Missouri’s Leadership in National Association of Insurance Commissioners (NAIC) Continues to Grow
Aug 5, 2013
Above: Missouri Insurance Director John Huff
Missouri Department Director John M. Huff was recently named as Chair of the National Association of Insurance Commissioners’ (“NAIC”) Financial Regulation Standards and Accreditation Committee (“Committee”), the Missouri Department of Insurance announced today, August 5, 2013.
The purpose of the Committee is to establish and maintain standards in promoting sound insurance company financial solvency regulation, as well as to evaluate the accreditation program to ensure it meets the standards of the changing regulatory environment. State insurance departments undergo a full accreditation review every five years that examines laws, regulations, financial analysis and examination functions, and organizational and personnel practices in determining a state’s compliance with the NAIC’s accreditation standards.
Meanwhile, the Missouri Department of Insurance continues to play a leadership role in the U.S. system of state-based insurance regulation by being involved in multiple NAIC committees.
Director Huff will continue his role as chair of the NAIC’s Solvency Modernization Initiative Task Force and vice chair of the Reinsurance Task Force and the NAIC/Industry Liaison Committee.
Director Huff’s other leadership positions with the NAIC include:
- NAIC’s representative on the U.S. Financial Stability Oversight Council
- Chair of the Midwest Zone
- Financial Stability Task Force
- International Insurance Relations Leadership Group
- Principles-Based Reserving Implementation Task Force
- Executive Committee and Internal Administration Subcommittee
- Financial Condition Committee
- International Insurance Relations Committee
About the NAIC’s Financial Regulation Standards and Accreditation (F) Committee
The NAIC’s Financial Regulation Standards and Accreditation (F) Committee (“Committee”) is charged with maintaining strengthening the NAIC’s Financial Regulation Standards and Accreditation Program.
The Committee assists states in implementing laws, practices and procedures, and obtaining personnel required for compliance with the standards.
In addition to conducting a yearly review of accredited jurisdictions, the Committee considers new model laws, new practices and procedures, and amendments to existing model laws required for accreditation. It determines the timing and appropriateness in adding such new model laws, and renders advisory opinions and interpretations of model laws required for accreditation, as well as on substantial similarity of state laws.
Further, the Committee produces, maintains and updates the “NAIC Administrative Policies Manual of the Financial Regulations Standards and Accreditation Program” to provide guidance to state regulators regarding the official standards, policies and procedures of the program. This includes maintaining and updating the NAIC’s “Financial Regulation Standards and Accreditation Program” pamphlet.
The Committee performs enhanced pre-accreditation review services.
Recent Changes to NAIC Accreditation Standards Now in Effect
In 2011, NAIC membership adopted revisions that were made to the Credit for Reinsurance Model Law (#785) and Credit for Reinsurance Model Regulation (#786) to reduce reinsurance collateral requirements for certified non-U.S. licensed reinsurers that are licensed and domiciled in qualified jurisdictions. During the 2011 Fall National Meeting, the Committee adopted the 2011 revisions to the significant elements under the “Reinsurance Ceded” standard currently required for accreditation, effective immediately. The revisions are being treated as an optional standard in that the states are not required to adopt collateral reductions for nonadmitted insurers. However, if a state chooses to do this, it must do so in accordance with Model #785 and Model #786.
Revisions to Review Team Guideline in the Examinations Communication Standard
At the 2012 Fall National Meeting, the Committee adopted revisions to the Communication of Relevant Information to/from Examination Staff standard in Part B2: Financial Examinations. Specifically, one of the Review Team Guidelines requires results of the examination to be shared with the financial analyst. The revisions update this Guideline to be more in-line with the guidance in the NAIC Financial Condition Examiners Handbook.
Effective January 1, 2014
2008 Revisions to the Model Regulation to Define Standards and Commissioners Authority for Companies Deemed to be in Hazardous Financial Condition (#385) Amendments to the Model Regulation to Define Standards and Commissioners Authority for Companies Deemed to be in Hazardous Financial Condition (#385) were adopted in 2008. The model provides additional standards for consideration by the commissioner to determine whether the continued operation of any insurer might be deemed to be hazardous to its policyholders, creditors or the general public. In addition, the revisions give the commissioner additional authority to issue an order requiring companies deemed to be in a hazardous financial condition to take corrective action. The revisions to model #385 impact the first two significant elements under the “Corrective Action” standard currently required for accreditation.
Risk Based Capital (“RBC”) for Insurers Model Act (#312) Required for Risk Retention Groups (“RRGs”) Part A standards became effective for risk retention groups on January 1, 2011. However, the Capital and Surplus standard did not require that a state adopt the RBC Model Regulation for use with RRGs. During a December 14, 2011 conference call, the Committee adopted the proposed revisions to the “Capital and Surplus” Part A standard that makes RBC applicable to RRGs.
Effective January 1, 2015
Risk-Based Capital for Health Organizations Model Act (#315)
At the 2010 Spring National Meeting, the Financial Condition (E) Committee adopted a recommendation to make the Risk-Based Capital for Health Organizations Model Act (#315) an accreditation standard. There have been no revisions made to Model #315 since 2009. Model #315 will be included in the Part A standards under the Capital and Surplus Requirement standard currently required for accreditation.
About the NAIC’s Accreditation Program
The mission of the NAIC’s Accreditation Program (“Program”) is to establish and maintain standards to promote sound insurance company financial solvency regulation. It provides a process whereby solvency regulation of multi-state insurance companies can be enhanced and adequately monitored with emphasis on the following:
- Adequate solvency laws and regulations in each accredited state to protect consumers and guaranty funds.
- Effective and efficient financial analysis and examination processes in each accredited state.
- Appropriate organizational and personnel practices in each accredited state.
- Effective and efficient processes regarding the review of organization, licensing and change of control of domestic insurers in each accredited state.
The Program will accomplish its mission by continually evaluating the adequacy and appropriateness of accreditation standards in accordance with the changing regulatory environment and through continued monitoring of accredited states by conducting the following accreditation reviews:
- Pre-Accreditation Reviews to occur approximately one year prior to a state’s full accreditation review. These reviews will entail a high-level review of the financial analysis and financial examination functions to identify areas of improvement.
- Full Accreditation Reviews to occur once every five years subject to interim annual reviews. These reviews will entail a full review of laws and regulations, the financial analysis and financial examination functions, and organizational and personnel practices to assist in determining a state’s compliance with the accreditation standards.
- Interim Annual Reviews to occur annually to maintain accredited status between full accreditation reviews. These will entail a review of any law and regulation changes, the financial analysis and financial examination functions, and organizational and personnel practices to ensure continued compliance with the accreditation standards and to identify areas of improvement.
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