NAIC Capital and Surplus Relief Working Group Public Hearing Report: January 27

ABOVE:  More than 150 people wait to testify before the NAIC Capital and Surplus Relief Working Group’s public hearing on January 27, 2009

 

The National Association of Insurance Commissioners (“NAIC”) Capital and Surplus Relief Working Group (“Working Group”) held a public hearing on January 27, 2009, to continue its review of requests from the life insurance industry to make adjustments in existing NAIC solvency framework components that impact statutory capital and surplus requirements.  More than 150 people attended the hearing, at which regulators received written and heard oral testimony from several consumer groups and industry representatives. To listen to hearing audio, click here.  To view hearing minutes, click here.

Prior to making recommendations to the full NAIC membership, the Capital and Surplus Relief Working Group asked several specialized technical groups to review and comment on nine specific proposals submitted by the American Council of Life Insurers (“ACLI”) for capital and surplus relief for certain life insurance policies and variable annuity contracts.  The ACLI proposal included nine specific items that request changes to reserving, risk-based capital, reinsurance collateral and accounting requirements.  To view the ACLI proposal, click here.

“Each of these proposals was considered and scrutinized by teams of accounting and actuarial specialists to ensure that our basic regulatory objectives of financial solvency, conservative accounting standards and strong consumer protections continue to be met,” said Washington, D.C., Insurance Commissioner Thomas Hampton, who chairs the Working Group.

Following four hours of public testimony, members of the Working Group considered nine specific proposals and recommended rejection of three proposals, and approval of variations of six other proposals impacting reserving requirements, reinsurance collateral and accounting procedures.

The Working Group’s recommendations will next be considered during a joint meeting of the NAIC Executive Committee and Plenary during a conference call on Thursday, January 29 at 3:00 p.m. EST.  Call-in information is available here.

“During these perilous times for our nation’s financial sector, insurance regulators are faced with some challenging decisions, but our foremost priority must be to protect America’s insurance consumers,” said NAIC President and New Hampshire Insurance Commissioner Roger Sevigny. “Many of the proposals before the Working Group have been discussed for years as part of our continuing efforts to modernize our solvency regime, and we are being extremely cautious as we proceed with consideration of any changes.”

“Today’s hearing highlights the difficult decisions we are faced with and the divergent opinions on how we should proceed,” Sevigny added. “I am confident that we will come to a good conclusion for the nation’s insurance consumers and companies, and I look forward to continued discussion as the NAIC’s Executive Committee and Plenary consider the Working Group’s recommendations.”

Public hearing speakers included (click on the speaker’s name to view his or her written testimony):

• Pat Baird, Chairman of the ACLI Board of Directors, urging speed in adopting the proposal
• Scott Harrison from the Affordable Life Insurance Alliance (“ALIA”), in favor of the ACLI proposal
• Bob Hunter, Director of Insurance, Consumer Federation of America, urging the NAIC to fully vet the proposal before adopting
• Alfred W. Gross, Commissioner of Insurance, Commonwealth of Virginia, expressing concern regarding the deferred tax asset portion of the proposal
  • An article entitled “The Rise of Deferred Tax Assets in Japan:  The Role of Deferred Tax Accounting in the Japanese Banking Crisis” referenced by Commissioner Gross
• Peter Gallanis, President of the National Organization of Life and Health Insurance Guaranty Associations, regarding the proposal’s financial significance
• Caitlin Prendiville, Research Analyst for Unite Here, against the proposal
• Brad Smith, Chairman, Milliman, in favor of the proposal

The following comment letters were received for consideration by the Working Group in favor of the ACLI proposal:

• Bruce Ferguson, Senior Vice President, State Relations and Paul Graham, Vice President, Insurance Regulation and Chief Actuary, ACLI
  • Comments from the ACLI regarding implementation language include:
    • Model Regulation Permitting the Recognition of Preferred Mortality Tables for Use in Determining Minimum Reserve Liabilities
    • Actuarial Guideline XXXVIII:  Application of the Valuation of Life Insurance Policies
    • Model Regulation on the Valuation of Life Insurance Policies
    • Calculation of the Total Asset Requirement
    • Statutory Accounting Principles Working Group Maintenance Agenda Submission Form A
• Scott Harrison, Executive Director, ALIA
• American Fidelity Assurance Company
• Linda Bohrer, Acting Director, Missouri Department of Insurance, Financial Institutions and Professional Regulation
• Larry Bruning, Chief Actuary, Kansas Insurance Department
• Andrew Hopping, Executive Vice President and Chief Financial Officer, Jackson National Life Insurance Company
• David Lenaburg, President and Chief Financial Officer, Legal and General America Companies

The following comment letters were received for consideration by the Working Group against the ACLI proposal:

• Arnold A. Dicke, FSA, MAA, AA Dicke Consulting
• Richard Bejarano, Interested Party
• Joseph Belth, Professor Emeritus of Insurance in the Kelley School of Business at Indiana University
• Philip Bieluch, Life Insurance Actuary
• Cantilo and Bennett, LLP
• Jeffery C. Alton, Vice President of Financial Regulation and Capital Analysis, CNA Financial Corporation
• Sean Dilweg, Commissioner of Insurance, Wisconsin
• James J. Donelon, Commissioner of Insurance, Louisiana (LA)
• Steve Mong, Interested Party
• John Owens, Interested Party
• Robert K. Sheridan, President and Chief Executive Officer, The Savings Bank Life Insurance Company of Massachusetts
• Ralph S. Tyler, Commissioner of Insurance, Maryland (MD)
• Elizabeth Martini, Vice President and General Counsel, The Union Central Life Insurance Company

Additional available documents regarding the ACLI proposal include:

• ACLI Proposal
• Capital and Surplus Relief Working Group Report
• Consensus Recommendation Grid
• Technical Group Reports

The NAIC has set up a Web page devoted to Capital Surplus Relief issues, which may be viewed by clicking here.

 

Should you have any questions or comments, please do not hesitate to contact Colodny Fass.

 

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