NAIC Executive Committee Rejects Bundled ACLI Capital and Surplus Proposal

Feb 3, 2009

On Thursday, January 29, 2009, the National Association of Insurance Commissioners (“NAIC”) Executive Committee (“Committee”) rejected a proposal to relax capital and surplus requirements for life insurers by a vote of 16-1.  In rejecting the proposals, the Committee ruled that current regulations were adequate to ensure life insurance industry solvency.

The proposal was based on an original series of nine emergency recommendations from the American Council of Life Insurers (“ACLI”) that were intended to address current NAIC capital and surplus requirement policies.  NAIC’s Capital and Surplus Working Group (“Working Group”) had recommended the adoption of five of the nine ACLI proposals – including modernizing restrictions on the use of life insurers’ surplus and capital.

Shortly after calling the meeting to order on January 29, the Executive Committee voted to bundle the ACLI recommendations together into a single measure. The Committee then briefly discussed the merits of the recommendations – with several members flatly stating their opposition to the collective recommendations – before voting them down in a singular role call. Because the Committee voted the motion down, the ACLI recommendations will not be presented at a general body meeting. In the future, the NAIC expects to consider some of the proposed changes, but not on an emergency basis.

Though Committee members expressed that they considered some of the proposals to be fundamentally good ideas, they were largely unwilling to expedite the formulation and implementation of new insurance regulations given the current insurance market.

The proposals that were previously adopted by the Working Group will be referred to the appropriate NAIC technical groups and committees for further consideration.

In the interim, the NAIC has deemed that current state law provides insurance regulators with the discretion necessary to supply measured relief to companies on a case-by-case basis.

“So far the insurance industry is in much better condition than most of the rest of the financial services sector because of strong state solvency regulations,” said NAIC President and New Hampshire Insurance Commissioner Roger Sevigny. “Simply put, the industry has not made a credible case for why we need to make changes on an emergency basis, and why those changes should be limited to the specific proposals made by the industry.”

 “While the Working Group’s proposals have merit, we believe such adjustments would be better implemented through the NAIC’s standard protocol,” said NAIC Vice President and Iowa Insurance Commissioner Susan Voss. “Any future consideration of changes to regulatory requirements will follow the NAIC’s open, transparent and deliberative process.”

 “State insurance regulators use time-tested tools to protect consumers and help maintain a solvent and competitive marketplace,” Sevigny added. “Today’s vote reflects our belief that it is not appropriate to make emergency, permanent industry-wide changes for which the need has not been demonstrated.”


Should you have any questions or comments, please do not hesitate to contact Colodny Fass.


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