National Association of Insurance Commissioners Summer 2012 National Meeting Committee Highlights

 

The National Association of Insurance Commissioners (“NAIC”) held its Summer 2012 National Meeting in Atlanta, Georgia from August 11 through August 14.  To access complete meeting materials, click here.

To view a chart containing hyperlinks to all committee summaries, click here.

Below are highlights of actions taken by the NAIC’s various committees and working groups.

 

Executive Committee and Plenary

The Executive Committee and Plenary met on August 14, during which it

• Reinstated the charge to the Life Insurance and Annuities Committee to appoint a working group to review and consider revisions to the Viatical Settlements Model Regulation (#698) for consistency with the 2007 revisions made to the Viatical Settlements Model Act (#697), including reviewing and considering revisions to or replacement of, as appropriate Appendix A Informational Brochure.
• Ratified the reappointment of Missouri Insurance Director John M. Huff to the Financial Stability Oversight Council.
• Adopted Amendments to the Standard Nonforfeiture Law for Life Insurance (#808).
• Adopted the Uniform Suspected Insurance Fraud Reporting Instructions and Form.
• Adopted Amendments to the International Insurers Department (IID) Plan of Operation.
• Adopted The Use of Social Media in Insurance white paper.
• Adopted the NAIC-Financial Planners and Insurance Products Proposed Survey Questions.

 

Executive Committee

The Executive Committee met on August 12, 2012, during which it:

• Adopted an additional charge for the Health Insurance and Managed Care (B) Committee to appoint a Health Care Reform Regulatory Alternatives (B) Working Group to: 1) provide a forum for discussion of and guidance on the alternatives to implementing a state-based exchange compliant with the federal Patient Protection and Affordable Care Act (“PPACA”) and the implications of such alternatives on NAIC members’ regulatory authority; 2) assist members in resolving open issues related to non-state-exchange PPACA alternatives; 3) analyze the impact of PPACA on member regulatory authority inside and outside a federal exchange and analyze the impact on existing NAIC model laws; and 4) identify opportunities for members to innovate and regulate outside a federal exchange.
• Adopted Model Law Development Requests for amendments to the Business Transacted with Producer Controlled Property/Casualty Insurer Act (#325) and the Health Insurance Reserves Model Regulation (#010).
• Received the report from the National Insurance Producer Registry (“NIPR”) Board of Directors, including the announcement that NIPR has successfully met the timelines established in the federal Dodd-Frank Wall Street Reform and Consumer Protection Act for the licensing of surplus lines producers. The law provided a two-year timeframe to get all surplus lines producers on the NAIC’s centralized database and the ability to do electronic licensing for all lines.
• Received the report of the Interstate Insurance Product Regulation Commission (“IIPRC”), which detailed a 60 percent increase in filing volumes and a 25 percent increase in registrations. Approximately 150 companies (representing 75 percent of the premium volume for asset-based products for small, medium and large companies and fraternals) have registered to file through the IIPRC.

 

Producer Licensing Working Group

The Producer Licensing Working Group met on August 12, 2012, during which it:

• Discussed Continuing Education Reciprocity. Establishing a Continuing Education Best Practices document to replace older guidelines currently in place was discussed. Alaska, Kansas, Minnesota, New Jersey and Virginia volunteered to be part of a Continuing Education Subgroup.
• Discussed a strategy for continued work toward reciprocity and the creation of framework language for states to follow as they work towards legislation changes.
• Discussed the biennial review of the State Licensing Handbook, including producer licensing testing (chapter 8) and surplus lines (chapter 10). The Working Group will hold conference calls on August 29, September 19 and October 17 to address any comments received, after which it will create a final draft for adoption.

 

Speed to Market Task Force

The Speed to Market Task Force met via conference call on June 7 and July 31, 2012, during which it:

• Adopted changes to the property/casualty Uniform Product Coding Matrix, to be effective January 1, 2013.
• Established a new Commercial Lines Subgroup and announced its members.

 

Information Systems Task Force

The Information Systems Task Force met on August 11, during which it heard a proposal for the NAIC to discontinue processing electronic financial statement submissions unless they are submitted via the Internet beginning with the first quarter 2013 filings.  The Task Force will finalize a decision on the matter at the NAIC’s Fall National Meeting.

 

Property and Casualty Insurance Committee

The Property and Casualty Insurance Committee met on August 13, during which it:

• Adopted revisions to the Business Transacted with Producer Controlled Property/Casualty Insurer Act (#325) that remove the risk retention group exemption.
• Received an update on the NAIC’s August 9 public hearing on lender-placed insurance and adopted a related Model Law
• Adopted a Model Development Request seeking the Executive Committee’s permission to amend the Creditor-Placed Insurance Model Act (#375), as well as the Property and Casualty Actuarial Opinion Model Law (#745).
• Adopted the Best Practices for Developing a Premium Comparison Guide.
• Received a report from a subgroup of Northeastern states collaborating on catastrophe issues.
• Decided to hold a public hearing on catastrophe claims practices at the NAIC’s Fall National Meeting.
• Decided to draft a charge to study the impact of the federal Affordable Care Act (ACA) on medical professional liability insurance.

 

Advisory Organization Exam Oversight Working Group

The Advisory Organization Exam Oversight Working Group met on August 11, 2012, during which it: the Working Group:

• Discussed procedures for closing out of “clean exams.”
• Announced that the District of Columbia would serve as the lead state for the 2013 SFAA (Surety and Fidelity Association of America) exam.
• Considered establishing a conference call schedule to begin drafting changes to the Market Regulation Handbook Chapter 25-Conducting the Advisory Organization Examination.

 

Auto Insurance Study Group

The Auto Insurance Study Group met on August 14, during which it adopted a work plan to study the effect of the cost of auto insurance on low-income consumers.

 

Earthquake Study Group

The Earthquake Study Group participated in a July 26 Webinar by the National Academies that covered information presented on the National Academies’ recently released research study entitled, “Induced Seismicity Potential in Energy Technologies.”  (This study can be found online by clicking here.)  Sponsored by the U.S. Department of Energy, the study identifies gaps in knowledge and research needed to advance the understanding of induced seismicity, as well as gaps in induced seismic hazard assessment methodologies and the research to close those gaps.  Further, it assesses options for steps toward best practices with regard to energy development and induced seismicity potential.  The National Academies includes the following four organizations:  the National Academy of Sciences, the National Academy of Engineering, the Institute of Medicine and the National Research Council.  They are independent, nonprofit institutions that provide science, technology and health policy advice under an 1863 Congressional charter.

 

Risk Retention Working Group

The Risk Retention Working Group met on August 12, during which it:

• Discussed state implementation of the Statement of Voluntary Dissolution Form 16b for Risk Retention Groups.
• Discussed changes in the Credit for Reinsurance Model Law (#785) and Credit for Reinsurance Model Regulation (#786) and their effect on risk retention groups.
• Heard an update on possible federal legislation concerning risk retention groups.
• Discussed how states handle application information to be forwarded to the NAIC as indicated in Section C of the Model Risk Retention Act (#705).

 

Transparency and Readability of Consumer Information Working Group

The Transparency and Readability of Consumer Information Working Group met on August 11, during which it:

• Considered adoption of the Consumer Shopping Tool for Homeowners Insurance, but due to the extensive comments received, the Working Group will revise the document and address the changes on a subsequent conference call.
• Announced that it will begin working on a consumer shopping tool for automobile insurance after the Consumer Shopping Tool for Homeowners Insurance is adopted.

 

Casualty Actuarial and Statistical Task Force

The Casualty Actuarial and Statistical Task Force met on August 11, during which it:

• Adopted a Request for Model Law Development to amend an existing law, Property and Casualty Actuarial Opinion Model Law (#745). The aim is to incorporate stronger actuarial discipline procedures. One option is wording that exists in the Actuarial Opinion and Memorandum Regulation (#822).
• Adopted the annual Regulatory Guidance regarding 2012 actuarial opinions. The guidance details regulatory expectations of the Appointed Actuary’s actuarial opinion and documentation.
• Discussed the definition of “qualified actuary” and decided to continue dialogue on the subject, expecting to work with other actuarial task forces and the American Academy of Actuaries (“AAA”).
• Adopted a new charge to the Appointed Actuary Subgroup to initiate formal dialogue with the AAA’s Council on Professionalism and Casualty Practice Council to address regulator concerns expressed in the Appointed Actuary Subgroup’s survey about the actuarial guidance and discipline process.
• Discussed a request to analyze pet insurance business and claims development to advise the Financial Condition Committee whether pet insurance is homogeneous to other inland marine business for financial reporting purposes.

 

Surplus Lines Task Force

The Surplus Lines Task Force met on August 13, during which it created a subgroup, tentatively named the Surplus Lines Requirements (C) Subgroup, to research issues related to surplus lines eligibility requirements.

 

Market Regulation and Consumer Affairs Committee

The Market Regulation and Consumer Affairs Committee met on August 13, 2012, during which it discussed how to enhance state insurance market regulation and the results of the market regulation survey distributed to the states and all interested parties.

 

Captive and Special Purpose Vehicle Subgroup

The Captive and Special Purpose Vehicle Subgroup met on August 11, during which it:

• Discussed the Subgroup’s draft Captive and Special Purpose Vehicle White Paper, which addresses state authority, confidentiality and transparency, types of business ceded to captives and SPVs, capitalization, credit for reinsurance, holding company analysis considerations and provides conclusions and recommendations from the Subgroup’s study. The recommendations address:
  • Accounting considerations regarding the treatment of XXX and AXXX reserve redundancies (i.e., reserves held in accordance with the Valuation of Life Insurance Policies Model Regulation (#830)),
  • Possible enhancements to the Special Purpose Reinsurance Vehicles Model Act (#789),
  • Adherence with the International Association of Insurance Supervisors standards related to use of captives,
  • Enhanced financial statement disclosures,
  • Enhanced transparency to other functional regulators,
  • Enhanced analysis guidance, including holding company analysis,
  • Development of accreditation guidelines, and
  • Recommend a study of further the developments regarding letters of credit issued on a qualified basis.

The Subgroup plans to review the draft over the next two weeks and then release the draft for public comment on a future conference call.

 

Own Risk and Solvency Assessment Subgroup

The Own Risk and Solvency Assessment (“ORSA”) Subgroup met on August 12, during which it:

• Adopted the ORSA glossary for inclusion in the next edition of the Manual.
• Discussed the July 23-24, 2012 ORSA Feedback Pilot Project results and next steps.
• Reviewed confidential ORSA Summary Reports from 13 volunteer insurance groups. The Subgroup intends to provide feedback to the 13 insurance groups directly within the next few weeks. As a result of the project, the Subgroup: 1) is drafting revisions to the ORSA Guidance Manual; 2) will be drafting recommendations to the Financial Condition Committee related to ORSA implementation; 3) will be providing general feedback to industry regarding specific items identified in the review of ORSAs; and 4) will be drafting referrals to the Financial Analysis Handbook Working Group and the Financial Examiner’s Handbook Technical Group regarding guidance for analysis and examination of the ORSA Summary Report, analyst and examiner coordination, and multi-state coordination expectations. The Subgroup plans to hold future conference calls to discuss these topics.

 

Catastrophe Risk Subgroup

The Catastrophe Risk Subgroup met on August 11, during which it:

• Discussed the status of the catastrophe data-collection issue. The reporting format has been approved by the Capital Adequacy Task Force to collect U.S. catastrophe losses. The Subgroup has agreed to collect non-U.S. catastrophe losses in the same level of detail as U.S. catastrophe losses separately through an informal process to NAIC staff.
• Decided to revisit the timeline and necessary steps for implementation of formula on an information-only basis for the 2013 annual statement.

 

Property and Casualty Risk-Based Capital Working Group

The Property and Casualty Risk-Based Capital Working Group met on August 11, during which it:

• Discussed the impact of the new certified reinsurer categories in Schedule F to the Risk-Based Capital formula.
• Discussed two major issues related to the Credit Risk Charge for Reinsurance Recoverables:
  • Allowing collateral to offset the reinsurance recoverable
  • Whether a 10 percent risk charge is too high

 

Examination Oversight Task Force

The Examination Oversight Task Force met on August 12, during which it discussed 2013 salary recommendations for financial examiners and agreed to wait until the NAIC Fall National Meeting to consider adoption of final recommendations.

 

Receivership Separate Accounts Working Group

The Receivership Separate Accounts Working Group met on August 11, during which it discussed what the term “insulated” should theoretically mean from a receivership perspective.

 

Reinsurance Task Force

The Reinsurance Task Force met on August 13, during which it:

• Adopted recommendations for the Financial Regulation Standards and Accreditation Committee on proposed revisions to the accreditation standard for reinsurance ceded.
• Heard status updates on implementation of the revised credit for reinsurance models, including:
  • Proposed revisions to the accreditation standard for reinsurance ceded
  • States’ efforts to implement the revised models
• Adopted instructions applicable to Form CR-F and Form CR-S, which are required to be filed by certified reinsurers under the revised credit for reinsurance models. The instructions will be attached as an appendix to the Credit for Reinsurance Model Regulation (#786).
• Received a referral from the Financial Analysis Working Group regarding quota share reinsurance contracts. The Task Force will establish a subgroup to consider the issues identified within the referral.

 

Risk Retention Group Task Force

The Risk Retention Group Task Force met on August 11, during which it:

• Received an update on the Risk-Focused Examinations Subgroup, which is awaiting the results of the September Peer Review Project that may impact its work on developing best practices for examinations of risk retention groups.
• Received an update on the status of the RBC accreditation standard referral.
• Discussed increased use of surplus notes for initial capitalization in lieu of letters of credit.
• Discussed the formation of risk retention groups by traditional medical malpractice insurers.

 

Group Solvency Issues Working Group

The Group Solvency Issues Working Group met on August 10, during which it:

• Heard an update on the states’ adoption of the Insurance Holding Company System Regulatory Act (#440) and the Insurance Holding Company System Model Regulation (#450).  Nine states have adopted the revisions to the Models, including Connecticut, Indiana, Kentucky, Louisiana, Nebraska, Pennsylvania, Rhode Islands, Texas and West Virginia.  Pennsylvania included language in its statutes that provides for the designation of a group supervisor and details explicit roles and duties of the group supervisor.
• Heard an update on Supervisory College initiatives.  The NAIC staff will be following up with states after the Summer National Meeting on the status of supervisory colleges and will be developing informational materials to assist states.  The Working Group instructed NAIC staff to research and develop a supervisory college calendar and communication process for state regulator use.

 

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