National Association of Insurance Commissioners Executive Committee and Plenary Joint Meeting Recap: October 11, 2011

 

The National Association of Insurance Commissioners (“NAIC”) Executive Committee (“Committee”) and Plenary met jointly via teleconference on October 11, 2011.  This meeting was in lieu of the one scheduled during the NAIC 2011 Summer National Meeting, which was canceled in August due to Hurricane Irene.

After calling the meeting to order, Iowa Insurance Commissioner and Committee Chairperson Susan Voss said that, prior to their consideration by the Plenary, the Committee typically would review and vote on certain items.  She asked if there were objections to taking a joint vote on those items, which she identified as the first nine on the agenda.  Hearing no objections, Chairperson Voss proceeded.

 

Executive Committee Task Force and Council Reports

The Committee and the Plenary unanimously voted to approve the following Task Force and Council reports (summary reports are included in the meeting materials on Page 3):

• AIG Managing Task Force
• Government Relations Leadership Council
• International Insurance Relations Leadership Group
• Producer Licensing Task Force
• Professional Health Insurance Advisors Task Force
• Solvency Modernization Initiative Task Force
• Speed-to-Market Task Force
• Surplus Lines Implementation Task Force

 

Long-Term Care Insurance Task Force Charges Transferred to Senior Issues Task Force

Speaking on behalf of Long-Term Care Insurance Task Force (“LTCITF”) Chairperson and Florida Insurance Commissioner Kevin McCarty, Florida Office of Insurance Regulation (“OIR”) General Counsel Belinda Miller moved to disband the LTCITF and to transfer its charges to the Senior Issues Task Force (“SITF”), which falls under the NAIC’s Health Insurance and Managed Care Committee.  Commissioner McCarty also chairs the SITF.

Ms. Miller said that the LTCITF and the SITF are two separate groups that require duplicative reporting, and that merging the two would create efficiency.  She recommended that all LTCITF charges be transferred to the SITF, except for the fourth, which requires a report of findings.  She asked that this charge be deleted. 

To view a list of the LTCITF’s charges, click here.

The motion to disband the LTCITF and transfer its charges to the SITF was approved without discussion.

 

Use of Captives by Insurers to Transfer Third-Party Insurance Risks

Rhode Island Superintendent of Insurance and Financial Condition Committee (“FCC”) Chairperson Joe Torti discussed the adoption of a new 2011 FCC charge relating to insurers’ use of captives to transfer third-party insurance risks.

The text of the new charge is:

• The Financial Condition (E) Committee will study insurers’ use of captives and special purpose vehicles to transfer 3rd party insurance risk in relation to existing state laws and regulations and establish appropriate regulatory requirements to address concerns identified in this study. The appropriate regulatory requirements may involve modifications to existing NAIC model laws and/or generation of a new NAIC model law.

Superintendent Torti said that a need for an additional charge might arise if additional accreditation requirements pertaining to these types of transactions become necessary.

A motion to adopt the charge was approved without discussion.

 

Executive Committee Charges and Bylaws Approved

The proposed Committee charges for 2012 (Page 63) and the NAIC bylaws (Page 64) were unanimously approved.

 

Amendments to the Annuity Disclosure Model Regulation (#245)

After the approval of a motion to adopt the Life Insurance and Annuities Committee’s (“LIAC”) September 23 meeting report, North Dakota Insurance Commissioner and LIAC Chairperson Adam Hamm presented proposed revisions to the Annuity Disclosure Model Regulation (#245).

A significant change to the Model is a new section establishing guidelines for annuity illustrations.  Commissioner Hamm explained that this should bring uniformity to annuity illustrations preparation methodology and lessen the possibility that consumers could be confused or inadvertently misled.

Other changes to the Model include making parts of it consistent with the NAIC Suitability in Annuities Transactions Model and detaching the Fixed Deferred Annuity Buyer’s Guide from the Model, where it was previously an appendix.

Commissioner Hamm explained that the revisions were the result of an “exhaustive” two-year process that included comprehensive discussion on all involved issues.

The Committee and the Plenary approved the changes to the Model without discussion.  The State of California abstained from the vote.

 

Insurer Bulletin on Stranger-Originated Annuity Transactions

Next, Commissioner Hamm discussed a bulletin developed and adopted by the LIAC on stranger-originated annuity transactions.  He said that after holding a public meeting on this issue, the LIAC decided to develop a bulletin that recommends insurers take actions to mitigate their exposure to such transactions.

A motion to adopt this bulletin, which is on Page 98 of the meeting materials, was made and unanimously approved without discussion.

 

Health Insurance and Managed Care Committee

Kentucky Insurance Commissioner and Health Insurance and Managed Care Committee (“HIMCC”) Chairperson Sandy Praeger discussed the HIMCC’s September 19 meeting report, which included the approval for an additional Subgroup on medical loss ratio quality improvement initiatives.   The first meeting of the new Subgroup is scheduled during the NAIC 2011 Fall National Meeting in Washington, D.C.

A motion to adopt the HIMCC’s report was approved without discussion.

 

Property and Casualty Insurance Committee

Mississippi Insurance Commissioner and Property and Casualty Insurance Committee (“PCIC”) Chairperson Mike Chaney presented a report from the PCIC’s September 16 meeting, during which he said a memorandum on producer-controlled insurers and risk retention groups was discussed.   The Risk Retention Working Group also was assigned to review and comment on pertinent financial regulatory standards. 

Commissioner Chaney reported that the PCIC also adopted a risk classification survey instrument for personal auto insurance, which, according to Commissioner Chaney, will provide a consistent way for states to study how risk classifications affect market prices.  He said that the PCIC believes this instrument has the “right balance,” although it is not as aggressive as some consumer groups would like.  He also said that the Dodd-Frank Act empowers the Federal Insurance Office (“FIO”) to monitor the extent to which underserved consumers have access to portable insurance products, and to collect certain information from consumers if state regulators do not have it.  However, he said that there are currently no plans for centralized data collection efforts.

Also during its September 16 meeting, the PCIC:

• Adopted a white paper entitled “The Background and Implications of Defective Drywall,” which will be presented for formal adoption by the Plenary at the NAIC Fall National Meeting;
• Agreed to cease work on drafting a model law to provide a regulatory framework for credit scoring information vendors;
• Discussed federal efforts to reauthorize the National Flood Insurance Program;
• Adopted the Title Agent Statistical Data Implementation Guideline; and
• Distributed the draft 2012 PCIC proposed charges and established a deadline for written comments.

A motion to adopt the PCIC’s report was approved unanimously.

 

Earthquake Consumer Guide

Commissioner Chaney discussed the “Consumer’s Guide to Earthquake Insurance,” which was adopted by the PCIC at its March 2011 meeting.  Describing the guide as “noncontroversial,” he explained that it is designed to raise awareness of earthquake exposure around the United States, adding that 90 percent of Americans live in areas with the potential to experience earthquakes. 

Information in the Guide, which includes tips on basic mitigation efforts and preparedness, educates consumers on insurance deductibles, what to do after an earthquake, and how to file a claim.

The Committee and the Plenary approved a motion to adopt the Guide without discussion. 

 

Third-Party Administrator Act Guideline

Commissioner Chaney reviewed an NAIC guideline entitled, “Registration and Regulations of Third-Party Administrators,” which was developed by the Workers’ Compensation Task Force and also adopted by the PCIC at its March 2011 meeting.   This Guideline replaces the Third Party Administrators Model Law (#90), which was adopted by the NAIC in 1977 and amended in 2001. 

Commissioner Chaney said that jurisdictions will have two versions of the Guideline to consider.  Version 1 expands the scope of Model Law #90 by adding workers’ compensation and stop-loss coverages, whereas Version 2 omits workers’ compensation.

A motion for the Committee and the Plenary to adopt the Guideline was unanimously approved without discussion.

A copy of the Guideline is located on Page 111 of the meeting materials.

 

Title Agent Statistical Data Plan Implementation Guideline

Commissioner Chaney remarked on the Title Agent Statistical Data Plan Implementation Guideline, explaining that it will allow state regulators to better understand how title insurance markets are functioning. 

The Committee and Plenary unanimously approved a motion to adopt this Guideline, which is included in the meeting materials on Page 113.

 

Market Regulation and Consumer Affairs Committee Report

Next, Kentucky Insurance Commissioner and Market Regulation and Consumer Affairs Committee (“MRCAC”) Chairperson Sharon Clark reviewed the MRCAC’s September 12 meeting report, explaining that the MRCAC revised provisions pertaining to annuity suitability examination standards to be included in Chapter 19 of the NAIC’s Market Regulation Handbook (“Handbook”).  The MRCAC also adopted a new examination standard relating to retained asset accounts that will be included in the Handbook as well. 

A motion to adopt the report was approved without discussion. 

 

Financial Condition Committee Report

Superintendent Torti presented the Financial Condition Committee (“FCC”) meeting reports from March 28 and September 19, saying that only the nine items stemming from the March 28 meeting were on the consent agenda for the Committee and the Plenary.  Discussion of the FCC’s September 19 meeting would be for informational purposes only, with significant items up for consideration by the Committee at the 2011 Fall National Meeting in November.  

At its March 28 meeting, the FCC adopted referral letters to the Financial Analysis Handbook Working Group, the Capital Adequacy Task Force and the Life Actuarial Task Force (“LATF”) on various issues related to broadening products that are being included in separate accounts.  Also adopted at that meeting was a proposed modification to the charge of the Separate Accounts Risk Working Group.

Among actions taken at the September 19 meeting, the FCC adopted revisions to the Credit for Reinsurance Model Law (#785) and Credit for Reinsurance Model Regulation (#786) that are intended to implement key elements of the Reinsurance Regulatory Modernization Framework.   Additional revisions related to the trusteed surplus requirement for a multiple beneficiary trust account maintained by an assuming insurer in run-off.

Superintendent Torti said that the FCC also revised the current Risk-Based Capital for Insurers Model (#312) with the inclusion of fraternal benefit societies in the Life section of the Model and the update of the risk-based capital level at which the risk-based capital trend test could be triggered from 2.5 to 3.0 x Authorized Control Level Risk-Based Capital. 

Superintendent Torti also said that the FCC received a proposal from the Group Solvency Issues Working Group regarding Accreditation Part A:  Laws and Regulations.  The proposal was referred to the Financial Regulation Standards and Accreditation Committee (“FRSAC”) for consideration.

In addition, the FCC received a response memorandum from the LATF on the FCC’s referral letter regarding separate account issues.  The FCC published the memorandum for a public comment period ending October 19.

A motion to adopt the FCC’s March 28 report was approved without discussion.

 

Financial Regulation Standards and Accreditation Committee Report

Tennessee Insurance Commissioner Julie McPeak, who is also Chairperson of the FRSAC, said that, while the FRSAC did not have an open session call to discuss matters that would have come up at the canceled NAIC Summer National Meeting, a regulator-only call was held on October 5, during which state-specific accreditation issues were discussed.  At that time, FRSAC members voted to award continued accreditation to the Alabama Department of Insurance.

Commissioner McPeak said that all business that would have been considered at the Summer National Meeting will be discussed at the FRSAC’s next meeting.

The Committee and the Plenary approved a motion to adopt the FRSAC’s report without discussion.

 

International Insurance Relations Committee Report

Florida OIR General Counsel Miller said that the International Insurance Relations Committee (“IIRC”) held teleconference meetings on April 15 and August 24.

At its April meeting, the IIRC discussed proposed comments to be submitted to the International Association of Insurance Supervisors (“IAIS”) on material related to the IAIS’ Insurance Core Principles.  IIRC members adopted a motion to formally submit the comments to the IAIS as modified during the meeting.

During its August meeting, IIRC members discussed and adopted a motion to submit comments to the IAIS on the draft Concept Paper for the Common Framework for the Supervision of Internationally Active Insurance Groups, also known as ComFrame.  Due to the cancelation of the NAIC’s Summer National Meeting, IIRC members adopted a motion via e-mail to submit the comments.

A motion to adopt the IIRC’s report was made and approved without discussion. 

With no further business, the meeting was adjourned.

 

Should you have any questions or comments, please contact Colodny Fass.

 

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