Legal expense insurance -- annual statement reporting requirements

Issued and entered February 18, 1983 by Nancy A. Baerwaldt, Commissioner of Insurance

Act 501 of the Public Acts of 1982 has allowed for the writing of legal expense insurance for all insurers that are so authorized. The purpose of this bulletin is to inform all authorized licensed insurers of the State of Michigan's annual statement reporting requirements for legal expense insurance.

These specific and separate annual statement reporting requirements are for Life and Health Insurers and Property and Casualty Insurers that are authorized to transact legal expense insurance. An insurer that is authorized to transact legal expense insurance in Michigan must account for this business in their annual statement in the following specified manner:

ANNUAL STATEMENT REPORTING REQUIREMENTS FOR PROPERTY AND CASUALTY INSURERS WRITING LEGAL EXPENSE INSURANCE IN THE STATE OF MICHIGAN

All Property and Casualty Insurers authorized to transact legal expense insurance in the State of Michigan are to report this business in their annual statement in the following manner:

1. Premiums, Losses and Loss Adjustment Expense relating to legal expense insurance are to be reported separately between group and individual policies on the following annual statement pages and exhibits:

___ Underwriting and Investment Exhibit

a. Page 7, Part 2- Premiums Earned

b. Page 7, Part 2A- Premiums In Force

c. Page 8, Part 2B- Recapitulation of All Premiums

d. Page 8, Part 2C- Premiums Written

e. Page 9, Part 3- Losses Paid and Incurred

f. Page 10, Part 3A- Unpaid Losses and Loss Adjustments

___ Exhibit of Premiums and Losses

a. Page 14, State of Michigan Line of Business

2. Losses and Loss Expenses, relating to legal expense insurance business are to be reported separately between group and individual policies in Schedule O- Part 1- Loss Development and Schedule O- Part 2- Loss Expense Development. There is no change in the reporting requirements relating to Schedule O- Part 3- Summary Loss and Loss Expense.

Since the annual statement currently does not provide a specific line for legal expense insurance in the Line of Business Column of the above referred to exhibits, the insurer may either report these transactions in these exhibits as a write-in or may cross out one or two of the other lines of business which are not used and write in the appropriate description (Group Legal and/or Individual Legal).

ANNUAL STATEMENT REPORTING REQUIREMENTS FOR LIFE AND HEALTH INSURERS WRITING LEGAL EXPENSE INSURANCE IN THE STATE OF MICHIGAN

All Life and Health Insurers authorized to transact legal expense insurance in the State of Michigan are to report this business in the following manner:

1. Premiums, Losses, Loss Adjustment Expenses and Other Underwriting Expenses relating to legal expense insurance are to be reported separately between group and individual on the attached supplemental forms and these forms are to be part of the insurer's annual statement filing. The supplemental forms that are to be completed are as follows:

___ Underwriting and Investment Exhibit

a. Part 1- Premiums Earned

b. Part 2- Premiums Written{Footnote 1}

c. Part 2B- Recapitulation of All Premiums{Footnote 1}

{Footnote 1} Not reproduced.

d. Part 3- Losses Paid and Incurred

e. Part 3A- Unpaid Losses and Loss Adjustment Expenses

f. Part 4- Expenses

___ Loss and Loss Expense Exhibit {Footnote 1}

Losses and Loss Expense relating to legal expense insurance are also to be reported in Schedule O- Part 3- Summary- Loss and Loss Expenses. A separate Schedule O- Part 3- Summary- Loss and Loss Expenses is to be completed for group and individual legal expense insurance.

___ Premiums and Losses for Legal Expense Insurance Exhibit

The Exhibit labeled "Premiums and Losses for Legal Expense Insurance" is to be completed for Michigan Direct Business only. This is your state page for Michigan Direct Business relating to group and individual legal expense insurance.

2. The financial information within the supplemental forms that reflect the insurer's transactions relating to legal expense insurance are to be carried forward where appropriate to the following exhibits in the Life and Accident and Health annual statement blank.

a. Exhibit 12- Reconciliation of Ledger Assets

b. Exhibit 2- Net Investment Income

c. Summary of Operations

d. Liabilities, Surplus and Other Funds

Since the Life and Accident and Health's current annual statement does not provide for these transactions, the insurer should report these transactions as a "write in" in the appropriate exhibit.

Enclosed for your information is a completed sample which reflects the proper way that the supplemental forms relating to legal expense insurance are to be completed. This example further reflects the appropriate manner and exhibits which are to be completed in the Life and Accident and Health annual statement blank.