National Conference of Insurance Legislators’ 2014 Summer National Meeting Preview
Jul 7, 2014
A full slate of insurance-related issues and proposals is on the agenda for this week’s National Conference of Insurance Legislators’ (“NCOIL”) 2014 Summer National Meeting, which runs from July 10 through July 13 in Boston, Massachusetts:
Among the topics expected to be taken up by NCOIL members are:
- International Solvency and Capital Standards
- Natural Disaster Savings Accounts
- Insurance Scoring
- Property and Casualty Insurance Guaranty Funds
- Flood Insurance
To view NCOIL’s meeting preview, click here. To view the tentative event schedule, click here.
Highlights of scheduled events are below.
International Issues Task Force
On July 10, the first day of the Meeting, NCOIL’s International Issues Task Force (“Task Force”) will consider and decide on proposed strategies for addressing issues deemed as “high-priority” based on a comment process and ranked by urgency through recent collaborative meetings with interested parties.
“Mission creep,” state-federal coordination, reinsurance collateral, Solvency II equivalence, group supervision and the development of international capital standards were among the topics suggested by the Property Casualty Insurers Association of America (“PCI”) and others as the 2014 “top issues” upon which NCOIL should base the creation of targeted working groups moving forward.
To ensure states’ representation in discussions on the ” . . . engagement of the U.S. Treasury and the Federal Reserve Board in international activities relating to the regulation of insurance in closed door banking-dominated forums . . . ,” PCI suggested that a process should be established whereby the pertinent regulatory agencies consult with state and insurance industry representatives to arrive at consensus positions, since some federal positions are different and even contrary to the positions of state regulators, resulting in the lack of a consistent U.S. position that could lead to unforeseen systemic risk.
In regard to the development of international capital standards and group supervision, PCI related that, last summer, the Financial Stability Board (“FSB”) directed the International Association of Insurance Supervisors (“IAIS”) to come up with a Basic Capital Requirement (“BCR”) for global systemically important insurers (“G-SIIs”) and a quantitative capital standard (“ICS”) for Internationally Active Insurance Groups–all within timeframes that PCI described as “unrealistic.”
Particularly, the ICS direction was unsupported by any objective evidence of need and cost/benefit analysis, PCI remarked, explaining that it had triggered strong fears of unnecessarily higher capital, implementation of a bank-centric approach and the imposition of another insurance regulatory system on U.S. insurers that does not fit their market.
As a solution, PCI suggested taking more time to create the BCR, and also reversing the direction on the ICS, so as not to mandate it. However, PCI pointed out that the IAIS is aggressively moving to design and implement the BCR and ICS according to FSB demands.
Insofar as reinsurance collateral and Solvency II equivalence, PCI reminded that additional measures for the elimination of collateral are under consideration as states continue to implement the National Association of Insurance Commissioners’ (“NAIC”) Reinsurance Collateral Model Law and Regulation.
Notwithstanding that progress is occurring on the reduction of collateral, PCI explained that U.S. companies run a strong risk of enduring discrimination by the European Union if the U.S. regulatory system is not deemed to be the equivalent of Solvency II.
To counter, PCI said, the U.S. should advocate full and permanent Solvency II equivalence with regard to reinsurance, group supervision and group capital in return for action on reinsurance collateral by the end of 2015, given the January 1, 2016 effective date of Solvency II.
To view PCI’s and other interested party recommendations, click on the hyperlinks below:
- American Council of Life Insurers (ACLI)/Attachments One, Two, Three, Four
Also during its meeting, the Task Force will discuss a proposed resolution entitled States’ Response to International Proposals for Insurer Solvency Regulation and a Global Insurance Capital Standard, and co-sponsored by New York Senator Neil Breslin and Indiana Senator Travis Holdman.
The resolution touches on various international insurance initiatives relating to insurer solvency and capital standards, and expresses concern about their impacts on U.S. insurance oversight. Notably, it calls upon the NAIC, the Federal Insurance Office and the U.S. representatives on the Financial Stability Board (“FSB”) to oppose any international solvency standards that fail to appropriately accommodate the U.S. system and Fair Value accounting measurements favored by the International Association of Insurance Supervisors. The proposed resolution also urges state officials to communicate their concerns to the FSB’s U.S. representatives.
Property-Casualty Insurance Committee
Natural Disaster Savings Accounts
On July 11, NCOIL’s Property-Casualty Committee will consider a proposed resolution in support of H.R. 3989, also known as the Disaster Savings Account Act of 2013. Sponsored by Indiana State Representative Matt Lehman, the proposed resolution reaffirms NCOIL’s belief in the necessity of a multi-pronged approach to address natural disaster risk. It also reiterates the NCOIL’s support for loss mitigation measures and appropriate land use.
To view the resolution, click here.
H.R. 3989 would, in part, amend the Internal Revenue Code of 1986 so that individuals could create tax-exempt savings accounts for the purpose of defraying their natural disaster mitigation and recovery costs.
It also urges state and federal officials, and other stakeholders to explore further possible reforms that could provide similar long-term benefit in addressing natural disaster loss costs.
Workers’ Compensation Insurance Committee
On July 11, NCOIL’s Workers’ Compensation Committee will consider a proposed Model Act entitled Workers’ Compensation Coverage for Agricultural Laborers sponsored by Kentucky State Representative Steve Riggs. The proposal would require an agricultural employer to provide workers’ compensation coverage if the employer, during the preceding calendar year, had an aggregate payroll of at least $50,000 and paid hourly wages or salaries (and not on a piecework basis) to five or more regular employees. It also would allow exemptions for an employer’s family members, as well as allow owners of an agricultural enterprise to exclude themselves from workers’ compensation coverage.
To view the model, click here.
Model Law Review for Sunset/Re-Adoption
NCOIL’s bylaws require its committees to review their respective model laws every five years. The Property-Casualty Insurance Committee will consider the following at the Summer Meeting:
Insurance Scoring Model Act
Originally adopted in 2002, NCOIL’s Model Act, entitled Use of Credit Information in Personal Insurance, provides that:
- Insurers are prohibited from denying, canceling or non-renewing a policy based solely on credit information
- Insurers are required to re-underwrite and re-rate a policyholder whose credit report was corrected
- Insurers are required to:
- Notify an applicant that credit information will be used in underwriting;
- Notify an applicant when an adverse action is based on credit information and what the four primary credit-related factors were in that action;
- Indemnify insurance producers obtaining credit information/insurance scores according to an insurer’s procedures, and according to applicable law and regulation; and
- Restrict a consumer reporting agency’s ability to provide or sell data submitted in conjunction with an insurance inquiry.
The Model also requires insurers to give rating/underwriting relief to consumers whose credit has suffered from an extraordinary life circumstance, and would address methods and timeframes for requesting and granting exemptions.
To date, 29 states have based their legislation and/or regulation in whole or in part based on the NCOIL model. To review the Model’s current language, click here.
Guaranty Fund Model Act
Adopted in November 2007, the NCOIL Post-Assessment Property and Liability Insurance Guaranty Association Model Act establishes a comprehensive framework for the protection of claimants when a property and casualty insurer becomes insolvent. Similar to an NAIC model, proposed amendments to the NCOIL model would further limit how much a guaranty fund will pay for a claim and align the model’s claim-filing deadline requirement more closely with a typical, 24-month state statute of limitations.
To view the Model Act, click here.
Special Session on Private Market Flood Insurance
In a July 11 special session entitled “Flood Insurance: What’s Holding Back the Private Market?” legislators will explore reasons why private-market insurers are reluctant to offer flood insurance, as well as what would happen if the private market was more involved. Panelists also will discuss what state and/or federal approaches might facilitate development of a private flood insurance industry, as well as why flood coverage is considered an insurable risk in other countries but not in the United States.
The session will include academic/actuarial, Federal Emergency Management Agency (FEMA), insurer, reinsurer and state insurance regulator perspectives.
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