National Association of Insurance Commissioners (NAIC) Summer 2013 National Meeting Highlights

 

Attended by nearly 2,000 insurance industry members, the National Association of Insurance Commissioners (“NAIC”) 2013 Summer National Meeting spanned August 24-27 in Indianapolis, Indiana. 

To access complete meeting materials, including the final attendee list, news releases and daily bulletins from the event, click here.

To access the complete meeting matrix, which includes individual agendas, meeting materials and meeting summaries, click here.

Highlights from those meetings are provided below.

 

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

 

NAIC 2013 Summer National Meeting Highlights

 

Executive Committee and Plenary

The Executive Committee and Plenary met on August 27, during which it adopted the August 25 Executive Committee meeting report.  Items approved in this report included:

• The Principle-Based Reserving (“PBR”) Implementation Plan, along with PBR educational and legislative briefs
• Model law development requests for amendments to the Synthetic Guaranteed Investment Contracts Model Regulation (#695) and amendments to the Standard Nonforfeiture Law for Life Insurance (#808)
• The renaming of the NAIC/American Indian Liaison Committee to the “American Indian and Alaska Native Liaison Committee” (to be under the NAIC/Consumer Liaison Committee).  A mission statement was also approved.

Other items adopted by the Executive Committee included:

• Two model act development requests that emanated from the Proposed Responses to a Comparative Analysis of Existing U.S. Corporate Governance Requirements paper, which includes proposed enhancements to achieve U.S. regulatory needs intended to provide consistency with international standards.
  • The first request proposes development of a new Annual Reporting of Corporate Governance Practices of Insurers Model Act in order to provide regulators with a better understanding of domestic insurers’ governance practices.  The second would provide for a new Annual Reporting of Corporate Governance Practices of Insurers Model Act.
• The Captives and Special Purpose Vehicles white paper

The Executive Committee and Plenary also adopted the following:

• Guideline amendments to the Viatical Settlements Model Regulation (#698)
• Amendments to the Coordination of Benefits Model Regulation (#120)
• “Frequently Asked Questions about Healthcare Reform,” along with a corresponding flow chart
• The Consumer Shopping Tool for Homeowners Insurance.  To view the document, click here and go to page 7.
• The Federal Crop Insurance Program Handbook
• The Risk Retention and Purchasing Group Handbook
• The Guideline for Stay on Termination of Netting Agreements and Qualified Financial Contracts
• The Process for Developing and Maintaining the NAIC List of Qualified Jurisdictions as required under the 2011 revisions to the Credit for Reinsurance Model Law (#785) and the Credit for Reinsurance Model Regulation (#786)

To view the complete meeting materials, click here.

 

Producer Licensing Task Force

The Producer Licensing Task Force met on August 25, during which it adopted the revised uniform appointment form and the following revised applications:  individual initial producer, individual renewal producer, business entities (“BE”) initial producer, BE renewal producer, individual initial adjuster, individual renewal adjuster and BE initial adjuster.

The Task Force also discussed the role of navigators in the federal Affordable Care Act (“ACA”) and a proposal to develop a white paper in conjunction with the Health Insurance and Managed Care Committee and the Antifraud Task Force to address the following issues:  1) certification and training standards for navigators, producers and non-navigator assistance personnel; 2) potential fraud issues related to the activities of navigators, producers and non-navigator assistance personnel; and 3) functions of navigators and non-navigator assistance personnel, and how these functions vary from the functions of licensed producers.

 

Commercial Lines Working Group

The Commercial Lines Working Group, also part of the Executive Committee, met on August 23, during which it discussed industry concerns presented by the American Insurance Association and the Property Casualty Insurers Association of America (“PCI”).  To view those concerns, click here (begins on page 13).

Working Group members also reviewed charts from the Compendium of State Laws on Insurance Topics on states’ rate filing requirements and exemptions, as well as what types of criteria are used to determine filing approval times.

Authorization of a draft survey of states that will query the average time required for commercial lines forms and rates approval was postponed to allow time for a review of materials received during the meeting.  A 30-day comment period will be provided during which draft survey questions can be submitted.

                                                                                                                                                                

Property and Casualty Insurance Committee

The Property and Casualty Insurance Committee met on August 26, during which it reviewed the Government Relations Leadership Council’s resolution supporting reauthorization of the federal Terrorism Risk Insurance Act (“TRIA”).  The NAIC will be providing input to federal agencies and Congress on TRIA’s reauthorization.

The Committee also heard a presentation on the state of the reinsurance market from Bradley Kading of the Association of Bermuda Insurers and Reinsurers.   To view the presentation slides click here and go to page 23.

A report on proposed federal legislation relating to catastrophe reserving was given by District of Columbia Insurance  Commissioner William P. White.  Still in draft form, the bill, which would be known as the “National Disaster Insurance Protection Act,” would amend the Internal Revenue Code of 1986 to allow private insurers and reinsurers to increase their financial capacity for responding to catastrophes through the creation of tax-exempt disaster protection funds in the District of Columbia.   To read the entire bill, click here and go to page 37.

 

Auto Insurance Study Group

The Auto Insurance Study Group met on August 24, during which members discussed initial results from a survey of states on programs or initiatives they have implemented to address auto insurance availability and affordability. 

The following presentations were heard from regulator representatives:

• Jim Stephens described a recent analysis conducted by Illinois that compared auto premiums across ZIP codes.
• Frank Goins spoke about a recent survey of Kentucky auto insurers that asked about the effect of various rating factors.
• Elena Ahrens spoke about a recent survey of Nevada auto insurers that asked about the use of credit, occupation and education.
• Chris Shultz provided an overview of the California Low Cost Automobile Insurance Program.
• Tony DiPaolo described a Massachusetts initiative designed to root out fraud schemes in high fraud areas.
• Angela Nelson spoke about Missouri’s annual collection of ZIP code-level premium and loss data.

To view the slides from these presentations, click here and go to page 9.

 

Catastrophe Insurance Working Group

In addition to hearing a presentation on catastrophe savings accounts and other national catastrophe issues at its August 25 meeting, the Catastrophe Insurance Working Group discussed the creation of a standard catastrophe reporting form, which will be handled by the newly created Data Reporting Template Subgroup.

 

Casualty Actuarial and Statistical Task Force

The Casualty Actuarial and Statistical Task Force met on August 24, during which it discussed proposed revisions to the Annual Statement Instructions Schedule P.  A draft will be made available for comment soon. 

Also pending for public comment are the Joint Qualified Actuary Subgroup’s draft discussion paper, the Regulatory Guidance on Property and Casualty Statutory Statements of Actuarial Opinion for 2013, and the Regulatory Guidance on the Property and Casualty Actuarial Opinion Summary for 2013.

 

Surplus Lines Task Force

The Surplus Lines Task Force met on August 26, during which it recommended the distribution of suggestions to states for improving surplus lines information access.  To view the suggestions, click here and go to page 5.

The Task Force officially disbanded the Surplus Lines Requirements Subgroup and adopted its proposed 2014 Task Force charges, which are listed below:

• Maintain the International Insurers Department (“IID”) Plan of Operation and its requirements relating to standards for inclusion on the NAIC Quarterly Listing of Alien Insurers concerning capital and/or surplus funds, U.S. trust accounts and fitness of management among other criteria.  This ongoing charge will be assumed by the IID Plan of Operation Review Group.
• Perform financial analysis of surplus lines market utilizing the NAIC Financial Data Repository and other sources in order to prepare a regulator report; and
• Develop and oversee implementation of state-based solutions addressing the surplus lines subtitle of the Nonadmitted and Reinsurance Reform Act.

 

Terrorism Insurance Implementation Working Group

The Terrorism Insurance Implementation Working Group met on August 25, during which it discussed the Government Relations Leadership Council’s consideration of a TRIA resolution (which was ultimately adopted).  The Working Group also discussed a July 16, 2013 Federal Register notice in which the Federal Insurance Office (“FIO”) requested comments on issues related to terrorism insurance, including the potential effects of TRIA’s termination, take-up rates, suggested changes for any future programs, availability of reinsurance and consideration of additional risks.

Risk Management Solutions (RMS) gave a presentation on the Boston bombing from a terrorism modeler’s perspective, after which representatives from PCI discussed upcoming policy renewal issues.

On August 29, the Working Group held a conference call on how to respond to the Federal Register’s TRIA notice.  The meeting materials are listed below:

• Agenda
• NAIC Resolution to Support Reauthorization of the Terrorism Risk Insurance Act
• Federal Register Notice

 

Market Regulation and Consumer Affairs Committee

In addition to adopting examination protocols for social media-related revisions to the Market Regulation Handbook‘s Chapter 16–General Examination Standards (which were later approved by the Executive Committee/Plenary) during its August 26 meeting, the Market Regulation and Consumer Affairs Committee adopted the Insurance Department Investigator Safety Guideline. 

Also reviewed were the results of a survey assessing consumers’ understanding of standards of care used in the sale of annuities.

Committee members discussed the NAIC model law review initiative and the following models assigned for their review:

• Military Sales Practices Model Regulation
• Authorization for Criminal History Record Check Model Act
• Unauthorized Transaction of Insurance Criminal Model Act

An update on IAIS market conduct activities was given, along with a review of federal activities relating to market regulation.

 

Financial Condition Committee

The Financial Condition Committee met on August 26, during which members discussed the NAIC process for assigning group codes.  The NAIC staff was directed to draft a group codes process for future consideration.

In other actions, the Committee adopted the Solvency Modernization Initiative Task Force White Paper entitled The U.S. National State-Based System of Insurance Financial Regulation and the Solvency Modernization Initiative.

 

Property and Casualty Risk-Based Capital Working Group

The Property and Casualty Risk-Based Capital Working Group met on August 24, during which members discussed asset risk and heard from the Reinsurance Association of America (“RAA”) on its proposal to revise the reinsurance credit risk charge.  Click here to view the RAA proposal, which begins on page 7.

 

Catastrophe Risk Subgroup

The Catastrophe Risk Subgroup met on August 24, during which members received a status report on catastrophe risk examination procedures.  They also heard insurance industry comments on additional disclosure requirements that may be implemented and any planned further use of proprietary models and windstorm data collection issues.  The NAIC is developing examination procedures for validating catastrophe modeling, along with data that will be used to determine catastrophe risk charges ultimately incorporated into the property and casualty RBC formula.  To view the meeting materials, click here.

 

Climate Change and Global Warming Working Group

The Climate Change and Global Warming Working Group met on August 26, during which two of its subgroups were approved to be disbanded: 

• Impact of Climate Disclosure Survey Subgroup (now disbanded)
• Impact of Climate Exam Subgroup (now disbanded)

 

Receivership and Insolvency Task Force

The Receivership and Insolvency Task Force met on August 25, during which members discussed guaranty fund coverage of contingent deferred annuities, factored settlements and life settlements.  A request will be made to hear presentations on this topic at the NAIC’s Fall National Meeting.

The Task Force adopted a report by the Federal Home Loan Bank Legislation Subgroup, which has studied the receivership implications of the Federal Home Loan Banks’ (“FHLBanks”) proposed receivership legislation that would exempt FHLBanks from stay and voidable preference provisions.  The Subgroup drafted and received comments on a proposed guideline and plans to finalize the guideline, as well as an advisory bulletin to state insurance departments.  It also plans to begin drafting guidance on receivership considerations involving FHLBank advances that will be included in the Receivers Handbook for Insurance Company Insolvencies.

The SEC Consideration Subgroup reported on its pending discussion draft of receivership considerations for separate account products registered with the U.S. Securities and Exchange Commission.

Of note, the Title Insurance Guaranty Fund Working Group is considering guidelines for the formation of a title insurance guaranty fund and the addition of title insurance to an existing property and casualty guaranty fund.

 

Risk Retention Group Task Force

The Risk Retention Group Task Force met on August 24, during which members discussed revisions to the Insurance Holding Company System Regulatory Act (#440), the Insurance Holding Company System Model Regulation (#450) and their applicability to risk retention groups (“RRGs”).  The Task Force will consider adoption of the revisions for accreditation purposes for RRGs on its next conference call.

It was agreed that 2008 revisions to the Model Regulation to Define Standards and Commissioner’s Authority for Companies Deemed to be in Hazardous Financial Condition (#385) and how the revisions relate to the definition of hazardous financial condition in the federal Liability Risk Retention Act of 1986 will be offered for public comment for 30 days.

Further, 2006 revisions to the Risk-Based Capital for Insurers Model Act (#312) related to the trend test for property and casualty insurers were also discussed.  It was noted that the trend test is required to be included as part of states’ adoption of RBC for RRGs.  Adoption of Model #312 for RRGs will be required for NAIC accreditation as of January 1, 2014.

Optional for accreditation, however, are 2011 revisions to the Credit for Reinsurance Model Act (#785) and the Credit for Reinsurance Model Regulation (#786).

 

Corporate Governance Working Group

The Corporate Governance Working Group met on August 25, during which members discussed input received from the Market Regulation and Consumer Affairs Committee about the incorporation of market conduct concepts into proposed corporate governance enhancements.

During the meeting, a presentation was given by interested parties on concepts to be included in the development of a corporate governance model law that would be known as the “Corporate Governance Annual Filing Model Act.”  To read the presentation, click here (starts on page 6).  This presentation included an overview of a draft model prepared by the interested parties to submit corporate governance disclosures to regulators on an annual basis.

The Working Group then formed an Internal Audit Subgroup and a Drafting Subgroup to develop the draft models for presentation back to the Working Group.   To view the model law development requests, click here (starts on page 16).

 

Group Solvency Issues Working Group

The Group Solvency Issues Working Group met on August 25, during which it heard an update on IAIS initiatives relating to Insurance Core Principle 23: Group-Wide Supervision.  Proposed changes to the Financial Analysis Handbook’s roles and responsibilities of the U.S. lead state/U.S. group-wide supervisor were also reviewed.

A proposed letter to the Financial Examiners Coordination Working Group related to group-wide supervision was discussed, but action on this was deferred until after the NAIC’s 2013 Own Risk and Solvency Assessment (ORSA) Pilot Project is completed.

 

Financial Regulation Standards and Accreditation Committee

The Financial Regulation Standards and Accreditation Committee met on August 24, during which members:

• Adopted 2012 revisions made to Financial Condition Examiners Handbook deemed by the Financial Examiners Handbook Technical Group to be significant for accreditation purposes.
• Voted to hold a 30-day comment period on proposed revisions to the Review Team Guidelines to incorporate the significant 2012 amendments made to the Financial Condition Examiners Handbook.
• Adopted the 2012 revisions to the Business Transacted with Producer Controlled Property/Casualty Insurer Act (#325) for accreditation purposes for RRGs, effective January 1, 2014.  The revisions remove the exemption of RRGs chartered as captives from the definition of “licensed insurer.”
• Voted to hold a one-year comment period the Risk Management and Own Risk Solvency Assessment Model Act (#505) as a possible addition to the accreditation standards.
• Adopted the 2010 revisions to the Insurance Holding Company System Regulatory Act (#440) and the Insurance Holding Company System Model Regulation (#450) as an update to the accreditation standards, effective January 1, 2016.
• Adopted proposed revisions to the Review Team Guidelines to incorporate the new quarterly automated analysis process included in the 2013 version of the Financial Analysis Handbook.
• Voted to hold a 30-day comment period on a referral from the Corporate Governance Working Group related to an additional significant element in the Part A: Corrective Action Standard.
• Voted to hold a 30-day comment period on a referral from the Risk Retention Group Task Force relating to the current Part A for RRGs requirement to audit the Note 1 reconciliation of surplus from Generally Accepted Accounting Principles to Statutory Accounting Principles.
• Adopted a referral from the Risk Retention Group Task Force relating to a technical correction of the information in the Accreditation Interlineations relating to reinsurance guidance for RRGs.
• Voted to hold a 30-day comment period on a referral from the Group Solvency Issues Working Group that includes proposed revisions to the Review Team Guidelines regarding performance and documentation of the annual holding company assessment.
• Voted to hold a 30-day period on a referral from the Financial Examiners Coordination Working Group related to uploading examination reports in the Financial Exam Electronic Tracking System (FEETS). The Committee also voted to hold a 30-day comment period on proposed revisions to the Review Team Guidelines that NAIC staff will draft to implement the new requirement discussed in the referral.

 

 

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