Industry Issues | ERM & Emerging Risks

Emerging Risk: NAIC – State Regulation


The National Association of Insurance Commissioners held its spring national meeting in Milwaukee from March March 24 - 27. Some developments included:

Big Data (EX) Working Group

The Big Data Working Group unanimously adopted a motion to forward a request for NAIC staff to conduct research into the appropriate skills and the potential number of resources required for the organization to address the needs of the NAIC membership in conducting their reviews of predictive models and make appropriate recommendations to the Executive (EX) Committee and the Internal Administration (EX1) Subcommittee.

During the discussion of this matter, PCI testified that it supports resources for training state staff to better address complex filings. However, we object to any effort to allow NAIC personnel to review rate filings. Following the session, PCI met with the working group chair and other commissioners and was assured that they do not want the NAIC to become a regulator or return to the predictive analytics review team proposal of last summer that PCI opposed.

Additionally, after much discussion, the Big Data Working Group unanimously approved a set of charges to the Casualty Actuarial and Statistical Task Force including sharing information, changes to regulator handbooks and potentially new filing requirements for rates based on models.

Group Capital Calculation (E) Working Group

The Group Capital Calculation (E) Working Group exposed for comment a memo on the scope of the group to which the group capital calculation (GCC) will apply. The proposal would include all entities under the ultimate controlling person of the group - whether an insurer, a non-operating holding company or another entity - unless the group's lead state opts for a less inclusive scope. The scope of the group is a key decision that will affect much of the rest of the GCC, and the ultimate controlling person default appears to be too broad.

The group also heard comments on the issue of what non-insurance, non-financial entities should be included in the calculation. PCI testified that, since the GCC's purpose should be policyholder protection, only entities that could pose material contagion or reputational risk to the insurers in the group should be included.

PCI is working with the NAIC to accelerate the development of a version of the GCC that can be field tested, without moving so fast that mistakes are made. The group will hold important conference calls in the next several weeks on other key issues to move the process along.

UPDATE: The NAIC's Group Capital Calculation (E) Working Group is asking for comments by May 8, 2018 on the attached memo from chairman David Altmaier. Also attached is a very early comment letter from Berkshire Hathaway and CNA. This committee will hold a conference call to discuss these open issues in the GCC. Commissioner Altmaier's scope memo takes a very broad approach, beginning with the ultimate controlling person unless the lead regulator decides differently.

Casualty Actuarial and Statistical (C) Task Force

The Casualty Actuarial and Statistical Task Force of the Property Casualty Insurance (C) Committee met to further their discussion and next steps on charges related to an Appointed Actuary Job Analysis Project referred to them from a three-state (Alabama, Louisiana and Maine) ad hoc working group of the NAIC Executive Committee.

Even though it has received numerous comment letters and testimony voicing questions and concern - including from PCI, the task force is pressing forward on an aggressive timeline to develop P/C Appointed Actuary Educational Standards and an Assessment of Professional Actuarial Organizations' Examinations and Educational Content for Designations. The ad hoc working group met with representatives on March 25, to clarify the timeline that they expect CASTF to follow, and their plan to have a revised "qualified actuary" definition adopted by year-end to be effective for actuarial opinions issued for 2019 year-end annual statements.

Group Solvency Issues (E) Working Group

The Group Solvency Issues (E) Working Group approved its "Form F Implementation Guide", intended to give non-binding guidance to regulators and companies in completing and analyzing the annual Form F - Enterprise Risk Report required of all insurance groups.

While the regulators did not accept several revisions proposed by PCI and other industry associations, we were able to significantly scale back this document from its earlier scope. Additionally, the regulators repeatedly stressed that the guide is not mandatory and cannot be enforced. PCI hopes the guide will provide greater clarity to both companies and regulators.

International Insurance Relations (G) Committee

The group heard reports and introduced the new IAIS Deputy Secretary General. PCI presented on our IAIS strategic plan comments that emphasize the need for increased transparency, flexible standards and a greater focus on assisting with market development in the less developed country members of IAIS.

Terrorism Insurance Implementation (C) Working Group

At the meeting of the TRIA Working Group, the NAIC staff presented findings on the NAIC's 2016 TRIA data call, reporting 2015 data. In addition, the working group chair announced that two TRIA data calls will be released within the next few days. The chair provided an update that both the NAIC and FIO data calls were based on the template that FIO used in the past with minimal changes and the due date will be May 15. The Treasury data call will be submitted through ISO and the states will submit through the New York portal.

Unfortunately, the NAIC has decided to move ahead with the zip code level property supplement that PCI worked against. The property supplement will be due in September and will be just for the states. The chair announced the FIO will host webinars during April for insurers to assist in the filing. 

For more reports on other developments that occurred at the NAIC spring national meeting, refer to the April 2, PCI NAIC Bulletin.


The NAIC Makes InsurTech Adoption a Top Priority

The National Association of Insurance Commissioners' three-year innovation plan, "State Ahead: Strategy Plan 2018-2020", reveals that it is looking to adopt emerging technologies, such as cloud capabilities, artificial intelligence, and self-service business intelligence tools, to store collected data, publish reports on market findings, and launch proof of concepts. Among other things, the NAIC plans to develop a new Insure U website as a resource for consumers to learn about insurance-related topics, and provide opportunities for state insurance regulator engagement on current issues in the insurance marketplace, including InsurTech, RegTech, cybersecurity, and autonomous vehicles. "We need to evolve with the marketplace around us, lest we be left behind," said the NAIC. "This is especially true of the tools and services developed and provided by the NAIC. In particular, we foresee leveraging even further the information the NAIC collects as a critical element to the future."