Members of a new Dodd-Frank Receivership Implementation Working Group are coming up with ideas about how to tackle giant insurer insolvencies.

The working group, part of the Receivership and Insolvency Task Force at the National Association of Insurance Commissioners (NAIC), Kansas City, Mo., will help the NAIC respond to provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 that could affect receiverships of “systemically significant” insurance companies.

In theory, if a troubled, systemically important insurer’s home state regulators failed Dodd-Frank Actto take action to resolve its problems, the Federal Deposit Insurance Corp. might end up administering the receivership using the laws in effect in the insurer’s home state.

The working group has posted a draft outline of items for consideration on its section of the NAIC’s website.

The 4 main areas of items for consideration are:

  1. Examination of state receivership processes.
  2. Dealing with receiverships in which an insurer is a subsidiary or affiliate of some other type of financial company.
  3. The national coordination efforts needed to prepare for a giant insurer receivership.
  4. Any changes in state regulations or statutes that might be needed.

In the state-level processes section, officials talk about the need for insurance regulators to have quick access to trial courts and trial court determinations, so that state regulators can take over troubled insurers within the 60-day window established by Dodd-Frank.

In the section dealing with possible changes in state statutes and regulations, officials say some states may want add a provision for systemic significance in the “hazardous condition” rule that exclaims when regulators may need to take control of a troubled insurer.

The type of emergency contemplated is “not necessarily an insolvency finding and not necessarily a liquidation,” officials note.