Report 2005-115.2 All Recommendation Responses

Report 2005-115.2: Department of Insurance: Former Executive Life Insurance Company Policyholders Have Incurred Significant Economic Losses, and Distributions of Funds Have Been Inconsistently Monitored and Reported (Release Date: January 2008)

Recommendation #1 To: Insurance, Department of

To increase assurance that Aurora follows key provisions in the ELIC agreements, the commissioner should seek the right to review Aurora?s future distributions of ELIC estate funds and review those distributions to ensure that it adds the proper amount of interest to the funds, and distributes the funds correctly.

1-Year Agency Response

The CLO sent a written request seeking the right to review future distributions to Aurora and the national guaranty organization on February 27, 2008. Although discussions with Aurora continue, Aurora has not made a commitment to fulfill the CLO?s request. There have been no subsequent distributions for the CLO to review. Future distributions, if any, are dependent on the outcome of pending litigation. (See 2010-406 p. 56)

California State Auditor's Assessment of 1-Year Status: Fully Implemented

Recommendation #2 To: Insurance, Department of

In order to ensure that information is available to policyholders and other parties interested in the disposition of ELIC?s assets, the commissioner should, as soon as practical after the end of each year and upon the termination of any trust, complete a report that includes the assets and liabilities; the amount of all distributions, if any, made to the trust beneficiaries; and all transactions materially affecting the trust and estate.

1-Year Agency Response

The CLO has placed summarized financial information along with a brief narrative of the ELIC estate and grantor trusts for the year ended December 31, 2007, and December 31, 2008, on its Web site. The CLO will continue to update this information after the end of each year. (See 2010-406 p. 57)

California State Auditor's Assessment of 1-Year Status: Fully Implemented

Recommendation #3 To: Insurance, Department of

In order to ensure that the financial information reported by the CLO is accurate, the commissioner should continue the practice of auditing the ELIC estate and any trusts that remain open on a periodic basis as recently implemented by the current chief financial officer.

1-Year Agency Response

Finance?s reviews for the year ended December 31, 2007, and December 31, 2008, have been completed and are available on the CLO?s Web site. The CLO will continue the practice of having Finance auditors review the ELIC estate and grantor trusts. (See 2010-406 p. 57)

California State Auditor's Assessment of 1-Year Status: Fully Implemented

Recommendation #4 To: Insurance, Department of

In order to ensure that it accurately records distributions in its primary accounting system, and its financial reporting is correct, the CLO should periodically reconcile the distributions reported in its general ledger to its subsidiary databases.

1-Year Agency Response

The commissioner stated that the CLO will continue its practice of reconciling distributions to the Trust Administration System subsidiary databases and to the general ledger, and stated that the CLO has reformatted the financial presentation of the ELIC financial statements and has established separate accounts in the ELIC estate general ledger for each future distribution. (See 2010-406 p. 58)

California State Auditor's Assessment of 1-Year Status: Fully Implemented

All Recommendations in 2005-115.2

Agency responses received after June 2013 are posted verbatim.