Global Capital Standards Not Yet Inevitable, PCI and Others Say; NAIC Group Solvency Issues Working Group To Discuss at June 17, 2014 Meeting

Jun 16, 2014


In its ongoing discussions on the the appropriate scope, form, and accounting basis for group-wide financial reporting and the use of such reports, the National Association of Insurance Commissioners (“NAIC”) Group Solvency Issues Working Group (“Working Group”) has narrowed its focus in determining whether to expand the NAIC Insurance Holding Company Model Act and Regulation.  The proposed amendments would provide legal authority for a regulator to act as a group-wide supervisor over an internationally active insurance group or insurance holding company, including the authority to set group capital requirements.

During the Working Group’s June 5, 2014 call, it was suggested in response to concerns from various insurance industry members that some initial high-level consolidated data might be helpful in acting as a filter so that more detailed information would only requested by a lead state regulator in instances where there was reason to believe there were issues outside the scope of U.S. insurers, and/or filter out those insurers that are part of small groups where non-insurance operations are small.

The Property Casualty Insurers Association of America (“PCI”) joined other insurance industry entities in two sets of collective comments submitted on the issue.

Suggesting that the NAIC should better define terms such as “group-wide supervisor,” “lead state,” “insurance group,” “insurance company holding system” and “consolidated financial statements, PCI and its colleagues asked the Working Group to suspend consideration of proposed amendments to the Insurance Holding Company Model Act and Regulation, as well as urge states to defer further state legislative activity on these types of changes until the following can be determined:

1.       Is additional group-wide supervision needed and will it further the primary goal of consumer protection?

2.       If it is needed, what are the supervisory gaps that need to be addressed, inasmuch as significant authority for supervision already exists?

3.       What state regulatory authority can withstand a constitutional challenge?

“We are confused that such changes appear to be presented as foregone conclusions in the Working Group materials with statements such as ‘it appears the IAIS (International Association of Insurance Supervisors) will require direct authority for the insurance group’ and ‘it seems appropriate to consider how best to amend the (Insurance Holding Company Model Act) to account for the inevitability of a global capital standard,'” one of the PCI-signed letters explained.   “It seems particularly unnecessary to expose a proposal in conflict with established NAIC policy based on assumptions of not yet finalized IAIS standards.   We do not agree that the ‘inevitability’ of these policies now exists at the international level, or that it should drive U.S. policy regardless.”

These comments will be reviewed by the Working Group at a meeting tomorrow, June 17, 2014 at 1:00 p.m. (CDT).  To register for the call, click here.

To view the meeting materials and comments to date, click here.

Meanwhile, the Working Group has requested comments by July 7, 2014 on the current spreadsheet used by states for group reporting, along with proposed changes to the NAIC Insurance Holding Company Model Regulation Form B, and proposed data that could be used in a possible group annual statement. 

To view these items, click here.


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