Regulator Appointments Still Available at the NAIC 2015 Summer National Meeting–Price Optimization, Sharing Economy, Cybersecurity, Earthquake Forum Highlight Packed Agenda
Aug 4, 2015
If you haven’t yet made your appointments to visit with regulators at the upcoming National Association of Insurance Commissioners (“NAIC”) Summer 2015 National Meeting, the Colodny Fass Insurance Regulatory Team is gearing up and rapidly filling reservations for our clients at the event, which runs from August 15 through August 18 at the Hyatt Regency Hotel Chicago in Chicago, Illinois
Among trending issues highlighting the agenda are price optimization, insurer challenges in the growing sharing economy and the increasing importance of cybersecurity as it relates to the insurance industry.
As the Casualty Actuarial and Statistical Task Force (“CASTF”) prepares to incorporate the most recent round of comments from both insurers and consumer representatives on the NAIC’s draft Price Optimization White Paper, Indiana became the seventh state to ban insurance company use of “price optimization” in ratemaking, following California, Florida, Maryland, Ohio,Vermont and Washington.
At the most recent CASTF meeting, Property Casualty Insurers Association of America (“PCI”) Director of Personal Lines Policy Alex Hageli noted that, while regulators have more-than-adequate tools to address price optimization concerns, they should also factor in real-world application to their approach, given the growing number of individual bulletins by different regulators on the topic that could potentially produce inadvertent consequences.
To view the CASTF Summer National Meeting agenda, click here.
Robert Passmore of PCI will join Jeff DeTurris of the Insurance Service Office (“ISO”) at the Sharing Economy Working Group to impart industry insight on the issue of home sharing. Chaired by Chaired by California Insurance Commissioner Dave Jones, the Working Group recently completed its work on a white paper, entitled “Transportation Network Company Insurance Principles for Legislators and Regulators.”
Legislation was recently filed in California targeting online vacation rental businesses that are not collecting and remitting taxes from residents who rent out rooms in their homes. Authored by Senator Mike McGuire, SB 593 requires companies such as Airbnb, Couchsurfing, Roomorama and others to adhere to local vacation rental laws.
To view the Sharing Economy Working Group agenda, click here.
The NAIC is ratcheting up its efforts to tackle cybersecurity issues. Following up on its adoption of the Guiding Principles for Cybersecurity this spring and developing new reporting requirements for insurers to better track cyber-insurance policies issued in the marketplace, the NAIC also plans to coordinate with state insurance regulators to conduct examinations of insurance companies to verify companies are taking appropriate steps to protect sensitive data, including confidential personal information.
Further, the NAIC’s Cybersecurity Task Force released a Consumer Cybersecurity Bill of Rights draft during late July for public comment. At the Summer National Meeting, the NAIC Executive Committee will consider a number of cybersecurity-related agenda items, including two model law development requests.
A special forum on “All Things Earthquake” hosted by Oklahoma Insurance Commissioner John Doak will precede the Summer National Meeting opening. Organized by the NAIC’s Center for Insurance Policy and Research, the four and a half-hour August 14 event will examine earthquake exposures and challenges, the science surrounding fracking-induced earthquakes, and regulatory experiences and concerns with earthquakes. Several prominent industry speakers are also scheduled, including Glenn Pomeroy, Chief Executive Officer of the California Earthquake Authority; Dr. Steve Horton, a seismology researcher from the Center for Earthquake Research and Information; Director Lori K. Wing-Heier, Alaska Division of Insurance; and Angela Nelson, Director of Market Regulation for the Missouri Department of Insurance.
The NAIC will also host an orientation for state legislators and government officials on the morning of August 15.
Below are highlights from the NAIC’s 2015 Summer National Meeting preview:
In addition to an update on the National Flood Insurance Program and catastrophe-related legislation, the Catastrophe Insurance Working Group will hear a presentation from Guy Carpenter on LiveCat/Deductible Buy-Down and discuss the next steps to be taken in updating the NAIC State Disaster Response Plan.
The Catastrophe Risk Subgroup will continue discussion on the implementation of the catastrophe risk charge in the property and casualty risk-based capital formula.
The Terrorism Insurance Implementation Working Group will discuss the status of a Blanks proposal on data described in the federal Terrorism Risk Insurance Program Reauthorization Act of 2015.
The Executive Committee will consider approval of two model law development requests from the Cybersecurity Task Force for amendments to NAIC Insurance Information and Privacy Protection Model Act (#670) and Privacy of Consumer Financial and Health Information Regulation (#672), among other agenda items.
The Cybersecurity Task Force will be updated on cybersecurity legislation, as well as hear a report from the IT Examination Working Group and discuss the Federal Financial Institutions Examination Council cyber assessment tool. A panel forum with will be held with Premara, Anthem and Care First on their recent data breaches. Additionally, members will discuss progress on the NAIC’s Cybersecurity Consumer Bill of Rights.
The Climate Change and Global Warming Working Group will hear a presentation from Dr. Paul S. Chinowsky, Mortenson Professor of Sustainable Development and Director of Mortenson Center for Engineering in Developing Communities for the University of Colorado on the risks associated with climate vulnerability and the financial impact of taking a reactive or proactive approach to climate resiliency. Additionally, Alex Bernhardt, U.S. Responsible Investment Leader for Mercer, will discuss findings from Mercer’s recently published report, Investing in a Time of Climate Change.
The Sharing Economy Working Group will hear from the ISO and PCI about the industry’s outlook on home sharing.
The Property and Casualty Risk-Based Capital Working Group will continue discussion on the underwriting risk charges and credit risk for reinsurance.
Property and Casualty Insurance Committee members will hear a presentation on a U.S. Supreme Court decision concerning disparate impact.
They will consider adoption of a Title Insurance Consumer Shopping Tool Template and Buyers Guide. Also on their agenda is the review of a letter from the Casualty Actuarial and Statistical Task Force on its charge related to the Society of Actuaries’ general insurance educational track.
The Crop Insurance Working Group will hear a presentation from the Independent Insurance Agents and Brokers of America giving the agency perspective on recent changes to the federal crop insurance program. The Risk Management Agency and the National Crop Insurance Services will also present.
The Auto Insurance Study Group–a joint effort of the Property and Casualty Insurance Committee and the Market Regulation and Consumer Affairs Committee–will discuss a draft data call template.
The Transparency and Readability of Consumer Information Working Group will hear a presentation on California’s new policy comparison tool and discuss the addition of language relating to transportation network companies to the NAIC Auto Shopping Tool.
The Workers’ Compensation Task Force will hear a report on the update of the 2006 Workers Compensation Large Deductible Study currently underway. Members will also hear a State of the Line Report from the National Council on Compensation Insurance, reports on opt-out legislation proposed in several states, and a report on medical marijuana and its possible impact on the workers’ compensation system
The Reinsurance Task Force will discuss the status of the proposed Captive Reinsurance Model Regulation and memoranda on proposed updates to the definition of “Securities listed by the SVO,” including discussion on populations of securities to be considered for inclusion in the definition and deemed eligible for use as collateral for purposes of the Credit for Reinsurance Model Act (#785) and Credit for Reinsurance Model Regulation (#786.) The Task Force will also receive updates on states efforts in their implementation.
The Principle-Based Reserving Implementation Task Force will discuss the Experience Reporting Framework, consider criteria for “Substantially Similar” to use to determine the Valuation Manual operative date, discuss a Principle-Based Reserving pilot and hear updates on the XXX/AXXX Reinsurance Framework charges sent to other NAIC committee groups.
International Insurance Relations
The International Insurance Relations Committee will discuss progress on initiatives of the International Association of Insurance Supervisors (“IAIS”), 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 receiving an update on the U.S.-European Union Dialogue Project and the status of mutual recognition issues. Reports will be given on the International Monetary Fund Financial Sector Assessment Program of the U.S. and work in progress at the Organisation for Economic Co-operation and Development, as well as updates on ongoing activities and relations with international regulators.
The ComFrame Development and Analysis Working Group will discuss progress on ComFrame, particularly the ongoing IAIS field testing process; the development of the various global insurance capital standards, including the Higher Loss Absorbency consultation document; and potential approaches for a U.S. group capital framework.
During the joint meeting of the Executive Committee and Plenary, members will consider adoption of the Stop Loss Insurance, Self-Funding and the federal Affordable Care Act White Paper, which explores the potential for and consequences of small employer self-insurance in the post-Affordable Care Act environment. Although at this point, the increase in small employer self-funding is not known, there has been demonstrated interest in discussing self-funding in the small group market, as indicated by the recent development of stop loss insurance policies specifically designed to market to small employers.
The NAIC Consumer Liaison Committee will discuss current health reform insurance issues related to the Affordable Care Act, such as health plan price transparency in Massachusetts (an overview of the law with guidance from the Massachusetts Division of Insurance); balance billing and the importance of transparency for consumers (findings from a Georgetown University report); filing a complaint from a consumer’s perspective (Consumers Union research and state-specific complaints tool); what consumer complaints reveal (findings from the California Office of the Patient Advocate report); the consumer cybercrime bill of rights; and the use of nontraditional rating factors.
The Group Solvency Issues Working Group will finalize feedback from the 2014 Own Risk and Solvency Assessment (ORSA) pilot project.
The Privacy Disclosures Working Group, part of the Market Regulation and Consumer Affairs Committee, will review its 2015 charges and discuss possible next steps regarding the electronic delivery of annual privacy notices and the potential sunset of the sample privacy notices in Model #672.
The Financial Regulation Standards and Accreditation Committee will discuss grandfathering provisions and effective dates related to the revised Accreditation Preamble that include the scope of the NAIC’s Accreditation Program, specifically as it relates to captive insurers and special purpose vehicles that reinsure certain lines of life insurance business. The Committee will also discuss comments received and consider adoption of Model #505 as a new Part A accreditation requirement. A one-year comment period will be considered for the following: Model #305, Model #306, the 2014 revisions to Model #205 and the 2014 revisions to Model #440, the Insurance Holding Company System Regulatory Act.
The Producer Licensing Task Force will discuss how to enhance the sharing of Financial Industry Regulatory Authority (FINRA) regulatory actions with state insurance regulators. The Producer Licensing Working Group will discuss state compliance with the NAIC Continuing Education Reciprocal Agreement, the uniform appointment process and revisions to the State Licensing Handbook.
After a regulator-only session, the Advisory Organization Examination Oversight Working Group will hear comments from representatives from advisory organizations on proposed changes to Chapter 25 of the Market Regulation Handbook and discuss plans for 2016 examinations.
The Valuation of Securities Task Force may adopt an amendment to the Purposes and Procedures Manual of the NAIC Investment Analysis Office to provide the NAIC Securities Valuation Office (“SVO”) with comprehensive instructions governing how to compile the quarterly list of insurer-owned securities published in the NAIC Automated Valuation Service. The Task Force will also hear several status reports from the SVO and the Structured Securities Group (“SSG”). The SSG will report on the status of a request for proposal conducted by the NAIC to identify suitable vendors of financial modeling services for the use of the SSG during the annual surveillance of insurer-owned residential mortgage-backed securities and commercial mortgage-backed securities. The SVO also will report progress on the development of standards for non-bank lenders to be added to the NAIC Bank List.
- Research on the Regulation of Banks and Non-Banks re: the Possible Conversion of the NAIC (Letter of Credit) Bank List into a List of Qualified U.S. Financial Institutions (as Defined in the Credit for Reinsurance Model Act Model #785
The SVO will report on the status of a project to assess the Derivatives Instrument Model Regulation (#282) and join the American Council of Life Insurers to report on a study of Dutch generally accepted accounting procedures (“GAAP”) and a recommendation whether to add Dutch GAAP as a National Financial Presentation Standard in the NAIC definition of Audited Financial Statement. The SVO may also discuss the status of a review of changes in United Kingdom GAAP and whether such changes permit the retention or require the deletion of United Kingdom GAAP as a Financial Presentation Standard in the NAIC definition of Audited Financial Statement. The SVO staff will further report on the status of discussions with industry on a project to revise the rules that govern filing of insurer-owned securities with the SVO. A progress report will also be given on a 2014 project to discuss efforts to clarify the failure of insurers to identify why some securities are not being filed with the SVO.
The Market Information Systems Research and Development Working Group will hear an update on the Market Action Tracking System project.
Part of the Financial Condition Committee, the Mortgage Guaranty Insurance Working Group will continue discussions on proposed changes to the Mortgage Guaranty Insurance Model Act (#630), related standards and the analysis and development of a risk-based capital requirement for mortgage insurers.
The Emerging Actuarial Issues Working Group will discuss the pending response to currently exposed question seeking interpretations of Actuarial Guideline XXXVIII–The Application of the Valuation of Life Insurance Policies Model Regulation (AG 38).
The Risk-Focused Surveillance Working Group will discuss its work on the development of a Group Profile Summary template and related guidance, as well as its work in developing sample job descriptions that outline the skills and abilities necessary for financial analysts and examiners to effectively implement risk-focused surveillance.
Part of the Accounting Practices and Procedures Task Force, the Statutory Accounting Principles Working Group will hear comments on items currently in the comment process and consider proposed changes to statutory accounting principles. Potential topics to be discussed include prepayment penalties and amortization on callable bonds; the investment classification project; SSAP No. 97-Subsidiary Controlled and Affiliated Entities; accounting for surplus notes; and short sales and sale-leasebacks with non-admitted assets.
The Receivership and Insolvency Task Force will discuss comments received on clarifying guaranty association coverage of structured settlements, while the Receivership Model Law Working Group will discuss a survey of receivership model laws corresponding to the Financial Stability Board’s Assessment Methodology for the Key Attributes of Effective Resolution Regimes for Financial Institutions.
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