August 2021 NAIC-Related Activity & NAIC Summer National Meeting
This month’s summary includes the NAIC Summer National Meeting, as well as other NAIC-related activity that happened during the rest of the month.
Blanks Working Group (Blank) Interest Parties (IP) Call – August 3, 2021
In a very rare action, the Blanks IPs held a meeting to discuss current documents exposed for comment. The meeting focused on four statement proposals that had previously been exposed, but action was deferred until a later Blanks meeting, allowing for an extra comment period. Industry had requested the deferrals. Those proposals are 2021-11, 2021-12, 2021-13, and 2021-14, which are all posted on the Blanks Working Group webpage. The narrative below is in the order of discussion, which seemed to tackle the easier proposals first.
- Proposal 2021-14 didn’t seem to generate a lot of concern, leading to a very brief discussion.
- The concern with proposal 2021-12, which affects only the Analysis of Operations in the Life/Fraternal statement, is the continuity problem that would be created—that is, getting the suggested changes to roll up into the current Analysis of Operations Summary. IPs discussed the possibility of providing the information in the form of a separate Notes disclosure or possibly a supplement to the statement.
- IPs felt they needed more information on why regulators felt the additional lines of business proposed in 2021-13 for the Property/Casualty statement were needed; what are regulators really looking for? The information being requested is more statistical than financial and is not readily available.
- Proposal 2021-11 affects only Property/Casualty reporting. The proposal itself is unusual in that the sponsor is a consumer advocate. The sponsor feels one of the statistical reports furnished by the NAIC is not produced in a timely manner (that is correct) and is suggesting revisions to statement reporting that would make the information available sooner. Industry, however, pointed out that what is being requested is well beyond what the sponsor indicated as the reasons for revisions. In addition, much of the proposed information is statistical in nature and would be better handled by the current NAIC group that produces the statistical reports, not as part of statement reporting.
The co-chairs of the IP group announced they had a meeting with Blanks NAIC staff the next day and will bring up all of Industry’s concerns on these proposals. Another Blanks IP meeting will be scheduled later.
Group Solvency Working Group (GSWG) – August 4, 2021
This Working Group has been charged with incorporating language from the International Association of Insurance Supervisors’ Common Framework for the Supervision of Internationally Active Insurance Groups (ComFrame) into the NAIC’s Financial Analysis Handbook (Handbook). Prior to this meeting, GSWG had exposed for comment proposed revisions to the Handbook. This meeting was the first chance for all to meet and review comments received during the exposure period. A common theme found in most of the submitted comments was concern that proposed Handbook revisions went beyond the authority of the NAIC’s Insurance Holding Company System Regulatory Act (Model #440) in identifying groups that would be subject to ComFrame measures. ComFrame guidelines are intended for application to internationally active insurance groups (IAIG). Some of the proposed revisions to the Handbook appear to suggest U.S. regulators can apply these measures to non-IAIG groups. Some regulators also asked for clarification on this issue. In particular, the conversation centered around the following two sentences:
“While such considerations and procedures are applicable to insurance group identified as IAIGs, they may also be appropriate for use in the supervision of other large insurance groups that do not yet meet the IAIG criteria. As such, analysts should use judgment in determining whether the IAIG considerations and procedures should be applied to a broader range of insurance groups.”
Other topics discussed during the call included the appearance of codifying new quasi-legal provisions in the Handbook, insufficient allowance of regulator discretion and flexibility, elimination of references to the Insurance Capital Standard (ICS), references to ComFrame or Insurance Core Principles (ICPs) without incorporating the specific language, and responsibilities of the groupwide supervisor. (This listing is not complete.) The Working Group will consider all of the comments received and begin work on producing the next version of the updated Handbook. The meeting ended with a quick update of the activities of the Own Risk and Solvency Assessment Implementation Subgroup.
NAIC National Meeting – General Comments
The NAIC Summer National Meeting occurred from August 14 to 17 using a hybrid format. Those wanting to attend in person traveled to Columbus, Ohio, to do so. Those not wanting to travel attended virtually. The hybrid format went surprisingly well, with mostly smooth transitions from the physical conference room to the virtual meeting room. But even with the in-person approach, the meeting was not the usual setup. Only a handful of meetings occurred in Columbus. Most of the working groups and task forces met virtually either before the National Meeting or afterward.
There are certain advantages to attending the virtual part of a hybrid meeting. One thing that is definitely worth mentioning is the music that was played for a short period of time prior to the opening of each session. Kudos to the DJ or whoever selected the music. It was great! It was also nice to see the faces of those who were speaking, or at least those who were speaking from the in-person part of the meeting. Unfortunately, many of those speaking remotely did not turn on their cameras. When attending physical meetings, it is often difficult for attendees to distinctly see the speaker. This is because many of the rooms are quite large and attendees are located some distance from the head table. The final advantage is not having to quickly move from one meeting location to another. When attending virtually, you just click on a new Zoom link and there you are!
The next several activity summaries are from meetings that occurred during the “official” NAIC Summer National Meeting. After that, coverage of other meetings is provided, closing out August activity.
NAIC Consumer Liaison Committee – August 14, 2021
Through this committee, consumer organizations are provided the opportunity to interact with insurance regulators on topics of importance to their constituency. Although the number can vary from year to year, for 2021 there are 39 organizations represented at NAIC meetings. The discussions at each meeting usually begin with a presentation on a specific topic, followed by an opportunity to ask questions. The talks provide an excellent educational opportunity and often provide details on consumer topics that are only lightly touched upon by the usual news outlets. This meeting provided information on five different topics.
To get things started, the Coalition Against Insurance Fraud and United Policyholders presented “Helping Consumers Avoid Getting Burned or Blown-Away by Post-Disaster Fraud.” The presentation identified several different types of fraud affecting both consumers and insurers. General types of fraud discussed included contractor and repair scams, insurer actions such as requiring the use of certain contractors, and both intentional and unintentional consumer fraud. It was pointed out that scammers often target certain populations for fraud, while insurers often unknowingly contribute to fraudulent activity with the locations selected for their claim response teams. The intent of providing this information was to urge the passing of “storm chaser laws” by state departments of insurance, as well as recommending states have disaster plans and consumer warnings in place to address fraud.
Next up was the Center for Economic Justice (CEJ) providing information on the impact of the COVID-19 pandemic on consumer credit scores and insurance underwriting. The CEJ expressed concern about the industry practice of using average credit scoring derived historically in the wake of the pandemic. Accordingly, they suggested a moratorium on this practice until credit scores have a chance to catch up and normalize after the pandemic. In addition, the CEJ urged the use of individual credit scores rather than using average credit scores.
The AIDS Institute and Health Equity Solutions provided a presentation entitled “Regulatory Possibilities for Promoting Equity through Telehealth.” Both groups pointed out how telehealth can overcome barriers for providing services to some geographic locations, for lack of transportation, where there is a lack of providers, and for stigma-related barriers. However, they felt that although the last 18 months provided an excellent platform to test and expand the concept of telehealth, they did more to preserve existing disparities rather than ease them. The presenters pointed out a number of current problems with the concept of telehealth but felt if these issues are addressed going forward, telehealth can help with underserved communities and populations.
“Implementation of the No Surprises Act: Implications for Consumer Protections” from Families USA was the next topic of discussion. The federal government has adopted consumer protection for surprise and balance billing, referred to as the No Surprises Act, effective January of 2022. Surprise billing happens when people unknowingly get care from providers that are outside of their health plan’s network. It can happen for both emergency and nonemergency care. Balance billing occurs when a provider charges a patient the remainder of what their insurance does not pay, a practice currently prohibited in both Medicare and Medicaid. The intent of the presentation was to suggest ways in which state insurance departments could be sure consumers have the tools they need to ensure comprehensive protections when the law takes effect, including the possible adoption of state laws that are more stringent than the federal bill.
The last presentation was “Disparities in Insurance Access: A Survey of State and Local Grassroots Consumer Organizations” given by the University of Georgia and Georgians for a Healthy Future. The presentation summarized material from a survey of 72 grassroots organizations to determine their perspective on insurance issues as well as their awareness, or lack thereof, of the resources available through the state departments of insurance. The survey found challenges in insurance access, unaffordable insurance products, difficulty understanding coverage, difficulty understanding costs, and products that don’t provide sufficient coverage. One of the items highlighted by the survey is information not being available in the consumer’s language. Other areas of perceived discrimination or bias included income, race/ethnicity, health state, age, gender, disability, LGBTQ+ status, and transgender status. Surprisingly, 32 percent of the grassroots organizations indicated “other” types of bias also existed. The survey found these organizations believe some companies consistently deny claims and that certain agents, brokers, or insurers won’t sell to specific types of constituents and that insurance regulators tend to be more passive than active in addressing discriminatory practices. In fact, many of these organizations indicated they have no interactions with the state departments of insurance at all, which should be viewed as a lost opportunity for regulators.
Opening Session – August 14, 2021
This was the 232nd session of NAIC National Meetings, with David Altmaier, Commissioner of the Florida Office of Insurance Regulation and NAIC President, presiding. The Opening Session is not like other NAIC sessions. It is more like a regular “business meeting” similar to those conducted by other organizations. Those sitting at the head table during the meeting were introduced and are NAIC officers. Two new NAIC members were introduced, meaning two new Commissioners or Directors of Insurance (or a like title) had taken office since the last National Meeting.
The physical meeting was held in Columbus, Ohio. It had been 29 years since Ohio had last hosted an NAIC National Meeting. According to tradition, the Ohio Commissioner of Insurance provided an opening “Welcome to Ohio/Welcome to Columbus” speech to the attendees.
President Altmaier then spoke for the remainder of the meeting. His address covered the absence of in-person meetings and innovative ways the various state insurance departments have handled the pandemic. He then touched upon the NAIC priorities for the year, providing a brief update on current related projects. Those priorities are: COVID-19, Long-Term Care Insurance, Consumer Data Privacy Protections, Climate/Natural Catastrophe Risks and Resiliency, Big Data and Artificial Intelligence, and Race and Insurance.
Altmaier also announced the formation of a new “lettered” committee, the first new letter committee formed by the NAIC in quite some time. The “H” Committee will focus on innovation, artificial intelligence, and cybersecurity affecting the insurance sector. Currently, processes and charges for the new Committee are being drafted. For the new addition, the NAIC bylaws will need to be amended and Plenary will have to give its final approval, which should happen at the next National Meeting.
Innovation and Technology Task Force – August 14, 2021
The Task Force heard reports from the following groups:
- Big Data and Artificial Intelligence Working Group
- Speed to Market Working Group
- E-Commerce Working Group
It then heard an update on cybersecurity workstreams and priorities and discussed consumer data ownership issues. The group was informed of several projects being conducted by other NAIC groups that might have a possible impact on the charges of this Task Force. Reports were given on the status of some model law development and adoption by states, as well as international initiatives related to artificial intelligence and big data.
Financial (E) Conditions Committee – August 14, 2021
After adopting the minutes from its last meeting on July 8 and the Spring National Meeting, the Committee then adopted reports from 14 of its task forces and working groups. Since there were no controversial items or items needing separate discussion, the reports were adopted en masse. Those groups were:
- Accounting Practices and Procedures Task Force
- Capital Adequacy Task Force
- Examination Oversight Task Force
- Financial Stability Task Force
- Receivership and Insolvency Task Force
- Reinsurance Task Force
- Risk Retention Group Task Force
- Valuation of Securities Task Force
- Group Capital Calculation Working Group
- Group Solvency Issues Working Group
- Mortgage Guaranty Insurance Working Group
- Mutual Recognition Working Group
- Mutual Recognition Working group
- NAIC/American Institute of Certified Public Accountants Working Group
- National Treatment and Coordination Working Group
The group then voted to send a referral to the Statutory Accounting Principles Working Group suggesting language revisions to its policies distinguishing between substantive and nonsubstantive accounting changes. In fact, the referral suggests that those two terms be eliminated. Instead, items that used to be labeled as substantive would now be called a “New SAP Concept,” while the label of nonsubstantive would be replaced with the term “SAP Clarification.” The Committee felt this action was needed after the adoption of clarifying revisions to Statement of Statutory Accounting Principles No. 71 – Policy Acquisition Costs and Commissions last year and the apparent confusion regarding the timing for revision implementation. If the language revisions are done, SAP Clarifications would be effective immediately upon adoption (unless stated otherwise), while New SAP Concepts would have a stated effective date. It also means those of us who have been using the original terms since 1998 will have to update our vocabulary!
The Committee then moved onto the adoption of revisions to the process for evaluating qualified and reciprocal jurisdictions. This will now be sent onto Plenary for final approval.
The last item on the agenda was to consider adoption of revised charges for the renamed Macroprudential Working Group. Whoa! Macro, what? The Cambridge Dictionary indicates that macroprudential is “used to describe laws, rules and conditions for banks and financial organizations which are intended to protect the whole financial system from risk.” In relationship to the charges the Macroprudential Working Group will have, macroprudential analysis is defined as a “method of economic analysis that evaluates the health, soundness, and vulnerabilities of a financial system.” Macroprudential analysis looks at the health of the underlying financial institutions in the system and performs stress tests and scenario analysis to help determine the system’s sensitivity to economic shocks.” The group that was renamed was previously the Liquidity Assessment Subgroup. With the new name comes a new set of charges.
Climate and Resiliency Task Force – August 15, 2021
The Task Force heard reports from its workstreams. As a reminder, this group uses the term workstreams instead of working groups or subgroups. Instead of dedicated webpages for each workstream, a Climate Risk and Resiliency Resource Center is used to provide limited information on the activities of each workstream. What is available, however, does not provide the level of detail normally found for working groups or subgroups. The reports provided were not included in the material distributed in advance of the meeting. Workstreams providing reports were:
- Pre-Disaster Mitigation
- Climate Risk Disclosure
The California Department of Insurance’s Climate Insurance Working Group provided a report entitled “Protecting Communities, Preserving Nature and Building Resiliency: How First-of-its-Kind Climate Insurance Will Help Combat the Costs of Wildfires, Extreme Heat, and Floods.” The focus of the report was the idea that when catastrophes happen, only a small portion of the risks are insured (protection gap) and communities need help to improve their readiness and resilience, with resilience being a key term. Also stressed in the report’s conclusion is the role insurance can serve as a tool for more equitable recovery. The full report can be found at: https://www.insurance.ca.gov/cci/docs/climate-insurance-report-07-22-2021.pdf and/or will become part of the Task Force’s National Meeting minutes when posted later.
The final presentation to the committee was from the Reinsurance Association of America (RAA) and provided information on its mapping tool for resiliency planning. The presentation, entitled “Enhancing Resiliency Through the Use of Data to Drive Advocacy,” demonstrated the use of FEMA’s National Risk Index (NRI). The NRI is designed to help identify areas most at risk of natural hazard. The tool provides information down to the county and census tract level and evaluates 18 natural hazards, social vulnerability, and community resilience. The NRI can be found at https://www.fema.gov/flood-maps/products-tools/national-risk-index. Information is provided on tornado, coastal flooding, riverine flooding, hurricane, strong wind, drought, ice storm, earthquake, hail, wildfire, heat wave, and cold wave risks. The RAA provided suggestions to help mitigate these risks including legislative action, public and private funding options, as well as how the NAIC and states can use the NRI.
Executive (E) Committee – August 15, 2021
The Committee adopted reports from the following groups:
- Climate and Resiliency Task Force
- Government Relations Leadership Council
- Innovation and Technology Task Force
- Long-Term Care Insurance Task Force
- Special Committee on Race and Insurance
Next on the agenda was the receipt of a status report on the implementation of the NAIC State Ahead strategic plan implementation. The three-year project is nearing its end. The Committee will now start planning for State Ahead 2.0.
The group next heard a status report on current model efforts for:
- Model Regulation to Implement the Accident and Sickness Insurance Minimum Standards Model Act (#171),
- Annuity Disclosure Model Regulation (#245),
- Insurance Holding Company System Regulatory Act (#440),
- Insurance Holding Company System Model Regulation with Reporting Forms and Instructions (#450),
- Life Insurance Disclosure Model Regulations (#590),
- Nonadmitted Insurance Model Act (#870), and
- New models including the Pet Insurance Model Law and State Pharmacy Benefit Manager Licensure and Regulation Model Act.
As the final act of the meeting, the Committee heard oral reports from the National Insurance Producer Registry and the Interstate Insurance Product Regulation Commission.
International Insurance Relations (G) Committee – August 16, 2021
Unlike other NAIC committees, this group doesn’t have permanent groups that it oversees; therefore, there were no meeting minutes to review except for their own. If any special topics need to be addressed, the 15 members of the Committee handle the workload. After adopting minutes from their previous meetings, the discussion moved to two NAIC comment letters that were previously exposed for comment. The comment documents focus on drafts prepared by the International Association of Insurance Supervisors (IAIS). One letter addresses an issue paper on Insurer Culture, and the other focuses on a revised Application Paper on Supervisory Colleges. After a brief review of both documents with emphasis on a few revisions that were made, the group voted to submit the comments. An update on key IAIS projects and priorities of the IAIS, as well as the following international activities, was provided.
- Regional Supervisory Cooperation
- Organisation for Economic Co-operation and Development
- Sustainable Insurance Forum
IAIS Secretariat Q&A Session with Interested Parties – August 16, 2021
The IAIS Secretariat is not one person, but rather a management team. Prior to answering questions, some personnel changes for the Secretariat were announced. The program then moved to some members of the Secretariat responding to questions and comments provided by those attending the NAIC meeting. Although the questions/comments addressed were regarding work being done on an international basis, some of the issues will find their way into U.S. statutory accounting. Comments/questions received included:
- U.S. insurers would like to see more transparency within IAIS activities and would like to have more of an opportunity for insurers of all sizes to be interactive in the process. This has been an ongoing request for some time.
- Birny Birnbaum of the CEJ wanted to know more about consumer participation (would we expect anything less from Birny?) and also had questions about insurer culture.
- Discussion on digital assets, Big Data, and AI governance on an international level.
Property and Casualty Insurance (C) Committee – August 16, 2021
The Committee heard brief reports from the following task forces and working groups:
- Casualty Actuarial and Statistical Task Force
- Surplus Lines Task Force
- Title Insurance Task Force
- Workers’ Compensation Task Force
- Cannabis Insurance Working Group
- Catastrophe Insurance Working Group
- Pet Insurance Working Group
- Terrorism Insurance Implementation Working Group
- Transparency and Readability of Consumer Information Working Group
The updated Title Insurance Consumer Shopping Tool Template was adopted. A new wire fraud section was added to the template along with a few other minor edits to bring things up to date, for example, eliminating references to “phone books.”
The next item on the agenda was a presentation on closing the protection gap, a hot topic for catastrophes and/or disasters. The Association of Bermuda Insurers & Reinsurers and the Insurance Development Forum provided a presentation entitled “Role of Public-Private Partnership in Addressing the Global Insurance Protection Gap.”
NAIC staff then provided two data reports. The first report was on the cyberinsurance market, which included an overview of data received from the cybersecurity supplement required to be filed by property and casualty companies as part of their annual statement. Heads up! During the presentation, the question was asked if cybersecurity should become a separate reported line of business, including its own section in Schedule P. That is something to watch for the future. The second report was on private flood insurance. It utilized information from the new flood supplement filing as well as a data call for 2018 and 2019 flood information. Concern was expressed over the completeness of the new flood supplemental filing, as it was found that some companies had overlooked the new requirement.
Life Insurance and Annuities (A) Committee – August 16, 2021
The Committee received and adopted reports from the following groups:
- Accelerated Underwriting Working Group
- Life Actuarial Task Force
The Life Insurance Illustration Issues Working Group asked for guidance on how to proceed with its work. For the last five years, this group has been working on enhancing a policy summary, or buyer’s guide, required by two current NAIC model regulations. The buyer’s guide is supposed to help the consumer with readability and understandability of life insurance policies. The Working Group reported it has completed its work—kind of. The group has produced two different versions of its work because it cannot come to a consensus on which version should be adopted. After a short discussion that included several different lines of thought, it was decided the Working Group will provide a report to the Committee for review and further discussion.
An update on the Special Committee on Race and Insurance Workstream Four was provided. This Workstream is waiting on approval from Plenary to begin its work charges, which will involve several groups within the NAIC framework.
Health Insurance and Managed Care (B) Committee – August 16, 2021
The Committee received and adopted reports of its task forces, working groups, and subgroups from the following:
- Consumer Information Subgroup
- Health Innovations Working Group
- Health Actuarial Task Force
- Regulatory Framework Task Force
- Senior Issues Task Force
A large part of the meeting was spent discussing the implementation and enforcement of the Federal No Surprises Act (NSA), which is scheduled to go into effect on January 1, 2022. (See brief discussion in the NAIC Consumer Liaison summary.) The discussion was divided into two parts. To get things started, comments were provided by the Center for Consumer Information and Insurance Oversight covering the first set of federal “rules” for the NSA, which were released in July. CMS (Centers for Medicare & Medicaid Services) will enforce federal requirements, but if states have additional or more stringent requirements, they will need to enforce those rules. The need for collaboration between states and CMS for enforcement and education and what that might look like was part of the discussion.
The second part of the NSA discussion was a panel of providers providing their perspective. Those participating were the American Hospital Association, American Medical Association, and Federation of State Medical Boards. There were two main ideas offered by these organizations; that of time (is there enough time to be in compliance?) and questions, questions, questions. Are there standards for implementation? Who is responsible for oversight: federal or state government? Will there be variations between states or national standards to minimize variation? What type of reporting needs to be put in place? A lot of questions.
Market Regulation and Consumer Affairs (D) Committee – August 16, 2021
In a nice change of pace, this Committee left the reports of its task forces and working groups until later in the meeting. The first part of the meeting was dedicated to a presentation entitled “Claim Optimization and the Insurance Promise” given by the University of Connecticut School of Law. The presentation asked if predictive modeling of claims by insurers might be leveraging available information in an illegal manner. In other words, are insurers using nonclaims-related data to evaluate the policyholder/claimant’s willingness to accept an offer, rather than on the fair value of the claim itself? Nonclaims-related information might include shopping habits, geographic location, financial status, education level, etc. Doing so would violate the Unfair Claims Settlement Practices Act. The presentation was serving as a warning to regulators that they need to be aware of the possibility of these practices and require insurers to report on models used and in what manner they are being used. At the end of the presentation, an industry representative briefly rebutted several of the ideas that had been presented. However, other interested parties supported several of the concepts.
The Committee then heard and adopted task force and working group reports from:
- Antifraud Task Force
- Market Information System Task Force
- Producer Licensing Task Force
- Market Conduct Examination Guidelines Working Group
- Market Analysis Procedures Working Group
- Market Conduct Annual Statement Blanks Working Group
- Privacy Protections Working Group
- Market Actions Working Group
- Advisory Organization Examination Oversight Working Group
CIPR: Casualty Catastrophe Risk in the Time of Social Inflation: Landscape, Modeling and Action – August 17, 2021
The Center for Insurance Policy and Research (CIPR), an affiliate of the NAIC, presented this special session on the last day of the Summer National Meeting. The two-hour session covered a wide variety of topics, all tied to the concept of reserving for catastrophic casualty risk exposures. Evidence has shown that most insurers are not as prepared to handle casualty catastrophe risk as they are property catastrophe risk. Most companies try to handle the new risks as they surface by revising their policies to exclude those risks. According to the presentation, industry does not appear to be capturing data, developing needed tools and making decisions based on exposure management information. The session contained several different presentations and a panel discussion to explore the concept of emerging catastrophic risks, tools that are available to understand it, and suggested actions industry and state insurance regulators can take to address it.
Executive (E) Committee and Plenary – August 17, 2021
As is usual, this was the last session of the Summer National Meeting. After roll call (all states and U.S. territories), the group adopted the August 15 Executive Committee minutes, which included the formation of the new “letter” committee, the H Committee. Next on the agenda was the normal series of minute adoptions from the 2021 Spring National Meeting, except for those items required to be handled separately. Items that were considered separately were:
- Adoption of Guideline to Definition of Reciprocal State in Receivership Laws.
- Revisions to SSAP No. 71. It is unusual for a revised SSAP to be separately handled by Plenary. But over the course of the crafting of the revision and its subsequent adoption by lower NAIC groups, it caused heated discussions on all levels. After the initial motion to adopt was received, a second motion was made to delay the implementation until December of 2022. This delaying tactic had been attempted before. There was then a discussion among the regulators. SSAP No. 71 was adopted without the amendment to extend the implementation date.
A few changes to 2021 charges were adopted. The group then received reports from the A, B, C, D, E, F, and G Committees on activity that happened during this National Meeting. Again, a few items had to be handled separately. Those items were:
- Adopted revisions to the Valuation Manual. There are special rules for the adoption of revisions to this manual. At least three-fourths of the members of the NAIC vote, but not less than a majority of the total membership must approve, and members who vote must represent more than 75 percent of the direct premiums written reported in the last Life/Fraternal or Health Statements. The revisions were adopted, although not unanimously. It took a little time to verify the 75 percent test, as a couple of states with large premium volume voted against the revisions or abstained.
- Adoption of amendments to Annuity Disclosure Model Regulation #245.
- Consideration of Model Law Addressing Licensure or Registration of Pharmacy Benefit Managers (PBMs). Wow! This really set off a lengthy discussion which, again, is unusual by the time an item is considered by Plenary. Some states thought the model was too weak. Some states confirmed they already have stronger laws on their books. Some states indicated they do not have the authority to regulate PBMs, thus adoption would not benefit them. In the end, a roll call vote was called. The group needed a two-thirds vote for adoption but didn’t make that requirement. The law was defeated by abstentions.
- Amendments to the Insurance Holding Company System Regulatory Act and Insurance Holding Company System Model Regulation with Reporting Forms were unanimously adopted to accommodate the Group Capital Calculation and Liquidity Stress Tests.
- The Process for Evaluating Qualified and Reciprocal Jurisdictions updates also were unanimously adopted.
The chair pointed out a report on state implementation of NAIC-adopted model laws and regulations included in the material.
So ended another NAIC National Meeting. Now let’s continue with the activity for the remainder of August.
Statutory Accounting Principles Working Group (SAPWG) – August 26, 2020
SAPWG began by taking the following actions:
SAPWG received and responded to a referral from VOSTF regarding the use of a parent’s credit rating for use in an unrated entity’s WCFI program.
The discussion then turned to the proposed principles-based bond definition that had previously been exposed for comment. NAIC staff provided a review of the work that had been done to date, and those entities that submitted comment letters were given a chance to summarize their comments. SAPWG was asked to affirm that the work that had already been accomplished was an acceptable framework for moving forward. NAIC staff laid out an informal timeline, indicating they felt the earliest any changes in the bond definition could be implemented would be January 1, 2024, which would include any needed statement reporting revisions.
SAPWG indicated it was satisfied with the direction that had already been taken and work should continue toward developing an issue paper and proposed SSAP revisions (at the minimum, revisions to SSAP No. 26R and 43R). In addition, a “43R study group” will be formed, with the intent of increasing the number of regulators participating in the project.
NAIC Staff indicated the topic of unrated equity tranches of securitizations had been raised during discussions to craft the new bond definition. Staff became aware that there is a lot of inconsistency among industry in the reporting of these investments and felt separate work on these trances need to occur. SAPWG agreed, so staff will move forward with this project as well.
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