National Association of Insurance Commissioners 2014 Fall National Meeting Preview

 

The National Association of Insurance Commissioners (“NAIC”) 2014 Fall National Meeting will be held from November 16 to 19 in Washington, D.C.

Special events scheduled during that time include a complimentary panel forum entitled “Navigating Interest Rates in the Life Insurance Industry.”  The discussion will address how insurers are navigating the current interest rate environment and also consider the potential outcome of various future interest rate fluctuations, should they occur.  Speakers will include insurance regulators, economists, and representatives from life insurance companies and rating agencies.  Former NAIC Senior Counsel for Financial and Insolvency Regulation Doug Hartz will serve as the moderator.  For more information and event registration, click here.

Also as part of the 2014 Fall National Meeting, attorneys from state insurance departments, insurance companies and other entities are encouraged to attend the NAIC’s Continuing Legal Education Seminar.  Topics include legal ethics, insurance company data security breaches, the Affordable Care Act, ride-sharing regulatory issues and case law updates.

Below are highlights from regularly scheduled NAIC committee, task force and working group meetings at the conference. 

To view the complete 2014 Fall National Meeting preview, click here.

 

Executive Committee and Plenary

During a joint meeting of the Executive Committee and Plenary, commissioners will consider adoption of proposed charges for the NAIC’s 2015 Executive Committee, along with the 2015 NAIC Budget.  The following items have been marked for individual consideration aside from the regular consent agenda:

• Corporate Governance Annual Disclosure Model Act and Regulation
• Guideline for Payment of Interest to Receiver on Overdue Reinsurance Recoverables
• Model Risk Retention Act (#705) as an Additional Part A Standard for Accreditation Purposes
• 2011 revisions to the Risk-Based Capital (“RBC”) for Insurers Model Act (#312) relating to the Life Trend Test for Accreditation Purposes
• A referral from the Corporate Governance Working Group related to the Part A: Corrective Action Standard for Accreditation Purposes

 

Principle-Based Reserving Implementation Task Force

The Principle-Based Reserving Implementation Task Force will hear updates on the Rector & Associates, Inc.’s XXX/AXXX Reinsurance Framework charges sent to other NAIC committee groups.  Commissioners also will discuss the Principle-Based Reserving (“PBR”) Implementation Plan, the Statistical Agent Framework and “Substantially Similar” criteria that would be used to compare state Standard Valuation Laws to the NAIC model law.

The PBR Review Working Group will review interested party comments on the draft changes to the life and health annual statement blank and discuss the PBR framework for risk-focused PBR examination, including issues related to the enhancement of review procedures.

The Working Group also will discuss state insurance department and NAIC staff support for PBR implementation and oversight of the PBR modeling process, along with standardized reporting formats for (Valuation Manual) VM-31 actuarial reporting requirements.

Members will be updated on the Company Experience Reporting framework.

 

Life Insurance and Annuities Committee

The Contingent Deferred Annuity Working Group, part of the Life Insurance and Annuities Committee, plans to review and consider comments received on contingent deferred annuity (“CDA”)-related revisions to the following:

• Annuity Disclosure Model Regulation (#245)
• Suitability in Annuity Transactions Model Regulation (#275)
• Advertisements of Life Insurance and Annuities Model Regulation (#570)
• Life Insurance and Annuities Replacement Model Regulation (#613)

The Working Group will discuss comments received on a guidance document and/or model bulletin it has been asked to develop as a reference for states interested in modifying their annuity laws to clarify their applicability to CDAs. 

Members will consider comments submitted on whether some type of non-forfeiture or cancellation benefit should be developed for CDAs.

The ERISA Retirement Income Working Group may hold a conference call to continue discussions related to the U.S. Department of Labor annuity safe harbor rules and possible options to encourage retirement plan sponsors to offer annuities to their employees as a retirement option.

On another possible conference call, the Unclaimed Life Insurance Benefits Working Group may discuss a recommendation on developing a new NAIC model law to address the issue of unclaimed death benefits.

The Life Actuarial Task Force will consider adoption of amendments to the Valuation Manual, among other agenda items prior to an American Academy of Actuaries report on non-forfeiture modernization.  Members also will discuss any remaining input on an American Council of Life Insurers proposal for small company considerations insofar as Actuarial Guideline 48.

The Life Actuarial Task Force will hear updates on the Kansas field test of non-variable annuity reserve assumptions and the joint efforts of the Society of Actuaries and Academy’s work on the 2014 Valuation Basic Table and Commissioners’ Standard Ordinary tables.  Commissioners will continue discussions on the proposals for a new actuarial guideline to address certain considerations on the illustrations of indexed universal life insurance products.  They also will be updated on the Academy’s Premium Deposit Work Group’s modifications to the Synthetic Guaranteed Investment Contracts Model Regulation (#695).

 

Property and Casualty Insurance Committee

The Property and Casualty Insurance Committee will hear presentations on the National Oceanic and Atmospheric Administration’s Weather-Ready Nation program and Celent’s research into consumer acceptance of telematics data.

The Advisory Organization Examination Oversight Working Group will meet in a regulator-only session to discuss progress on ongoing exams and possible revisions to Chapter 25 of the Market Regulation Handbook.

The Auto Insurance Study Group will discuss the status of work underway on auto insurance price optimization and potential data collection.

Members of the Catastrophe Insurance Working Group will be updated on the National Flood Insurance Program, as well as discuss the formation of a subgroup to document best practices for reducing post-disaster insurance recovery obstacles for insurance consumers.  

The Catastrophe Response Working Group will discuss its charge to recommend ways the NAIC can assist states with disaster reponse.  Members will also consider updates to the NAIC State Disaster Response Plan and address issues relating to wind/hail damage exclusion endorsements.

The Climate Change and Global Warming Working Group will hear a presentation on Ceres’ findings and recommendations from the 2013 Insurer Climate Risk Disclosure Survey.  Another presentation will be given by Howard Kunreuther of the Risk Management and Decision Processes Center at the University of Pennsylvania’s Wharton School on Chapter 2 of the Intergovernmental Panel on Climate Change’s recent 5th assessment report, entitled “Mitigation of Climate Change.”

The Terrorism Insurance Implementation Working Group will discuss the NAIC’s continued support of the federal Terrorism Risk Insurance Act (“TRIA”) re-authorization, along with updates to a related model bulletin on filing procedures, expedited filing forms and policyholder disclosures.

The Transparency and Readability of Consumer Information Working Group will hear presentations from academics on “smart disclosures.”  Members will continue their focus on increasing consumer accessibility to various carriers’ policy forms on a pre-sale basis, as well as the facilitation of consumers’ understanding of the content of insurance policies and ability to assess differences in corresponding policy forms

The Surplus Lines Task Force will consider adopting an interpretation of a section within the federal Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 that provides for the increase of certain minimum qualification standards for exempt commercial purchasers.

The Workers’ Compensation Task Force will hear an update on TRIA legislation, along with a report on filings that various state insurance departments have received for “mega-deductible” workers’ compensation plans.  Also as part of the agenda, members will discuss the handling of filings that states have received from entities not properly licensed as workers’ compensation advisory organizations.

 

Financial Condition Committee

The Corporate Governance Working Group, part of the Financial Condition Committee, will consider recommendations for Part A accreditation guidelines related to the recently adopted corporate governance models.  

The Emerging Actuarial Issues Working Group will review pending responses to currently pending questions seeking interpretations of Actuarial Guideline XXXVIII-The Application of the Valuation of Life Insurance Policies Model Regulation (also known as AG 38).

The Group Solvency Issues Working Group will continue discussions on potential changes to the Insurance Holding Company System Regulatory Act (#440) and the Insurance Holding Company System Model Regulation (#450).

The Private Equity Issues Working Group will hear a presentation from the U.S. Securities and Exchange Commission.  Members are expected to finalize the development of regulator procedures to be used when considering ways to mitigate or monitor risks associated with private equity/hedge fund ownership or control of insurance company assets.

The Emerging Accounting Issues Working Group and the Statutory Accounting Principles Working Group, both part of the Accounting Practices and Procedures Task Force, will consider proposed changes to statutory accounting principles as part of the agenda.  Among discussion topics are an issue paper on risk-sharing provisions, along with another paper on wholly owned real estate through a limited liability corporation.  Other items include an investment classification project, restricted assets, the Statement of Cash Flows, accounting for surplus notes and 2012 group long-term disability reserve standards.

The Catastrophe Risk Subgroup, part of the Capital Adequacy Task Force, will continue discussion on implementation of the catastrophe risk charge in the property and casualty RBC formula.

The Property and Casualty Risk-Based Capital Working Group will continue its review of underwriting risk charges and credit risk for reinsurance.

The Receivership and Insolvency Task Force will hear a federal legislative update.  Its Receivership Model Law Working Group will assess a receivership model law for uniform adoption by states.

The Reinsurance Task Force will consider the adoption of reports from the Qualified Jurisdiction Working Group and the Reinsurance Financial Analysis Working Group.  The Task Force will receive updates on states implementation of revisions to Model #785 and Model #786, the Credit for Reinsurance Model Law and Regulation, respectively. The Task Force may also consider the adoption of the Uniform Application Checklist for Certified Reinsurers, along with the approval of several jurisdictions for inclusion in the NAIC List of Qualified Jurisdictions.

The Valuation of Securities Task Force will consider referring technical guidance produced by the NAIC’s Securities Valuation Office (“SVO”) to the Financial Regulation Standards and Accreditation Committee that would assist states in aligning their legal references and processes with NAIC designations and current practices.  Also on the agenda is a discussion on guidance received from the Reinsurance Task Force related to a proposed amendment to the NAIC Bank List that would equalize credit rating standards between domestic and foreign banks

Members will consider next steps in a joint project with the Reinsurance Task Force in examining whether the phrase “securities listed by the SVO” in the NAIC Credit for Reinsurance Model Law should be clarified.

The Valuation of Securities Task Force will also consider adoption of amendments to the Purposes and Procedures Manual of the NAIC Investment Analysis Office that would add Canadian Accounting Standards for Private Enterprises and French generally accepted accounting principles (“GAAP”) to the NAIC National Financial Presentation Standards List (permitting insurers to file audited financial statements prepared in accordance with these standards with the SVO without a reconciliation to U.S. GAAP).

Members will also evaluate an amendment that would add a definition and documentation standard for Real Estate Mortgage Investment Conduit transactions filed with the NAIC Structured Securities Group.

In addition, the Task Force is expected to hear several presentations and status reports from NAIC staff on a number of open projects, including the progress of the 2014 year-end annual surveillance of insurer-owned residential mortgage-backed securities and commercial mortgage-backed securities, the status of a project seeking to identify the reasons for misreporting of securities by insurers, a discussion of concentration risk, changes in federal rules governing certain money market funds and their impact on NAIC processes, and a presentation on how to evaluate whether the NAIC Derivative Instruments Model Regulation should be retained as a national standard.

The Financial Regulation Standards and Accreditation Committee will discuss a revised draft of proposed revisions to accreditation guidance related to the definition of “multi-state insurer” for accreditation purposes, specifically as it relates to certain captive insurers and special purpose vehicles.

The Committee will receive a status update on individual state adoption of the 2010 revisions to the Insurance Holding Company System Model Act and Regulation.  Members will hear information and the overall NAIC accreditation process, including how accreditation reviews are performed.

 

International Insurance Relations Committee

The International Insurance Relations Committee will discuss progress on initiatives of the International Association of Insurance Supervisors, including the status of the Common Framework for the Supervision of Internationally Active Insurance Groups (“ComFrame”), the various global capital developments and financial stability issues.

The Committee also anticipates discussing cooperative efforts with the Federal Insurance Office on the U.S.-European Union Dialogue Project.  Members will be updated on the International Monetary Fund Financial Sector Assessment Program of the U.S., as well as receive reports on work in progress at the Organisation for Economic Co-operation and Development, the Joint Forum, the Financial Stability Board and other relevant international organizations.

The ComFrame Development and Analysis Working Group will discuss progress on ComFrame, in particular the ongoing field testing process, the development of the various global insurance capital standards and a potential approach for a U.S. group capital framework.

 

 

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