliated funds $ 417,788 $ 162,468 Fund balance 142,696,278 128,320,353 Total liabilities and fund balance $ 143,114,066 $ 128,482,821 Page 7 of 19
Statements of Assessments Charged and Collections, Expenses and Fund Balance Modified Cash Basis Year Ended December 31, 2014 2013 Assessments charged and collections: Members' assessments charged $ 21,381,376 $ 18,513,801 Net investment and interest income 601,588 522,697 Distributions collected in connection with insolvency proceedings (including interest thereon) 15,687,758 21,818,823 Large deductible recoveries 124,789 316,464 Total assessments charged and collections 37,795,511 41,171,785 Expenses: Claims paid 20,104,296 15,732,906 Claims expenses paid 1,235,673 759,825 Administrative expenses charged Association 2,050,432 1,846,347 Administrative expenses paid direct 29,185 62,832 Total expenses 23,419,586 18,401,910 Excess of assessments charged and collections over expenses 14,375,925 22,769,875 Fund balance at beginning of year 128,320,353 105,550,478 Fund balance at end of year $ 142,696,278 $ 128,320,353 Page 8 of 19
WCSF DISBURSEMENTS - WCSF In 2014, the WCSF s loss payments on insolvent estates totaled $20.1 million plus $1.2 million of LAE. Figure 2: WCSF Payments on Estates in 2014, below, shows Lumbermens Mutual Casualty Company with the highest payments of $8.2 million in 2014. RECEIPTS - WCSF Distributions from insolvent estates in 2014 totaled $15.7 million. The WCSF collected $21.4 million in assessments from 278 member companies in 2014. BALANCES AND RESERVES - WCSF The year end available funds for the WCSF totaled $142.7 million with combined loss and LAE reserves of $284.1 million and $8.9 million, respectively. Page 9 of 19
INSOLVENCY ACTIVITY Freestone Insurance Company was domiciled in Delaware and was declared insolvent on August 15, 2014. The WCSF received 176 workers compensation claims with approximately $314,156 paid in loss and LAE and $4.1 million in combined loss and LAE reserves. In 2014, 24 insolvent workers compensation estates were managed by the WCSF. There were 4 estate closures in 2014. Page 10 of 19
SLIGF CLAIMS AND FINANCIAL ACTIVITY Page 11 of 19
Statements of Assets, Liabilities and Fund Balance Modified Cash Basis December 31, 2014 2013 ASSETS Cash and cash equivalents $ 801,616 $ 737,138 Reserve fund 37,000 37,000 Investments, at cost 10,333,034 10,305,353 Due from affiliated fund - 18,760 Total assets $ 11,171,650 $ 11,098,251 LIABILITIES AND FUND BALANCE Due to affiliated fund $ 10,025 $ 6,605 Total liabilities 10,025 6,605 Fund balance 11,161,625 11,091,646 Total liabilities and fund balance $ 11,171,650 $ 11,098,251 Page 12 of 19
Statements of Collections, Expenses and Fund Balance Modified Cash Basis Year Ended December 31, 2014 2013 Collections: Net investment and interest income $ 44,808 $ 51,472 Distributions collected in connection with insolvency proceedings (including interest thereon) 9,538 912,778 Total collections 54,346 964,250 Expenses: Claims recovered (68,153) (48,496) Claims expenses paid (recovered) 5,282 (43,509) Administrative expenses charged Association 43,674 41,530 Administrative expenses paid direct 3,564 4,672 Total recoveries (15,633) (45,803) Excess of collections over expenses 69,979 1,010,053 Fund balance at beginning of year 11,091,646 10,081,593 Fund balance at end of year $ 11,161,625 $ 11,091,646 Page 13 of 19
NJSLIGF DISBURSEMENTS NJSLIGF continued to experience minimal claim activity in 2014. Losses paid totaled $43,565. However, the organization recovered $111,718 for a net recovery of $68,153. RECEIPTS Distributions from insolvent estates totaled $9,538 in 2014. BALANCES AND RESERVES As of December 31, 2014, NJSLIGF had a fund balance totaling $11.2 million with combined indemnity and LAE reserves of $3.3 million. Page 14 of 19
UCJF CLAIMS AND FINANCIAL ACTIVITY Page 15 of 19
Statements of Assets, Liabilities and Fund Balance Modified Cash Basis December 31, 2014 2013 ASSETS Cash and cash equivalents $ 12,420,221 $ 13,967,875 Investments, at cost 6,491,831 3,015,989 Receivable from other funds 4,877 - Assessments receivable due from member companies net of allowance of $145,178 in 2014 and 2013 - - Total assets $ 18,916,929 $ 16,983,864 LIABILITIES AND FUND BALANCE Balances due plaintiffs arising from settlements $ 477,673 $ 466,918 Due to affiliated fund 1,619,688 713,825 Total liabilities 2,097,361 1,180,743 Fund balance 16,819,568 15,803,121 Total liabilities and fund balance $ 18,916,929 $ 16,983,864 Page 16 of 19
Statements of Assessments Charged and Collections, Expenses and Fund Balance Modified Cash Basis Year Ended December 31, 2014 2013 Assessments charged and collections: Members' assessments charged $ 84,314,311 $ 80,978,757 Claims recoverable 98,547 161,227 Net investment and interest income 304,145 265,991 Total assessments charged and collections 84,717,003 81,405,975 Expenses: Claims paid 67,148,060 76,511,847 Claims expense paid 7,683,966 4,441,625 Administrative expenses charged - Association 8,741,528 7,348,741 Administrative expenses paid - direct 110,436 142,954 Interest expense paid to affiliate - direct 16,566 19,608 Total expenses 83,700,556 88,464,775 Excess (deficiency) of assessments charged and collections over expenses 1,016,447 (7,058,800) Fund balance at beginning of year 15,803,121 22,861,921 Fund balance at end of year $ 16,819,568 $ 15,803,121 Page 17 of 19
UCJF DISBURSEMENTS The organization s UCJF responsibilities include the administration of uninsured motorist and stranger pedestrian PIP claims. In 2014, combined indemnity and LAE payments totaled $74.8 million with $67.1 million in indemnity and $7.7 million in LAE. Figure 3: Loss and Expense Payments on Stranger Ped PIP UCJF Claims, 2010-2014, below, shows actual payments for pedestrian PIP claims in 2014. RECEIPTS At the May 21, 2014 Annual Meeting/Board of Directors Meeting, the NJPLIGA Board of Directors, as statutory administrator of the UCJF, reviewed the funding needs to satisfy responsibilities associated with stranger pedestrian PIP and uninsured motorist claims. The Board determined that an assessment of member companies Page 18 of 19
was necessary and authorized a 1.5% assessment of each carrier s automobile liability net direct written premium. The assessment generated a billing to 317 member companies in the amount of $84.3 million. RECEIPTS UCJF COLLECTION ACTIVITY The services of a collection agency are utilized to recover the debts owed to the UCJF by uninsured automobile owners and drivers and $98,547 was collected in 2014. BALANCES AND RESERVES The year end available funds for the UCJF totaled $16.8 million with outstanding indemnity and LAE reserves of $87.9 million. BOARD OF DIRECTORS Pursuant to N.J.S.A. 17:30A-1 et seq., NJPLIGA is governed by a nine member Board of Directors consisting of insurance industry representatives. The following is a list of the current Board of Directors. NJPLIGA David Ziemer, Board Chair Joanne Martyn, Vice-Chair John Esposito, Treasurer Stephen Crosta James Doherty Georgia Flamporis John Friedman William Lynch Robert Zetterstrom NJSLIGF Advisory Body Charles McCloskey, Jr. Thomas Mulligan Frank Powell, Jr. State Farm Insurance Company Federal Insurance Company AIG Property Casualty Company Selective Insurance Company of America Farmers Mutual Fire Insurance Company of Salem County Allstate New Jersey Insurance Company United Services Automobile Association Liberty Mutual Insurance Company New Jersey Manufacturers Insurance Company Metcom Excess Western World Insurance Group FTP, Inc. Board Counsel Cynthia Borrelli, Esq. Bressler, Amery and Ross, P.C. BOARD MEETINGS The Board of Directors met in regular session on January 29, 2014, May 21, 2014 and September 18, 2014. Page 19 of 19