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- What is the problem with London Pacific Life and Annuity?
London Pacific has investments in both the high tech and telecommunications industries. As
we all know, these investments have been hit extremely hard since last year. Although, the
company has many strong performing investments, these high tech and telecommunications
investments have suffered losses to the point that there is concern about London Pacific's
ability to meet its obligations.
- What is Rehabilitation and what is the role of the NC Dept. of
Insurance?
When the Wake County Superior court determines that an insurance company does not have the
ability to meet all of its financial obligations, it may be placed in either
Rehabilitation or Liquidation. Rehabilitation and Liquidation are similar to federal
bankruptcy proceedings.
If it is believed that the company can be saved or that the claimants can be better
protected by not activating the Guaranty Associations (see below), the company is placed
in Rehabilitation. The Commissioner of Insurance (in this case Jim Long) is appointed
Rehabilitator and all assets and management control of the company are transferred to him.
Through his Special Deputies, the Rehabilitator evaluates the company and proposes a plan
to restore the company to financial health while protecting the interests of the
policyholders and other creditors. If the Rehabilitator believes this is not possible, he
will ask that the company be placed in Liquidation.
- Why a Rehabilitation with a Moratorium at London Pacific?
The company's troubled investments are a relatively small piece of its total assets. We
believe it is in the best interest of the policyholders to place a moratorium on
surrenders and withdrawals so the company has an opportunity to recover some value from
the troubled investments. We believe this is the best available means by which we can
reasonably expect to assure the full value on your annuity that you deserve and were
promised.
- What does the Moratorium in Rehabilitation mean to me?
During the moratorium, your policy benefits will continue as always except your ability to
withdraw and surrender your policy is restricted to the criteria adopted through the
Hardship program. Policy crediting rates will continue as the company has always done. In
addition, you may annuitize as allowed by your contract. You may also receive interest
from your policy either monthly or annually if allowed by your contract.
NOTE: Withdrawal of funds from your account MAY create a taxable event for you. If you
are unsure of the tax consequences of withdrawing from your contract, PLEASE contact your
tax advisor before requesting a withdrawal.
- How long will the Moratorium last?
Although the court did not set a time limit on the moratorium, it is hoped that 24 - 36
months should be sufficient time for the company's assets to recover. Although we cannot
guarantee this timeframe, we believe it is a realistic estimate at this point.
- What if I need to get a large sum of money and my only source of funds
is my policy
Some policies have a provision allowing a 10% partial surrender each year with no
surrender penalty. This provision will continue to be available. Additionally, you may
request another 10% withdrawal from such contracts, but the surrender penalty will be
applied to that portion of the withdrawal.
For those policies with surrender rights that do not have the 10% withdrawal provision, an
automatic 10% withdrawal will be allowed, but will have the applicable surrender penalty
applied.
Finally, there will be hardship withdrawals allowed during the moratorium period.
NOTE: Withdrawal of funds from your account MAY create a taxable event for you. If you
are unsure of the tax consequences of withdrawing from your contract, PLEASE contact your
tax advisor before requesting a withdrawal.
- What are the requirements of the Hardship Program, and what do I have
to do to get my money?
The purpose of the hardship program is to allow people in hardship situations to obtain
their money. Surrenders and loans will be allowed on a case-by-case basis for genuine
hardship situations upon written application to:
London Pacific Hardship Committee
P. O. Box 29506
Raleigh, NC 27626
The Rehabilitator has developed the initial uniform criteria to deal with hardship cases
with examples of the documentation required. The hardship criteria and application are
available here:
Request Hardship Form
London Pacific has established a Hardship Committee consisting of personnel from the NC
Dept. of Insurance and from the staff of London Pacific. They will meet every week and
will review the applications received that week and either approve, deny or request
additional information that will help you qualify.
NOTE: Withdrawal of funds from your account MAY create a taxable event for you. If you
are unsure of the tax consequences of withdrawing from your contract, PLEASE contact your
tax advisor before requesting a withdrawal.
- Can I apply for a 1035 exchange?
Generally, a full 1035 exchange is defined as a surrender and is therefore subject to the
Moratorium. It may be possible to do a partial 1035 exchange using the 10% rules defined
in #6 above.
- Will death benefits be paid during the Moratorium?
Yes. At this time all death benefits will be processed promptly.
- Will I be allowed to put additional funds in my annuities or buy a new
annuity contract?
No. Any funds received or drafted from your account will be returned to you.
- What are Variable Accounts and why are they treated differently?
The Regency Series variable account contracts are like mutual funds. They are backed by
assets that are maintained in a separate account from the other assets of London Pacific.
These assets can only be used to pay variable account contracts and cannot be used to
support the other policyholders of London Pacific. For these reasons, these contracts are
not subject to the moratorium.
- Can I still move my funds between the Variable Options and the Fixed
Option allowed in my Regency Series Variable Annuity contract?
You cannot move funds from the Fixed Option or to the Fixed Option at this time.
Additionally, if you have funds in the Fixed Option, then that portion is not covered by
the Separate Account assets and is subject to the moratorium. However, you can still move
funds between any of the Variable Account options.
- I have a Universal Life Policy with London Pacific. How am I affected
by the moratorium?
You may continue to pay into your policy but the withdrawal prohibitions apply regarding
surrenders. Additionally, no partial surrenders are available to UL policyholders,
however, we are still considering providing some relief in this area.
- What happens if the market does not recover or the troubled
investments turn out to be worthless?
If this happens, the company may be placed in liquidation and you may receive something
less than the full value on your account if your account is in excess of Guaranty Fund
limits in your state. For amounts in excess of Guaranty Fund limits, you would receive
additional amounts from London Pacific based on asset values. Even in a liquidation
scenario we currently estimate that the amount paid by London Pacific above the Guaranty
Fund levels would likely exceed 90% of the remaining cash value of your account.
- What is Liquidation and what would this mean to me?
If the company is put into liquidation, the job of the Commissioner as Liquidator is to
collect all the assets of the company and liquidate them to pay the policyholders and
other creditors of the company. To do this, he follows the Priority of Distribution in NC
General Statutes 58-30-220. There are 5 classes of claims and the Liquidator must pay all
claims of a particular class before he can begin paying a lower class. The classes are as
follows:
- The Liquidator's cost of administration;
- Policyholder claims;
- Claims of government;
- Limited employee claims;
- Everyone else.
Unfortunately, liquidation can be a long involved process. The Liquidator must first
determine how much money he will have to pay people before he can disperse payments. This
is more difficult than it sounds. Usually, it involves lawsuits to collect the money and
assets of the company. Then those assets have to be sold to maximize their value so as
many people as possible can be paid. Sometimes it can take years.
However, there is a safety net to protect most policyholders. Each state where the company
wrote business has a Guaranty Association that has the responsibility to pay policyholder
claims. Every state guaranty association imposes limits subject to each state guaranty
association law on the amount of net cash surrender values and death benefits that are
provided. Benefits provided by the guaranty associations are generally for any single life
irrespective of the number of policies. For example, net cash surrender value caps range
from $100,000 in most states to $300,000 (such as in North and South Carolina), and
$500,000 in Washington. Total aggregate benefits provided by guaranty associations (which
include death benefits and net cash surrender values) range from $300,000 in most states
to $500,000 in certain other states such as Washington. In addition, some state guaranty
association laws provide for reduction of the rate of interest credited on policies and
annuities below that specified in the policies in certain situations or provide other
reductions in the amount that may be covered (for example, California will only cover 80%
of the contractual obligations). The Guaranty Associations then file a claim for the
payments with the liquidating company. If London Pacific does go into liquidation, you
will be advised how you can get the covered portion of your claim paid by your Guaranty
Association.
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