National Association of Insurance Commissioners (NAIC) Summer 2014 National Meeting Highlights

Sep 3, 2014

 

The National Association of Insurance Commissioners (“NAIC”) held its Summer 2014 National Meeting from August 16 through 18 in Louisville, Kentucky.

As part of Kentucky Insurance Commissioner Sharon Clark’s welcome, the Kentucky Department of Insurance organized a “fitness challenge” in which meeting attendees were challenged to count their total number of steps by wearing a pedometer.  Hawaii Department of Commerce and Consumer Affairs Commissioner Gordon Ito took top honors in the contest for the most steps taken by an insurance commissioner.  North Dakota State Representative and former National Conference of Insurance Legislators President George Keiser logged the most for attending legislators.  To view the complete challenge results, click here.

The Summer 2014 National Meeting was highlighted by a special session on insurance issues relating to commercial ride and car-sharing conducted by transportation network companies (“TNCs”).  Generally, the session illustrated that some progress has been made toward addressing these issues, as evidenced by the recent actions of several of the largest TNCs, which now provide $1 million of liability coverage for damages that exceeded a driver’s personal insurance limits during the time he or she is operating a vehicle for hire.  However, the coverage applies only to “Periods 2” and “Period 3”–terms used to describe the phase of the transaction once a passenger is in a TNC car–or when a TNC driver has accepted a request for a ride from a TNC smartphone application.

Coverage gaps still remain for “Period 1,” which designates the time period during which the driver has engaged the TNC application, but has not yet picked up a passenger.  It was explained during the forum that, during the last few months, two of the largest TNC companies have taken steps to address the insurance gap in Period 1 by extending coverage to it, although views still vary widely on what the appropriate level of coverage for this period should be.

To view the session materials, click on the hyperlinks below:

Notably, the Interstate Insurance Product Regulation Commission (“IIPRC”) met in Louisville on August 15 before the National Meeting began.  Joining the IIPRC for the first time was the Interstate Insurance Product Regulation Compact’s newest member, Arizona, which became the 44th Compacting State on July 24, 2014.

Appointed by the National Conference of State Legislatures, Arkansas State Senator Jason Rapert was added to the IIPRC Legislative Committee.  Senator Rapert, who chairs the Arkansas Senate Insurance and Commerce Committee, was instrumental in introducing and guiding the passage of the Compact legislation in that state during 2013.

Also during the meeting, the IIPRC provided a response to the Florida Office of Insurance Regulation (“OIR”) that the legislation adopted by the Florida Legislature in 2013, which became effective on July 1, 2014, contained several material variances from the Compact legislation and therefore was not an effective acceptance to join the Compact.   To view a report on the legislation by the OIR, click here.

During its meeting, the IIPRC also adopted amendments to 30 life uniform standards that were subject to its periodic five-year review process.  These amendments, which were substantially clarifying in nature, will become effective later this year and will apply on a going-forward basis.

Below are highlights from summaries of the NAIC committees, task forces and working groups that met last month in Louisville.  To access the complete meeting summary matrix that includes materials and agendas, click here.

 

Executive Committee and Plenary

The Executive Committee and Plenary met on August 19, during which the reports of NAIC committees, working groups and task forces were adopted, including the Principle-Based Reserving Implementation Task Force (thereby effectively adopting the XXX/AXXX Reinsurance Framework in concept).

Also approved were amendments to the Long-Term Care Insurance Model Regulation (#641) and Annual Financial Reporting Model Regulation (#205).

The agenda included an update on states’ implementation of NAIC-adopted model laws and regulations and culminated in the recognition of contributions made by former NAIC President (1981) and Arkansas Insurance Commissioner William H.L. Woodyard III, who recently passed away.

 

Executive Committee

The Executive Committee met on August 17, 2014.  Administrative and operational items approved during the meeting, included a waiver of registration fees for NAIC training courses for consumer representatives.

Also approved:

  • The retention of a consultant on the issue of the NAIC’s operating reserve policy
  • Funding for retaining consulting actuaries to review current the NAIC’s actuarial reporting to recommend a new format
  • Regulatory Treatment Analysis Service pricing for developing NAIC designations for new government-issued securities
  • A recommendation to retain a consultant to review governance of the NAIC along with the consultant’s related scope of work
  • Funding for the September 2014 launch of “Protecting the Future,” the NAIC’s education outreach campaign
  • Use of the same selection process as that used in 2010 and 2012 to select an insurance commissioner representative to the Financial Stability Oversight Council (“FSOC”)
  • The filing of an amicus brief at the request of Pennsylvania Insurance Commissioner Michael F. Consedine in the case City of Sterling Heights General Employee’s Retirement System et al. v. Prudential Financial, Inc. et al. to address the confidentiality of state market-conduct examination materials
  • A recommendation of the NAIC’s independent investment advisor to liquidate the NAIC’s investments in a certain fund
  • The NAIC Audit Committee’s recommendation for the allocation of the 2014 Needs-Based Grant funding
  • The allocation of existing NAIC resources to the Examination Tracking System Continuum Action Support Initiative

The Executive Committee adopted the XXX/AXXX Reinsurance Framework, which furthers an action plan to develop proposed changes to the insurer/captive regulations specific to XXX/AXXX transactions.

The XXX/AXXX Reinsurance Framework would not change the statutory reserve requirements; rather, it would change what types of assets or securities are needed to back those reserve liabilities.  The framework would also require the ceding company to disclose the assets and securities used to support the reserves and hold a risk-based capital cushion if the captive does not file risk-based capital.

With this adoption, numerous groups will develop the details to create the framework for subsequent consideration by the entire NAIC membership.

Amendments to the Credit for Reinsurance Model Law (#785) and the Actuarial Opinion and Memorandum Regulation (#822) were also adopted.

In addition to approving development of the Corporate Governance Annual Disclosure Model Act and Regulation, the Executive Committee heard status reports on amendments to the following:

  • Annuity Disclosure Model Regulation (#245)
  • Suitability in Annuity Transactions Model Regulation (#275)
  • Life Insurance and Annuities Model Regulation (#570)
  • Life Insurance and Annuities Replacement Model Regulation (#613)
  • Insurance Holding Company System Regulatory Act (#440)
  • Insurance Holding Company System Model Regulation with Reporting Forms and Instructions (#450)
  • Creditor-Placed Insurance Model Act (#375)
  • Property and Casualty Actuarial Opinion Model Law (#745)
  • Actuarial Opinion and Memorandum Regulation (#822)
  • Mortgage Guaranty Insurance Model Act (#630)
  • Synthetic Guaranteed Investment Contracts Model Regulation (#695)
  • Annual Financial Reporting Model Regulation (#205)

 

Financial Stability Task Force

The Financial Stability Task Force met on August 16, during which the implications of the International Association of Insurance Supervisors’ (“IAIS”) financial stability-related initiatives were reviewed.  Members also heard an update on the Financial Stability Oversight Council and discussed the issues of insurance supervision and Federal Reserve collaboration.

 

Governance Review Task Force

The Governance Review Task Force met on August 18, during which a motion was voted down to request the Executive Committee to rescind its establishment of a subcommittee to review responses to the NAIC’s Request for Proposal for a consultant and have the Task Force manage the selection process.

 

Principle-Based Reserving Implementation Task Force

The Principle-Based Reserving Implementation Task Force met on August 18, during which members heard an status update on state adoptions of principle-based reserving (“PBR”)and discussed the Executive Committee’s adoption of the XXX/AXXX Reinsurance Framework and associated actions.  They also agreed to direct the Blanks Working Group on 2014 financial reporting relating to XXX/AXXX.

Along with using January 1, 2017 as the earliest probable Valuation Manual (“VM”) operative date, members considered the need to evaluate state laws for substantially similar terms and provisions.

A review of comments received on the PBR Statistical Agent Framework resulted in a directive for NAIC Staff members to revise the document draft.

A discussion was held on the need to update the PBR Implementation Plan.  

 

PBR Review Working Group

The PBR Review Working Group met on August 15, during which members agreed to publish draft PBR blanks changes, supplements and revised blanks instructions for public comment.  The agenda included discussion on:

  • A draft supplemental data collection template for VM-31
  • PBR Report Requirements for Business Subject to a PBR Valuation
  • NAIC PBR support for states
  • NAIC and state-by-state staffing requirements to implement PBR

Status updates were given on the development of the PBR Statistical Agent Framework and PBR company outreach.

 

Producer Licensing Task Force

The Producer Licensing Task Force met on August 17, 2014.  During this meeting, members adopted a recommendation that states require a variable line of authority license for producers selling contingent deferred annuities.  They reviewed another recommendation that the states of Washington and Texas be certified as “reciprocal” for purposes of Gramm-Leach-Bliley Act producer licensing reciprocity in accordance with the NAIC reciprocity standard.

 

Producer Licensing Working Group

The Producer Licensing Working Group met on August 17, during which its Continuing Education Subgroup reported that work on Continuing Education (“CE”) Uniformity and Reciprocity will proceed through coordination with regulators and industry members to create CE Recommended Course Guidelines and Best Practices for ultimate addition to the NAIC State Licensing Handbook.  The Best Practices will be placed specifically in Chapter 14, entitled “Continuing Education.”

Surplus lines uniformity and reciprocity was also discussed.  A survey will soon be distributed to determine how each state is currently processing the licensing of surplus lines.

The Adjuster Licensing Subgroup reported that work will continue on reviewing the Independent Adjuster Uniform Licensing to determine uniformity.  States will be assisted with implementing Independent Adjuster Licensing Guidelines and Best Practices.   Meanwhile, an Emergency Independent Adjuster Guidelines draft was published for public comment.

Revisions are underway as part of the State Licensing Handbook biennial review.  The revised handbook will be presented to the Producer Licensing Task Force at the NAIC’s 2014 Fall National Meeting.

Also at the meeting, the new National Insurance Producer Registry (“NIPR”) Executive Director Karen Stakem Hornig was introduced.  In addition to a report given on the NIPR Regulator User Interface project, it was advised that the amended definition for the “National Producer Number” will reflect states’ current practices and soon be posted to both the NAIC and NIPR Web sites

 

Contingent Deferred Annuity Working Group

The Contingent Deferred Annuity Working Group met on August 16, during which members heard a presentation from the Center for Economic Justice about consumer concerns with contingent deferred annuities (“CDAs”).

Preliminary comments were heard from the Insured Retirement Institute and the America Council of Life Insurers on the draft guidance document entitled “Guidelines for the Financial Solvency and Market Conduct Regulation of Insurers Who Offer Contingent Deferred Annuities.”  The comment deadline is September 5.

The comment period on draft revisions to the following models was extended to September 5:   Annuity Disclosure Model Regulation (#245), Suitability in Annuity Transactions Model Regulation (#275), Life Insurance and Annuities Model Regulation (#570), and Life Insurance and Annuities Replacement Model Regulation (#613).

The issue of nonforfeiture benefits relating to CDAs was reviewed.  A comment deadline of September 30 was set for the questions of 1) whether a non-forfeiture or similar benefit should apply to CDAs, 2) what this benefit should look like or how it could be calculated, and 3) the appropriate role for the Working Group with respect to this issue.

Gathering information from state regulators on CDA filings was recommended in order to determine whether information exists that could be helpful to share from a best practices perspective.

 

Life Actuarial Task Force

The Life Actuarial Task Force met on August 14 and 15, during which it heard an update from the Society of Actuaries (“SOA”)/American Academy of Actuaries Joint Project Oversight Group on the 2014 Valuation Basic Table (“VBT”), 2014 Commissioner Standard Ordinary (“CSO”) table and PBR margins.  The Task Force voted to allow public comment on the 2014 VBT report and the accompanying VBT for a period ending October 15.

Public comment will also be received until September 8 on an American Council of Life Insurers (“ACLI”) proposal for exempting small companies from the Valuation Manual (“VM”)-20, Requirements for Principle-Based Reserves for Life Products.  The proposal will include a footnote indicating that, after five years, the Task Force will consider the ongoing need for the exemption.

The comment period on another ACLI proposal for revising the effective date of the change to the mortality credibility calculation in VM-20 ends September 16.  This would allow AG 38 Section 8D the same mortality credibility to this effective date.

The proposed actuarial guideline (AG 48) to address the XXX/AXXX Reinsurance Framework will be open for comment until September 16, as will the Actuarial Guideline XXXIII Determining CARVM (Commissioners Annuity Reserve Valuation Method) Reserves for Annuity Contracts with Elective Benefits and the 2015 Generally Recognized Expense Tables.

Further, an ACLI proposal for non-material universal life secondary guarantees (“ULSG”) will also be open for comment.  It would allow non-material ULSG to use the Deterministic Reserve Exclusion Test.

Task Force members updated the status of the “List of 10 Items Required Prior to the Valuation Manual Operative Date” and agreed to send the document to the Life Insurance and Annuities Committee.

Members also discussed the ACLI draft actuarial guideline for indexed universal life illustrations.  The Task Force agreed to defer public comment on the guideline in response to a request from interested parties to present an alternative proposal.

 

Unclaimed Life Insurance Benefits Working Group

The Unclaimed Life Insurance Benefits Working Group met on August 16, during which members heard the results of an ACLI study on unclaimed life insurance benefits and the Social Security Administration’s Death Master File.

Next steps were discussed for developing recommendations to the Life Insurance and Annuities Committee to address the issue of unclaimed life insurance benefits.  The Working Group plans to hold a conference call within the next month to continue the discussions and consider adoption of one or more recommendations to be submitted for consideration.

 

Property and Casualty Insurance Committee

The Property and Casualty Insurance Committee met on August 18, during which members agreed to send the “Compendium of Reports on the Pricing of Personal Automobile Insurance” back to the NAIC’s Auto Insurance Study Group to possibly include a reference to additional reports.

A request to revise the Property and Casualty Actuarial Opinion Model Law (#745) was withdrawn.

A document entitled “Best Practices for Creating Consumer Online Insurance Policy Resources” was adopted along with a Data Collection Template that was referred to the Financial Condition Committee.

After a report on the CIPR Event: “Commercial Ride-sharing and Car-sharing Issues,” a working group was appointed to study related issues in more detail.

Members also heard a presentation on the new TransUnion/CARFAX rating model and agreed to ask the Auto Insurance Study Group to research related issues.

After an update on Yellow Corrugated Stainless Steel Tubing and carrier participation in a related safety public relations campaign, a motion was adopted to have the NAIC join the National Association of State Fire Marshals in support of these efforts.

Reports were given on lender-placed insurance data collection, the Applied Insurance Research inland flood model, and a multi-purpose vehicle proposal, the latter for which a working group was appointed to look into a broader catastrophe response effort.

Members also agreed to examine issues related to cyber-insurance, including possible data collection.

Finally, a discussion on a letter received from the National Association of Public Insurance Adjusters resulted in the appointment of a working group to evaluate issues related to the unauthorized practice of public adjusting.

 

Auto Insurance Study Group

The Auto Insurance Study Group met on August 16, during which it discussed an NAIC comment letter on the Federal Insurance Office request for information on auto insurance affordability and availability issues.  Industry and consumer groups were on hand at the meeting to provide input.

As part of that conversation, the issue of price optimization prompted the question of which NAIC group should handle the issue.  NAIC staff will query further.

 

Catastrophe Insurance Working Group

The Catastrophe Insurance Working Group met on August 17, during which it disbanded the Data Collection Template Subgroup as part of its agenda.  After hearing an update on the National Flood Insurance Program and catastrophe-related legislation, members heard a presentation on Farmers Insurance Company’s “Disaster Recovery Playbook.”

Discussion then turned to the formation of a new subgroup–the Post-Catastrophe Regulatory Guidance Subgroup–to provide guidance to standardize insurer premium collection procedures, underwriting limitations and a claims handling process that a state could adopt and activate after a catastrophe.

 

Casualty Actuarial and Statistical Task Force

The Casualty Actuarial and Statistical Task Force met on August 16, during which it adopted a referral response letter on the Insurance Regulatory Information System Ratio 11, Ratio 12 and Ratio 13.

Members voted to offer an action plan to evaluate the SOA’s general insurance actuarial educational track for a public comment period ending September 15.

They also heard a report from the AAA that included a presentation of a draft U.S. Qualification Standards Attestation document.  The NAIC’s Appointed Actuary Subgroup will draft a comment letter to send to the AAA.

 

Terrorism Insurance Implementation Working Group

The Terrorism Insurance Implementation Working Group met on August 17, during which an update was given on federal activities related to re-authorization of the Terrorism Risk Insurance Act (“TRIA”).  Members discussed potential revisions to a TRIA model bulletin on filing procedures, an expedited filing form and policyholder disclosures.  NAIC staff members will create a template so the documents can be quickly updated if and when Congress reauthorizes TRIA.

 

Transparency and Readability of Consumer Information Working Group

The Transparency and Readability of Consumer Information Working Group met on August 18, during which members heard presentations on the use of smart disclosures.  It was agreed that research should continue on the topic.

To read more about Smart Disclosures, click here.

 

Workers’ Compensation Task Force

The Workers’ Compensation Task Force met on August 18, during which members heard an update on TRIA and discussed the impact on the workers’ compensation market should TRIA not be renewed in its current form by December 31, 2014.

Reports were given on:

  • The Hostess Brands bankruptcy proceedings and the possible impact on self-insurance securities held by Kansas and Rhode Island
  • Second quarter 2014 Statistical Results for the Residual Market in independent bureau states
  • The state of the workers’ compensation market by the National Council on Compensation Insurance

 

Market Regulation and Consumer Affairs Committee

The Market Regulation and Consumer Affairs Committee met on August 18, during which members adopted a recommendation to retain the Authorization for Criminal History Record Check Model Act (#222) and the Unauthorized Transaction of Insurance Criminal Model Act (#890) as part of the NAIC’s Model Law Review Initiative.

Also adopted were Affordable Care Act market conduct examination standards for rescissions, extension of dependent coverage to Age 26, guaranteed availability of individual and small group market health insurance coverage, guaranteed renewability of individual and small group market health insurance coverage, and coverage of individuals participating in approved clinical trials.

Pending approval of the proposed market conduct accreditation charge by the Executive Committee and Plenary, a Market Conduct Accreditation Working Group was appointed.

Members adopted a process for choosing new Market Conduct Annual Statement (“MCAS”) lines of business and a revised attestation form for the submission of MCAS data.

 

Financial Condition Committee

The Financial Condition Committee met on August 18, during which members adopted the Corporate Governance Annual Disclosure Model Act and the Corporate Governance Annual Filing Model Regulation.  In response to an industry request, the Committee also approved a specific charge to address regulatory redundancy concerns with the documents as outlined in the Corporate Governance Working Group summary below.

The Corporate Governance Annual Disclosure Model Act and supporting Model Regulation provides a means for insurance regulators to receive additional information on the corporate governance practices of U.S. insurers on an annual basis.

Under the requirements of the Model Act, U.S. insurers will be required to provide a detailed narrative describing governance practices to their lead state or domestic regulator by June 1 of each year.  The narrative will be protected by strict confidentiality measures, which were included within the models to encourage insurers to be open and transparent in describing their governance practices to regulators.  Insurers will be allowed some discretion in determining the level within the organization to report their corporate governance practices at, depending upon their structure and organization.  The new disclosure requirements are expected to commence in 2016.

Key items required to be described within the corporate governance disclosure include:

  • The insurer’s corporate governance framework and structure including duties and structure of the Board of Directors and its committees;
  • The policies and practices of its Board of Directors and significant committees including appointment practices, the frequency of meetings held and review procedures;
  • The policies and practices directing Senior Management including a description of defined suitability standards, the insurer’s code of conduct and ethics, performance evaluation and compensation practices, and succession planning; and
  • The processes by which the Board of Directors, its committees and senior management ensure an appropriate level of oversight to the critical risk areas impacting the insurer’s business activities including risk management processes, the actuarial function, and investment, reinsurance and business strategy decision-making processes.

Also adopted during the meeting was the Model Guideline for Payment of Interest to Receiver on Overdue Reinsurance Recoverables, after which discussion ensued on the “Memorandum on Recommendations Regarding Separate Accounts” and the best way to move forward to address its recommendations.

A review of comments received on the exposed draft NAIC Group Code Assignment process was deferred until an interim Committee teleconference.

The Financial Analysis Working Group is receiving comments until October 1 on a proposed modification to AG 38 that would delete the existing requirement for companies to file annual reports, while granting the Working Group the right to ask for such reports when appropriate.

 

Corporate Governance Working Group

The Corporate Governance Working Group met on August 17, during which members heard a report on IAIS governance-related activities.  They also discussed comments received on potential redundancies created through the adoption of an annual corporate governance disclosure.  As a result of the discussions, the Working Group agreed to refer several potential redundancies to the Blanks Working Group and the Financial Examiners Handbook Technical Group for  consideration.  In addition, the Working Group agreed to refer broader redundancy concerns related to the overall solvency-monitoring process to the Financial Condition Committee for its consideration.

Also adopted were the Corporate Governance Annual Disclosure Model Act and the Corporate Governance Annual Disclosure Model Regulation to provide annual information on an insurer’s corporate governance practices to insurance regulators.

 

Emerging Actuarial Issues Working Group

The Emerging Actuarial Issues Working Group met on August 14, during which it adopted a response to a question on reserve credits for yearly renewable term reinsurance.  The response will be effective for the upcoming year-end.   The following were approved for public comments, which are due by September 16:

  • A response to a question on reinsurance assumed, 100 percent reinsurance ceded and use of a hypothetical portfolio
  • A response to a question on determining a starting asset portfolio
  • A response to a question on de-linkage of asset and liability cash flows

 

Private Equity Issues Working Group

The Private Equity Issues Working Group met on August 17, during which members heard a presentation about A.M. Best’s observations on private equity-owned insurers.  They later discussed issues involving private equity industry data, transactions between favored investors of private equity and insurance companies and comments received on proposed changes to the NAIC’s Financial Analysis Handbook.

 

Accounting Practices and Procedures Task Force

The Accounting Practices and Procedures Task Force met on August 17.  Members took the following actions, among others:

  • Adopted revisions to improve reporting of derivatives between Schedule DB and the balance sheet.
      • Opened the following substantive items to statutory accounting:
        • Requested information on the cash and non-cash transactions in cash flow statements and preferences on what should be included.   Directed NAIC staff to conduct a confidential state survey on the use of this statement
        • Discussion topics, and their suggested prioritization, for the investment classification project
      • Opened the following non-substantive items to existing statutory accounting guidance, among others:
        • Revisions to clarify that restricted assets can be admitted or non-admitted assets and disclosure clarifications
        • A request for comments on the need to clarify existing surplus notes guidance
        • Revisions to detail the separate accounts disclosure categories currently captured in Note 34. Directed NAIC staff to prepare a proposal to the Blanks Working Group to reflect minor language revisions
        • Revisions to Title Insurance to delete the disclosure for premium revenue reported on the Gross All-Inclusive and Gross Risk Rate premium basis, with corresponding revisions to the guidance
        • Revisions and requested input on the preferred reporting between two options for when asbestos and pollution exceptions are granted by a state with a 30-day comment period ending September 16. Also requested withdrawal of the related blanks proposal 2014-15BWG
        • Revisions to clarify that the RBC-authorized control level used in the annual realization threshold table for the deferred tax asset calculation is from the RBC ratio in process of being filed
        • Revisions to adopt ASU 2014-12: Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved After the Requisite Service Period
        • Revisions to reject ASU 2014-10: Development Stage Entities as not applicable
        • Revisions to consolidate all rejected generally accepted accounting principles (GAAP) guidance from INT 99-00: Compilation of Rejected EITFs into Issue Paper No. 99-Non-applicable GAAP Pronouncements
        • Opened revisions to incorporate changes to Appendix A-010 adopted by the Health Actuarial Task Force and the related actuarial guideline, to permit the use of the 2012 Group Long Term Disability Table and to incorporated the related actuarial guideline
      • Discussed the following outstanding agenda items, among others:
        • Considered comments from the Capital Adequacy Task Force and directed NAIC staff to draft guidance to move single-member and single real estate assets into real estate accounting guidance
        • Referred consideration of ASU 2014-11: Repurchase-to-Maturity Transactions, Repurchase Financings and Disclosures to the Restricted Asset Subgroup.

      Members were informed that the Restricted Asset Subgroup is discussing repurchase agreements and has directed NAIC staff to:  1) solicit information from states regarding long-term transactions; 2) conduct additional research on key topics; and 3) begin drafting guidance for disclosures and short-term transactions.

      A referral was received from the Principle-Based Reserving Implementation Task Force, which is pending Executive Committee approval, related to XXX/AXXX Reinsurance Framework.  The referral includes the charges to develop a proposed definition for “primary security” and an audited note to financial statements.

      It was noted that no comment letters are being planned on current GAAP exposures.

      In another action, the SSAP No. 43R Subgroup (part of the Financial Condition Committee) was disbanded.

      To view the Blanks Working Group meeting summary, click here.

      To view the Statutory Accounting Practices Working Group summary, click here.

       

      Capital Adequacy Task Force

      The Capital Adequacy Task Force met on August 17, during which members reviewed comments from interested parties on the final adoption date of current-year reporting proposals that are modified due to non-RBC working group adoptions.  Direction was discussed for the Investment Risk-Based Capital Working Group to begin analysis of the property and casualty, and health modeling of investments for all RBC formulas.

      Guidance for the 2014 RBC filings and for inclusion in the official 2015 RBC instructions was adopted.

      A plan to review collateral for derivatives was discussed.

       

      Investment Risk-Based Capital Working Group

      The Investment Risk-Based Capital Working Group met August 16, during which members discussed topics relating to exchange-traded funds and heard a report from the AAA that included recommended base asset risk factors for corporate bonds held by life insurance companies.  The AAA’s report provided for an increased granularity with base asset risk factors for the 19 nationally recognized statistical rating organization (“NRSRO”) rating categories (i.e., Aaa to Caa, excluding default).  However, the AAA proposed the compression of the 19 NRSRO ratings and corresponding base asset risk factors into 13 factors and NAIC classes.

      Questions were raised about increasing granularity in RBC for real estate beyond the base factor previously discussed. The ACLI will be providing an analysis of real estate by region and property type for further review.

      A discussion was held on the concept of carrying value for corporate bonds.

       

      Property and Casualty Risk-Based Capital Working Group

      The Property and Casualty Risk-Based Capital Working Group met on August 16, during which members adopted the 2014 Property and Casualty RBC formula and instruction publications.

      A proposal on the Credit Risk Charge for Reinsurance in R3 from the Reinsurance Association of America was approved for public input, with the comment period ending October 1.

      A status update was given on the issue of asset valuation reserve (“AVR”) versus non-AVR companies.

       

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

       

       

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