National Association of Insurance Commissioners 2010 Fall National Meeting: Committee Meeting Summaries and Minutes
Nov 28, 2010
The National Association of Insurance Commissioners held its 2010 Fall National Meeting in Orlando, Florida from October 18-21.
Various news releases emanating from meeting actions are listed below.
Committee meeting summaries follow, some of which include access to complete meeting minutes and materials where specified.
To reference NAIC’s model law index (see numbers in parentheses below), click here.
- NAIC Elects 2011 Officers
- NAIC Adopts Final Medical Loss Ratio Regulations
- NAIC Begins 2011 Budget Approval Process
- Market Conduct Annual Statement Project Grows to 34 Jurisdictions
- IIPRC Elects 2011 Officers
- NAIC Selects New Central Office in Kansas City
- Florida Office of Insurance Regulation Receives Esprit De Corps Award
- Alfred W. Gross Receives NAIC Presidential Award
- Alabama, New York Regulators Awarded NAIC’s Highest Honor
NAIC Fall 2010 National Meeting Committee Summaries and Minutes
Joint Executive Committee/Plenary
The Joint Executive Committee/Plenary met on October 21, 2010, during which it:
- Adopted the Regulation for Uniform Definitions and Standardized Methodologies for Calculation of the Medical Loss Ratio for Plan Years 2011, 2012 and 2013, per Section 2718 of the Public Health Service Act
- Deleted the Twenty-Four Hour Coverage Pilot Project Model Act (#960)
- Adopted a new model bulletin regarding Gramm-Leach-Bliley Act privacy notices
- Adopted the International Insurance Relations Guiding Principles
The Executive Committee met on October 19, 2010, during which it:
- Adopted three Model Law development requests:
- Amendments to the Model Risk Retention Act (#705)
- Amendments to the Credit for Reinsurance Model Law (#785)
- Amendments to the Credit for Reinsurance Model Regulation (#786)
Reveiwed model law development efforts, including the following:
- Model Law to Regulate Insurance Scoring Vendors
- Amendments to the Insurance Holding Company System Regulatory Act (#440) and Amendments to Insurance Holding Company System Model Regulation with Reporting Forms and Instructions (#450)
- Amendments to Annuity Disclosure Model Regulation (#245)
- Amendments to Standard Nonforfeiture Law for Life Insurance (#808)
To view the complete Executive Committee meeting minutes, click here.
Climate Change and Global Warming Task Force
The Climate Change and Global Warming Task Force met on October 17, 2010, during which it:
- Discussed recent activities relating to the Climate Risk Disclosure Survey, specifically, an NAIC questionnaire that was distributed on October 7 requesting that all of the states participating in the Climate Risk Disclosure Survey provide information that would allow the NAIC to develop an aggregate summary of insurer responses. Of the 21 jurisdictions known to be participating, five have submitted questionnaire responses.
- Received a presentation from Joseph Ferreira of the Massachusetts Institute of Technology on a pay-as-you-go study on the link between miles driven and loss claims. The presentation highlighted that mileage is positively correlated with insurance risk and that the correlation is statistically significant. Further, mileage rating supplements traditional class and territorial rating systems, providing greater explanatory power when used.
Long-Term Care Task Force
The Long-Term Care Task Force met on October 17, 2010, during which it continued discussion on recommendations for new or improved consumer disclosures regarding rate increases.
Market Regulation Accreditation Task Force
The Market Regulation Accreditation Task Force met on October 19, 2010, during which it:
- Discussed the primary goals of a market regulation accreditation program and what role, if any, domestic deference should play in the market regulation examination process
- Appointed a subgroup to develop a research plan for determining the areas of duplication in market regulation.
To view the complete Market Regulation Accreditation Task Force meeting minutes, click here.
Producer Licensing Working Group
The Producer Licensing Working Group met on October 19, 2010, during which it:
- Heard an update on a conference call between state regulators and the U.S. Department of Health and Human Services (“HHS”) Healthcare Integrity and Protection Data Bank concerning the data being requested from each state to reach compliance
- Discussed the 2010 limited lines charge. Surety and credit were specifically addressed.
- Adopted a motion to eliminate surety as a core limited line and be considered as part of the casualty line of authority
Solvency Modernization Initiative Task Force
The Solvency Modernization Initiative Task Force met on October 20, 2010, during which it discussed the U.S. priorities and focus for the International Association of Insurance Supervisors’ (“IAIS”) Common Framework (ComFrame) project for internationally active groups
Corporate Governance Working Group
The Corporate Governance Working Group met on October 19, 2010, during which it:
- Agreed to develop corporate governance principles for use in U.S. insurance regulation
- Discussed an update to the State Corporate Governance Law Summary by the NAIC Legal department that includes a corporate governance statute adopted by Rhode Island
- Agreed to proceed with work to draft corporate governance principles for use in insurance regulation by considering the referral on executive compensation, the study on existing state laws, the study of international corporate governance standards and the recommendations received as a result of the Financial Sector Assessment Program
Group Solvency Issues Working Group
The Group Solvency Issues Working Group met on October 19, 2010, during which it:
- Reviewed suggested group capital assessment options, discussing its favor of group capital analysis through the Own Risk and Solvency Assessment (“ORSA”), given that U.S. state insurance regulators could develop the ORSA to assist in the analysis of the group’s financial condition (e.g. target capital) and risks. A first draft on the group capital aspects of the ORSA will be prepared for review.
- Offered the draft Holding Company Best Practices Document for 45 days to interested parties and regulators for comment
- Offered the draft proposal to the Financial Regulation Standards and Accreditation Committee on Part A: Laws and Regulations Substantially Similar Elements for Revised Insurance Holding Company System Model Act for 60 day
- Approved the draft Web-based form for international regulators to voluntarily complete regarding requested U.S. state insurance regulator participation in supervisory colleges
- Heard a presentation from the Bermuda Monetary Authority on Group Supervision
Surplus Lines Implementation Task Force
The Surplus Lines Implementation Task Force met on October 20, 2010, during which it considered the recommendation of one of three possible options for developing a state-based solution for implementing the surplus lines provisions of the federal Nonadmitted and Reinsurance Reform Act of 2010:
- A legislatively authorized interstate agreement modeled on the International Fuel Tax Agreement;
- Endorsement of the Surplus Lines Insurance Multistate Compact (“SLIMPACT”); or
- Holding an interim meeting to agree on a compromise solution
Note: Minutes from the Surplus Lines Implementation Task Force have not yet been posted. To view minutes from the Surplus Lines Task Force meeting, click here.
Executive Committee and Internal Administration Subcommittee
The Executive Committee and Internal Administration Subcommittee met in a joint session on October 18, 2010, during which it:
- Selected BlackRock Solutions to model commercial mortgage-backed securities for the 2010 year-end reporting period;
- Appointed Director John Huff of Missouri as the NAIC representative and voice of state insurance regulators on the Financial Stability Oversight Council;
- Approved filing an amicus brief in Anthem Blue Cross v. Superintendent Kofman supporting the Superintendent’s discretionary authority to interpret approved rate increase requests as meeting the required standard as defined in statute and in the NAIC’s Model Law; and
- Approved the funding of an impact study of principle-based reserve methodology modifications to the Standard Valuation Law.
Information Systems Task Force
The Information Systems Task Force met on October 18, 2010, during which it reviewed approved Information Technology project requests for 2009 and 2010, including:
- Development of the Market Conduct Annual Statement (“MCAS”) process and systems for the 2010 filing year; support of the existing MCAS process for the 2009 filing year
- Complaints handling and reporting standards
- A financial electronic examination tracking system
- Identification of invested risk attributes in the integrated securities information system
Life Insurance and Annuities Committee
The Life Insurance and Annuities Committee met on October 19, 2010, during which it:
- Discussed the Harkin Amendment to the federal Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which deals with indexed annuity products and state adoption of the Suitability in Annuity Transactions Model Regulation (#275)
- Discussed a draft insurer bulletin on stranger-originated annuity transactions and established a subgroup to develop a new draft
Regulatory Framework Task Force
The Regulatory Framework Task Force met on October 18, 2010, during which it:
- Heard an update from representatives of the U.S. Department of Labor regarding recently issued guidance related to certain provisions in the federal Patient Protection and Affordable Care Act (“PPACA”)
- Discussed revisions to the Utilization Review and Benefit Determination Model Act (#73), the Health Carrier Grievance Procedure Model Act (#72) and draft language for six model language templates on: preventive services, rescissions, annual and lifetime limits, preexisting condition exclusions for individuals under age 19, choice of health care professional and dependent coverage to age 26
- Model language templates were adopted on: rescissions, choice of health care professional and dependent coverage to age 26
The ERISA Subgroup met on October 19, 2010, during which regulators discussed ongoing federal and state investigations into unauthorized multiple employer welfare arrangements (MEWAs) and other regulatory matters.
Note: ERISA (Employee Retirement Income Security Act of 1974) is a federal law that sets minimum standards for most voluntarily established pension and health plans in private industry to provide protection for individuals in these plans.
Property and Casualty Insurance Committee
The Property and Casualty Insurance Committee met on October 20, 2010, during which it:
- Heard a presentation on the Council of Insurance Agents & Brokers/LexisNexis Insurance Exchange. The exchange will facilitate the submission, rating and underwriting workflow among insurance brokers, agents, carriers and wholesalers, while capturing relevant market analytics. A pilot project is under way involving several brokers and carriers.
- Discussed progress on development of a data call for the purpose of gaining insight into the use of credit-based insurance scores and other risk classifications for personal auto insurance
- Adopted the Consumer’s Guide to Auto Insurance
- Heard a presentation on readability and disclosure for personal lines policies
- Discussed progress on drafting a model law to regulate credit scoring information vendors
- Was updated on federal legislation affecting property/casualty insurers including the reauthorization of the federal National Flood Insurance Program (“NFIP”)
- Heard a presentation on the PCI National Catastrophe Guidebook, which includes specific national catastrophe needs/issues and potential PCI solutions, approaches proposed by others, a summary of the major national catastrophe legislative proposals and information regarding understanding the national catastrophe marketplace
- Received information on the Medicare Advocacy Coalition and its work on Medicare secondary payers
Advisory Organization Examination Oversight Working Group
The Advisory Organization Examination Oversight Working Group met on October 17, 2010, during which it heard an update on the progress of the multi-state examination that recently began on the National Council on Compensation Insurance. Documents related to advisory organization examinations are being posted on I-SITE by the NAIC for regulators to access. The Committee also reviewed the progress of an upcoming multi-state examination of two other advisory organizations that are expected to begin in 2011. All NAIC members are asked to review the project plan contained in I-SITE and provide suggestions.
Catastrophe Insurance Working Group
The Catastrophe Insurance Working Group met on October 20, 2010, during which it:
- Discussed the NAIC’s white paper, “The Background and Implications of Defective Drywall,” which will be redrafted and distributed for public comment
- Heard a presentation from United Policyholders on residual market and quasi-public insurance programs, the risks they cover, challenges for residual insurers, the NFIP reauthorization, funding the risk pool and prospects for improvement
Risk Retention Working Group
The Risk Retention Working Group met on October 18, 2010, during which it:
- Appointed a subgroup to make technical changes to the Risk Retention and Purchasing Group Handbook, including the addition of legal cases
- Discussed a model law request to add corporate governance standards to Section 3 of the Model Risk Retention Act (#705)
- Discussed the status of a Government Accountability Office (“GAO”) study examining the treatment of risk retention groups by non-domiciliary states. The GAO has not yet begun work on this study, but it is expected that the Working Group will be asked to provide guidance to GAO on these issues in the near future.
Title Insurance Task Force
The Title Insurance Task Force met on October 19, 2010, during which it:
- Adopted a recommendation that broadens the scope of the title insurance actuarial reserve opinion to include both net and direct loss and loss adjustment expense reserves
- Authorized the preparation and submission of an application to the Blanks Working Group to adopt changes to the 2011 Quarterly and Annual Statement Blank – Title and the Quarterly and Annual Statement Instructions
- Heard a presentation from Joe Alderman of Freehold Capital Partners on his belief that private transfer fee covenants are beneficial. The Task Force will consider taking a position on private transfer fee covenants at a later date.
- Appointed a Title Insurance Market Conduct and Mortgage Fraud Working Group to review and assist various regulatory bodies in combating fraudulent or unfair real estate settlement activities
Title Statistical Plan Working Group
The Title Statistical Plan Working Group met via teleconference during September and early October, during which it:
- Reviewed a survey of what each jurisdiction needs to implement a data call, such as a statute or rule change to collect data and to keep the data confidential. The Working Group is not addressing any implementation issues for agents. Thirty-five responses to the survey were received from 31 jurisdictions and indicated:
- Some jurisdictions do not plan to implement the data call.
- Some jurisdictions currently have the authority to collect the data.
- Jurisdictions generally have the technology available for electronic collection and compilation of data.
- Jurisdictions need a statute and/or regulation change to collect the data and keep it confidential.
Workers’ Compensation Task Force
The Workers’ Compensation Task Force met on October 19, during which it:
- Adopted a report on revisions to the NAIC white paper, “An Overview of Workers’ Compensation Independent Contractor Regulatory Approaches”
- Heard an update on the status of the draft Third Party Administrator Guidelines being reviewed by the Producer Licensing Task Force.
- Heard an update on H.R. 635, a proposed federal bill that would authorize the creation of a National Commission on State Workers’ Compensation Laws
To view the complete Workers’ Compensation Task Force meeting minutes, click here.
NAIC/IAIABC Joint Working Group of the Workers’ Compensation Task Force
The NAIC/IAIABC Joint Working Group of the Workers’ Compensation Task Force held an interim meeting during the International Association of Industrial Accident Boards & Commissions (“IAIABC”) Annual Convention in September, during which it discussed the National Conference of Insurance Legislators proposed “Trucking and Messenger Courier Industries Workers’ Compensation Model Act” and the possibility of revising the current white paper on independent contractors with recommendations for best practices. The Working Group will also consider holding a symposium in 2011 to discuss a related position paper.
Market Regulation and Consumer Affairs Committee
The Market Regulation and Consumer Affairs Committee met on October 20, 2010, during which it adopted Antifraud Plan Guidelines, which establish standards for state fraud bureaus, insurance company special investigation units and any other interested parties regarding the preparation of an Antifraud Plan that meets the mandated requirements for submitting a plan with a state insurance department.
To view the Market Regulation and Consumer Affairs Committee meeting minutes, click here.
Consumer Disclosures Working Group
The Consumer Disclosures Working Group met on October 19, 2010, during which it:
- Was updated on the NAIC’s adoption of the Privacy Disclosure Model Bulletin and discussed future NAIC communication and tracking of state issuance of the Privacy Bulletin
- Discussed the potential sunset of the existing sample clauses in the NAIC Privacy of Consumer Financial and Health Information Regulation (#672)
- Heard a presentation on consumer testing of privacy disclosures and discussed next steps in the development of guidelines for disclosures
Military Sales Working Group
While the Military Sales Working Group did not meet during the Fall National Meeting, it continues to clarify and expand the definition of disciplinary actions that should be entered and maintained in the U.S. Department of Defense and the NAIC’s databases (e.g., beyond terminated agents, and agents and companies banned from or limited in access to an installation) as recommended in the May 2009 report of the GAO. It is also serving as a forum for the states to continue discussing multi-state enforcement efforts against insurance companies that are violating the provisions of the NAIC’s Military Sales Practices Model Regulation (#568), as enacted in the states.
Retained Asset Accounts Working Group
The Retained Asset Accounts Working Group met October 18, 2010, during which it reviewed the preliminary findings of its recent survey. The submitted disclosure forms and claim forms from 13 companies were reviewed against the best practices set forth in the NAIC’s Retained Asset Accounts (“RAA”) Sample Bulletin. The findings reflected the following areas of possible improvement for company disclosures:
- Companies generally portray RAAs as “checkbooks” rather than draft accounts, leading to possible confusion for consumers.
- Companies do not always indicate where the proceeds are kept-either transferred to a bank or kept in the company’s general account.
- While companies indicate interest will be earned, companies generally do not provide the interest rate to be earned in the initial disclosure form.
- Companies do not always clarify whether the funds are Federal Deposit Insurance Corporation (“FDIC”)-insured.
- Companies do not reference the protection of Guaranty Fund Coverage, when applicable.
- The disclosure forms vary widely in length from insurer to insurer.
- Additional disclosure may be needed regarding the proceeds exceeding FDIC and Guaranty Fund Coverage.
The RAA Subgroup will revise the NAIC Retained Asset Accounts Sample Bulletin to be consistent with its finding regarding company practices. Suggested language relating to the filing of RAA disclosures with state insurance regulators also will be included.
Market Information Systems Task Force
The Market Information Systems Task Force met via teleconference in September, during which it adopted revisions to the Market Conduct Annual Statement (“MCAS”) Life and Annuity Data Call. These included the removal of the group life line of business from the 2010 Market Conduct Annual Statement to be collected in 2011. The revisions will take effect January 1, 2011, to be reported by May 31, 2012, with the exception of the “polices/contracts applied for” and “free looks” fields, which will be in effect January 1, 2012, to be reported by April 30, 2013.
Revisions to the MCAS Data Elements Revision Process also were adopted so that, beginning in 2011, all changes must be adopted by the Market Analysis Procedures Working Group by June 1 and the Market Regulation and Consumer Affairs Committee by August 1 in order for the changes to be effective January 1 of the following year. MCAS changes adopted after June 1 by the Working Group and August 1 by the Committee will be effective in the second calendar year following their adoption.
The Task Force also met October 19, 2010, during which it heard an update on the “voice of customer” calls and discussed the primary objectives of market regulation. Recommendations on ways the data systems can be enhanced, consolidated or eliminated were reviewed.
NAIC staff will present a series of industry Webinars on the use of the new automated collection tool.
To view the complete Market Information Systems Task Force meeting minutes, click here.
Financial Condition Committee
The Financial Condition Committee met on October 20, 2010, during which it:
- Adopted recommendations with respect to any state’s early adoption of aspects of the NAIC’s Reinsurance Modernization Framework. The recommendations include key elements believed to be necessary for consideration when determining if any individual state’s initiatives are consistent with the Reinsurance Modernization Framework and therefore the state’s ongoing compliance with NAIC standards.
- Adopted a 2010 Annual Statement Disclosure related to Retained Asset Accounts
- Adopted the request of the Financial Examiners Coordination Working Group to begin meeting at the NAIC national meetings in 2011 to implement the recently adopted coordination framework related to holding company examinations
To view the complete Financial Condition Committee meeting minutes, click here.
Reinsurance Task Force
The Reinsurance Task Force met on October 18, 2010, during which it:
- Adopted a resolution in support of the Hague Conference on Private International Law and the Uniform International Choice of Court Agreements Act, which, in combination with federal legislation, is intended to implement The Hague Convention on Choice of Court Agreements in the United States.
- Adopted the September 23 exposure draft Recommendations Regarding Key Elements of the Reinsurance Framework for Accreditation Purposes, with the following modifications:
- Deleted Footnote 2, which clarifies that the two-year moratorium on the application of the recommendations to life reinsurance contracts will not apply
- Added a provision consistent with paragraph 20 of the Reinsurance Regulatory Modernization Framework regarding the one-year deferral from providing collateral with respect to losses from a defined catastrophic occurrence
- With respect to filing requirements for an eligible assuming insurer, amended the language in paragraph 1.e. to clarify that a report in a form that is substantially similar to the applicable NAIC annual financial statement filing blank, either Schedule F or Schedule S, would be acceptable at the discretion of the commissioner
To view the complete Reinsurance Task Force meeting minutes, click here.
Financial Analysis Working Group
The Financial Analysis Working Group of the Financial Condition Committee met on October 20, 2010 and heard presentations on nationally significant insurers and groups that are exhibiting characteristics of potentially troubled companies.
Accounting Practices and Procedures Task Force
The Accounting Practices and Procedures Task Force met on October 19, 2010, during which it adopted the reports of its working groups that included:
- The Statutory Accounting Principles Working Group incorporated guidance on guarantor accounting and disclosures in SSAP No. 5R Liabilities, Contingencies and Impairments of Assets and SSAP No. 25 “Accounting for and Disclosures about Transactions with Affiliates and Other Related Parties.”
- Revisions to modify the conditions required before recognizing liabilities for insurance-related assessments in SSAP No. 35R “Guaranty Fund and Other Assets” and Issue Paper No. 143 “Prospective-Based Guaranty Fund Assets”
- The revised SSAP modifies the conditions required before recognizing liabilities for insurance-related assessments. Under the new guidance the liability is not recognized until the event obligating an entity to pay an imposed or probable assessment has occurred. This impacts prospective-premium-based guaranty-fund assessments, as the event that obligates the entity for the assessment liability is the writing of, or becoming obligated to write or renew, the premiums on which the expected future assessment is to be based.
- Clarification of the definitions of loan-backed and structured securities modified to include an effective date of January 1, 2011
The following revisions to statutory accounting guidance were offered for public comment:
- A proposal to supersede SSAP No. 99Accounting for Certain Securities Subsequent to an Other-Than-Temporary Impairment and incorporate the guidance from SSAP No. 99 into the related underlying SSAPs
- Revisions to various SSAPs to incorporate accounting guidance on the allocation of realized capital gains and losses to AVR and IMR
- Revisions to SSAP No. 22 “Leases to incorporate guidance regarding lease modifications and the early termination of lease agreements”
- Revisions to allow a single collateral deposit to satisfy collateral requirements for multiple high-deductible policies, subject to an allocation agreement
- Revisions to clarify the fair value disclosures
The International Accounting Standards Board exposure draft for the accounting of insurance contracts is open for comment until November 30, 2010. It proposes a single International Financial Reporting Standard that all insurers, in all jurisdictions, could apply to all contract types on a consistent basis.
To view the complete Accounting Practices and Procedures Task Force meeting minutes, click here.
Capital Adequacy Task Force
The Capital Adequacy Task Force met on October 19, 2010, during which it released for comment a model law request form regarding changing the Risk-Based Capital for Insurers Model Act (#312) to increase the risk-based capital (“RBC”) percentage that could trigger the life RBC trend test from 250 to 300 percent.
To view the complete Capital Adequacy Task Force meeting minutes, click here.
Solvency Modernization Initiative RBC Subgroup
The Solvency Modernization Initiative RBC Subgroup met on October 17, 2010, during which it heard a presentation from the Bermuda Monetary Authority on the Bermuda Solvency Capital Requirement calculation and its use of calibration, time horizon, stress testing, action levels, types of risk and use of models.
Life Risk-Based Capital Working Group
The Life Risk-Based Capital Working Group met on October18, 2010, during which it:
- Received an update regarding the progress made on the American Council of Life Insurers (“ACLI”) long-term proposal for the RBC treatment of mortgage loans. The modeling assumptions and methodology will be finalized soon
- Released a proposal from the ACLI for a 30-day comment period on derivatives risk mitigation, including a New York proposal to adjust the total adjusted capital for an accounting mismatch between the credit default swap and the asset being hedged
Examination Oversight Task Force
The Examination Oversight Task Force met on October 19, 2010, during which it:
- Discussed a survey of the states regarding progress toward adopting the revised Model Regulation to Define Standards and Commissioner’s Authority for Companies Deemed to be in Hazardous Financial Condition (#385). The survey indicated that 12 states have completed the process to adopt the 2008 revisions to the Model.
- Adopted salary rate adjustments for financial examiners by reviewing changes in the Consumer Price Index over the past year
To view the complete Examination Oversight Task Force meeting minutes, click here.
Receivership and Insolvency Task Force
The Receivership and Insolvency Task Force met on October 19, 2010, during which it:
- Received a legislative update on rule-making efforts of the FDIC in regard to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
- Discussed state activity with the recently revised Life and Health Insurance Guaranty Association Model Act (#520) and the Property and Casualty Insurance Guaranty Association Model Act (#540). Since last quarter, several new states successfully updated their laws.
- Discussed and adopted the Task Force’s new 2011 Proposed Charge, which was characterized as “essential”:
- Monitor nationally significant insurers/groups within receivership to support, encourage, promote and coordinate multi-state efforts in addressing potential issues. This will include interacting with the Financial Analysis Working Group, domiciliary regulators and lead states to assist and advise as to what might be the most appropriate regulatory strategies, methods and action(s) with regard to a receivership or across receiverships.
To view the complete Receivership and Insolvency Task Force meeting minutes, click here.
Receivership Separate Accounts Working Group
The Receivership Separate Accounts Working Group met on October 19, 2010, during which it:
- Discussed survey results from the chief financial regulators regarding their interpretation of their respective statutes related to separate accounts
- Discussed a calendar regarding activities related to separate accounts within the Financial Condition Committee
- Received a presentation from the National Organization of Life and Health Insurance Guaranty Associations on guaranty funds and separate accounts
Risk Retention Group Task Force
The Risk Retention Group Task Force met on October 18, 2010, during which it:
- Considered the development of a capital adequacy standard regulatory tool that would be applicable to captive risk retention groups (“RRGs”)
- Formed a subgroup, to be chaired by the District of Columbia, that will consider this issue in greater depth. The other subgroup members will be Arizona, Delaware, Hawaii, South Carolina and Vermont.
To view the complete Risk Retention Group Task Force meeting minutes, click here.
Valuation of Securities Task Force
The Valuation of Securities Task Force met on October 19, 2010, during which it:
- Was updated on the construction of a comprehensive security-level risk assessment process
- Heard an NAIC report on the potential impact on insurers of implementing the modified filing exempt rule for loan-backed and structured securities for year-end 2010. A presentation also was given on proposed comprehensive instructions drafted by Matti Peltonen of New York that explained how insurers would determine the applicable NAIC designation for those loan-backed and other structured securities that are not modeled. The proposed instructions were received and released for a 30-day comment period.
- Received a proposal from New York that the classification of securities methodology in the Purposes and Procedures Manual of the NAIC Securities Valuation Office be deleted; that security classification performed by the SVO be required to be based on the definitions provided in the relevant SSAPs; and that when the SVO conducts annual updates, securities be reclassified, as necessary, in accordance with the SSAPs. The chair of the Task Force reported that this proposal had been discussed with Virginia Insurance Commissioner Alfred W. Gross in his capacity as chair of the Financial Condition Committee and there was agreement that the proposal presents a significant policy issue. Commissioner Gross asked the Task Force to prepare a report discussing the pros and cons of the proposal for review by the Financial Condition Committee. The New York proposal was released for a 45-day comment period.
- Discussed proposed interim instructions for modeled securities (RMBS and CMBS) for year-end 2010 reporting to replace the reference to the filing exempt rule in the Purposes and Procedures Manual and serve as the instructions referred to by SSAP No. 43R-Loan-Backed and Structured Securities – Revised. The proposed instructions were received and released for a 30-day comment period.
- Heard a status report from NAIC staff on the effort to model intrinsic values for insurer-owned residential mortgage-backed securities (RMBS) and CMBS for year-end 2010 reporting
- Discussed a proposed amendment to the Purposes and Procedures Manual pertaining to the SVO structured transactions group processes
- Discussed three proposed filing amendments to the Purposes and Procedures Manual for securities backed by the FDIC. Two proposals pertain to filing exemptions for certificates of deposits with longer than a year to maturity. The issue is the basis on which to grant the filing exemption. The NAIC staff supports a proposed filing exemption for CDs issued by banks rated by an NAIC acceptable rating organization (“ARO”). The NAIC staff notes that whether to grant a filing exemption for CDs issued by banks not ARO-rated is a policy issue, as the exemption would be based on the FDIC’s deposit insurance program, which is an insurance claims process, not a financial guaranty of payment. The last proposal pertains to securitizations created by the FDIC in its capacity as receiver of failed banks, but guaranteed by the FDIC as to payment of interest and principal. The concern is that, while the governing statute indicates that the FDIC can bind the full faith and credit of the U.S. government, this authority is limited as to amount, creating questions of whether any specific guaranty is within the “without the authorized limit.” The Task Force released the documents for an additional 30-day comment period, so that the Task Force members can decide whether they wish to rely on the FDIC processes discussed as the basis for a filing exemption.
- A progress report was given on the examination of issues and approaches by the Rating Agency Working Group. The NAIC has emphasized that, as a preliminary focus, it has considered those charges most directly concerned with determining which ratings have been reliable and what other supplemental and alternative risk-assessment benchmarks could be used when ratings were deemed to not be reliable.
Financial Regulation Standards and Accreditation Committee
The Financial Regulation Standards and Accreditation Committee met on October 18, 2010, during which it:
- Adopted revisions to the Use of Specialists-Computer Audit Expertise guidelines, effective January 1, 2011
- Adopted revisions to certain Part A: Laws and Regulations standards applicable to captive risk retention groups with a January 1, 2012 effective date
- Adopted revisions to the Guidelines primarily related to risk-focused examinations with a January 1, 2011, effective date
- Voted to release proposed revisions to the Guidelines regarding the timing of review of the examination planning memorandum for a 30-day comment period. The proposed revisions are based on related recommended enhancements to the Financial Condition Examiners Handbook.
- Adopted revisions to the Part B “Appropriate Depth of Review” and “Documented Analysis Procedures” standards with a January 1, 2012, effective date
- Voted to release proposed revisions to the Guidelines that clarify and incorporate the risk-focused surveillance approach and certain terminology currently included in the Financial Analysis Handbook for a 30-day comment period
To view the complete Financial Regulation Standards and Accreditation Committee meeting minutes, click here.
International Regulatory Cooperation Working Group
The International Regulatory Cooperation Working Group met on October 18, 2010, during which it was updated on proposed memorandums of understanding (“MOUs”) with Bahrain, Cayman Islands and Kazakhstan. MOUs have been recently signed with Taiwan (Republic of China). The Working Group recommended extending the MOU with China for two more years and sent its recommendation to the International Insurance Relations Committee for approval.
Life and Health Actuarial Task Force
The Life and Health Actuarial Task Force met during October 16 and 17, 2010, during which it:
- Heard a report from the Society of Actuaries (“SOA”)/American Academy of Actuaries (“AAA”) Joint Project Oversight Group on the development of a new payout annuity mortality table. A report also was given on the development of mortality tables for preneed insurance, simplified issue and guaranteed issue insurance.
- Discussed the development of an NAIC feedback loop process for principle-based reserve valuations. The Task Force formed a subgroup (to be chaired by South Carolina) to draft a white paper on the issue.
- Discussed the Insurance Contracts exposure draft from the International Accounting Standards Board and formed a subgroup to address responses to requests from the Task Force on international issues
- Decided to recommend no change in the Regulation for Uniform Definitions and Standardized Methodologies for Calculation of the Medical Loss Ratio for Plan Years 2011, 2012 and 2013 per Section 2718 of the Public Health Service Act with regard to contract reserves
- Asked the SOA to begin work on data formats for experience studies of policyholder behavior
To view the complete Life and Health Actuarial Task Force meeting minutes, click here.
Accident and Health Working Group
The Accident and Health Working Group met on October 17, 2010, during which it:
- Heard a report concerning progress toward completion of the medical loss ratio rebate regulation
- Proposed a definition of “moderately adverse experience” that will be reviewed by the Long-Term Care Task Force
- Heard a report from the Medicare Supplement Refund Subgroup concerning progress toward compilation of refund data
- Heard a report from the American Academy of Actuaries concerning progress toward sending a streamlined data call to industry participants in order to evaluate replacement of the 1985 NAIC Cancer Claim Cost Tables
- Heard a presentation by the American Academy of Actuaries concerning Actuarial Standard of Practice 28, the Health Actuarial Opinion Practice Note, the Contract Reserves Practice Note, and the Actuarial Certification of Restrictions Relating to Premium Rates in the Small Group Market Practice Note.
- A subgroup was established to provide guidance to regulators for the review of Health Actuarial Opinions.
NAIC/Consumer Liaison Committee
The NAIC/Consumer Liaison Committee met on October 18, 2010, during which it presented the Consumer Representative Award for Excellence in Consumer Advocacy to Colorado Insurance Commissioner Marcy Morrison and former Pennsylvania Insurance Commissioner Joel Ario.
To view the NAIC/Consumer Liaison Committee meeting minutes, click here.
NAIC/Industry Liaison Committee
The NAIC/Industry Liaison Committee met on October 19, 2010, during which it:
- Heard an update from Missouri Insurance Director John Huff on the first meeting of the Financial Stability Oversight Council in Washington, D.C.
- Discussed the Advanced Notices of Proposed Rulemaking recently issued by the Financial Stability Oversight Council, as well as industry plans to respond to the rulemaking notices
- Discussed the idea of inviting chief executive officers from different insurance companies to address the NAIC/Industry Liaison Committee at future meetings
- Received an update from David F. Snyder of the American Insurance Association on property/casualty insurance market conditions and possibilities for future improvements
To view the complete NAIC/Industry Liaison Committee meeting minutes, click here.