NAIC Summer 2009 National Meeting Report
Date Published: 06-26-2009
The National Association of Insurance Commissioners ("NAIC") held its Summer 2009 National Meeting from June 13-16, 2009, in Minneapolis. Action items on major issues discussed during the meeting are highlighted in the committee summaries below, along with hyperlinks to complete meeting summaries.
- To go directly to the Property and Casualty Committee summaries, click here.
- To view the complete meeting summaries matrix, click here.
- To access the NAIC Model Law Index in reference to Model Law numbers designated in parentheses below, click here.
Additional summary reports include:
The Executive Committee comprises the following Task Forces, Working Groups and Subgroups:
- Executive Committee
- AIG Managing Task Force (no hyperlink available, did not meet)
- AIG Special Working Group (no hyperlink available, did not meet)
- AIG Life Working Group (no hyperlink available, did not meet)
- Form A Subgroup (no hyperlink available, did not meet)
- Military Sales Working Group
- SVO Initiatives Working Group
- Climate Change and Global Warming Task Force
- Government Relations Leadership Council
- International Insurance Relations Leadership Group
- Producer Licensing Task Force
- Solvency Modernization Initiative Task Force
- Speed to Market Task Force
During its June 12 meeting, the Climate Change and Global Warming Task Force discussed follow-up activities related to the Climate Risk Disclosure Survey and the possibility of holding a Climate Change and Global Warming Summit. A presentation was given on the Pay As You Drive ("PAYD") insurance program, which converts insurance pricing to a variable cost model based on vehicle travel, so premiums are directly related to annual mileage.
In its June 12 meeting, the Group Solvency Issues Working Group discussed enhancements to the Insurance Holding Company System Model Regulatory Act (#440), among other agenda items.
During its June 14 meeting, the International Solvency and Accounting Working Group adopted modifications to the Issues for Consideration in the Solvency Modernization Initiative paper and discussed the implications of the International Association of Insurance Supervisors ("IAIS") Insurance Core Principles ("ICP") review for future work. A recommendation was made to the parent task force that the U.S. should endeavor to ensure that it either complies with or intends to make any necessary changes to comply with future IAIS standards, which the U.S. has supported in IAIS proceedings. As a corollary, the U.S. should vote against IAIS standards with which it does not agree. Members also were asked to provide input on U.S. views to the Chair of the IAIS Insurance Contracts Subcommittee for his preparation of a presentation before the joint International Accounting Standards Board ("IASB")/Financial Accounting Standards Board ("FASB") at their July meeting.
The Principles-Based Reserving Working Group met June 13, during which it established a 30-day comment period for the revised Standard Valuation. A joint conference call will be held with the Life Insurance Committee and the Solvency Modernization Initiative Task Force to consider possible adoption of the revised Standard Valuation.
The Speed to Market Task Force met via conference call on June 13. It adopted a motion to proceed with drafting standards for product requirements and delay technical implementation of the new Product Requirements Locator tool within the System for Electronic Rate and Form Filing ("SERFF") until after the standards are drafted. A report on the Interstate Insurance Product Regulation Commission regarding new member states, filing growth and product standard development was given.
The Product Filing Review Handbook Subgroup continued its review of Chapter 3, with changes that included re-titling the Advisory Organizations section on loss-cost multipliers. Further text will support information typically required for various loss-cost multiplier filings.
LIFE INSURANCE AND ANNUITIES COMMITTEE
The Life Insurance and Annuities Committee comprises the following Working Groups and Subgroups:
- Life Insurance and Annuities Committee
- Annuity Disclosure Working Group
- Indexed Annuities Working Group
- Suitability of Annuity Sales Working Group
During its June 15 meeting, the Life Insurance and Annuities Committee approved the release of the VM-20 section of the Valuation Manual for comment and the release of the 2010 Generally Recognized Expense Table ("GRET") for comment. The Committee decided to defer adopting the revisions to the Standard Valuation Law in order to allow for a 30-day comment period.
At its June 13 meeting, the Annuity Disclosure Working Group discussed the guaranty fund coverage disclosure notice issue. At the Working Group's request, a draft guaranty fund coverage disclosure template was developed by the American Council of Life Insurers ("ACLI") and the National Organization of Life & Health Insurance Guaranty Associations ("NOLHGA"). The Working Group will hold a conference call in July to discuss a revised draft and any comments received on the revised draft. Discussion was continued on the annuity illustration issue.
The Indexed Annuities Working Group, which met June 14, had conducted a nationwide data call and issued a public report regarding annuity products with a specific focus on the sales and marketing practices of indexed annuities.
Since then, significant changes have taken place within the annuity industry: Twelve companies have either left the annuity business or have gone into rehabilitation. Sales of variable annuities have decreased, while sales of fixed annuities have increased, making the previously gathered information less relevant Having completed its charges with the issuance of this report, the Working Group may now be disbanded.
During its June 12 and 13 meetings the Suitability of Annuity Sales Working Group voted to distribute for comment an exposure draft of proposed revisions to the Suitability in Annuity Transactions Model Regulation.
HEALTH INSURANCE AND MANAGED CARE COMMITTEE
The Health Insurance and Managed Care Committee comprises the following Task Forces and Subgroup:
- Health Insurance and Managed Care Committee
- Regulatory Framework Task Force
- Senior Issues Task Force
During its June 15 meeting, the Health Insurance and Managed Care Committee adopted three reports: the Regulatory Framework Task Force report, the Senior Issues Task Force report, and the Accident and Health Working Group report, which included adoption of revisions to the NAIC Medicare Supplement Insurance Model Regulation Compliance Manual. A one-year extension was requested to complete the update on the refund calculation in Appendix A of the Model Regulation to Implement the NAIC Medicare Supplement Minimum Standards Model Act.
At its June 14 meeting, the Regulatory Framework Task Force discussed comments received on draft external review model forms of the recently adopted Uniform Health Carrier External Review Model Act and requested that NAIC Staff develop new drafts for comment that incorporate the suggested revisions. The Task Force also released for comment drafts of revisions to three NAIC models impacted by the Genetic Information Nondiscrimination Act of 2008 ("GINA") and the special enrollment provisions in the State Children's Health Insurance Program ("SCHIP"). A draft survey to companies concerning the issue of policy rescissions and preexisting condition exclusion decisions was discussed, along with a review of the standardization of forms practices and procedures in health insurance underwriting with respect to regulatory modernization.
During its June 14 meeting, the ERISA Subgroup discussed ongoing federal and state investigations into unauthorized Multiple Employer Welfare Arrangements ("MEWA").
At its June 14 meeting, the Senior Issues Task Force adopted revisions to the Long Term Care Insurance Model Act and Regulation and recommended the adoption of revisions to the Medicare Supplement Compliance Manual. A Subgroup was appointed to revise Appendix E of the Long Term Care Insurance Model Regulation to standardize claims reporting definitions and discussed a concern that the SERFF is not currently prepared to accept filings for new 2010 Medicare supplement plans.
PROPERTY AND CASUALTY INSURANCE COMMITTEE
The Property and Casualty Insurance Committee comprises the following Task Forces, Working Groups and Subgroups:
- Property and Casualty Insurance Committee
- Advisory Organization and Examination Oversight Working Group
- Catastrophe Insurance Working Group
- Catastrophe Reserve Working Group
- Consumer Guides Working Group
- Crop Insurance Working Group
- Earthquake Study Group
- Terrorism Insurance Implementation Working Group
- Title Insurance Issues Working Group
- Casualty Actuarial and Statistical Task Force
- Surplus Lines Task Force
- Workers' Compensation Task Force
During its June 15 meeting, the Property and Casualty Insurance Committee adopted a white paper entitled "Natural Catastrophic Risk: Creating a Comprehensive National Plan," and reviewed updates on credit-based insurance scoring, a catastrophe model feasibility study and property and casualty model rating laws.
During its June 14 meeting, the Catastrophe Insurance Working Group discussed the federal Catastrophe Obligation Guarantee Act, which would establish a program to provide federal guarantees for debt issued by eligible state catastrophe-insurance programs, as well as insurers using "all-risk" policies.
Although the Consumer Guides Working Group did not meet during the Summer National Meeting, its Consumer's Quick Guide to Home Insurance and the Consumer's Quick Guide to Auto Insurance were approved during that time, and a copy of each has been sent to commissioners and public information officers with an advisory that the publications are available for use in both electronic and print versions. The electronic version may be downloaded from the NAIC Insure U Web site (www.insureUonline.org) and each state can request an electronic version of the brochure to make available on their Web site.
During its meeting on June 13, the Earthquake Study Group discussed its proposed 2009 work plan, which calls for updating the Study Group's Final Report and identifying strategies to communicate earthquake risk awareness, preparation, loss mitigation and recovery measures to insurers, producers and consumers. The Study Group also reviewed recent earthquake research studies.
During its June 14 meeting, the Title Insurance Working Group received an update on the three proposals submitted to Blanks Working Group for expanding the type-of-rate codes in Schedule T and introducing state pages into the title Annual Statement Blank. The Working Group discussion also included questions for an upcoming survey of state laws regarding the collectability of title agent data and prioritization of 2009/2010 work plan draft components.
At its June 14 meeting the Casualty Actuarial and Statistical Task Force discussed a potential blanks proposal to require an actuarial opinion on premium deficiency reserves, as well as the Actuarial Opinion data reporting requirements. The Task Force decided to send a letter to annual statement vendors, along with company reporting contacts. The Task Force also heard a report from NAIC Staff about the Solvency Modernization Initiative ("SMI") and current international technical work. A joint subgroup might be created by the Capital Adequacy Task Force and the Life and Health Actuarial Task Force because of the connection between SMI discussions and capital and reserves.
The Statistical Subgroup did not meet during the Summer National Meeting, but at its most recent meeting, it reviewed the draft Guideline for Implementation of Medical Professional Liability Closed Claim Reporting, with a focus on Part A. The Subgroup is anticipating a letter from the Life and Health Actuarial Task Force to request aid with the mandatory statistical reporting for principles-based reserving. Similar to the Commercial Lines Competition Database Report, a Personal Lines Competition Database Report is being developed by the Subgroup.
During its June 15 meeting, the Surplus Lines Task Force agreed to a request from the Producer Licensing Working Group to assist with researching issues with regard to the application of the commercial lines multi-state exemption to surplus lines. The Task Force also heard a presentation on how the lack of uniformity among the states in regard to surplus lines regulation places burdens on insurance brokers and discussed the potential application of a draft interstate compact (Surplus Lines Insurance Multi-state Compliance Compact-"SLIMPACT") to meet the goals of HR 2571. A survey will be forwarded to members regarding their input on SLIMPACT.
The Multi-State Surplus Lines Premium Tax Working Group did not meet during the Summer National Meeting, but at its most recent meeting, approved additional refinements to a Surplus Lines Survey developed to gauge the complexity of state processes related to surplus lines premium taxes and documentation, and to identify governing state statutes.
During its June 14 meeting, the Workers Compensation Task Force reviewed a draft of "Implementation Commentary," prepared by the Professional Employer Organization Guidelines Implementation Paper Drafting Group of the Professional Employer Organization Model Law Working Group and a similar document from the National Conference of Insurance Legislators ("NCOIL") titled "Employee Misclassification Workers' Compensation Coverage Model Act." An update also was given on H.R. 635, which would establish a National Commission on State Workers' Compensation Laws.
The Large Deductible Study Implementation Working Group did not meet at the Summer National Meeting, but previously had revised the draft Third Party Administrator ("TPA") Guidelines to present to the Regulatory Framework Task Force for review of health insurance changes from that of the current TPA Statute. The basis of various workers' compensation assessments was discussed, inasmuch as the use of State Page direct written premiums will fail to fully recognize the exposure and costs generated by large deductible policyholders.
At its June 13 meeting, the NAIC/IAIABC Joint Working Group reviewed "Implementation Commentary," a White Paper to assist states in implementing the Guidelines for Regulations and Legislation on Workers' Compensation Coverage for Professional Employer Organization Arrangements. The NCOIL independent contractor model law titled "Employee Misclassification Workers' Compensation Coverage Model Act" also was reviewed. An update on H.R. 635 explained federal legislation that would authorize the creation of a National Commission on State Workers' Compensation Laws.
The Professional Employer Organization Model Law Working Group did not meet at the Summer National Meeting, however, its PEO Guidelines Implementation Paper Drafting Group previously discussed a first draft of "Implementation Commentary: Guidelines for Regulations and Legislation on Workers' Compensation Coverage for Professional Employer Organization Arrangements," as well as Version Two of the Draft PEO Paper, which included previously-missing two sections: the Regulatory Framework for PEOs and Self-Insurance and Loss-Sensitive Coverage. The Draft PEO Paper will be released for public comment.
MARKET REGULATION AND CONSUMER AFFAIRS COMMITTEE
The Market Regulation and Consumer Affairs Committee comprises the following Task Forces and Working Groups:
- Market Regulation and Consumer Affairs Committee
- Antifraud Task Force
At its June 16 meeting, the Market Regulation and Consumer Affairs Committee discussed the Market Conduct Annual Statement ("MCAS"). The Complaint Database System Manual, which sets forth the codes and definitions for the NAIC's Complaint Database System and state reporting of complaints to the system was adopted.
At its meeting June 14, the Special Accreditation Standards Working Group discussed the NAIC Market Conduct Surveillance Model Act needed for a Market Accreditation Program and heard an overview of the NAIC Administrative Policies Manual of the Financial Regulation Standards and Accreditation Program.
FINANICAL CONDITION COMMITTEE
The Financial Condition Committee comprises the following Task Forces, Working Groups and Subgroups:
- Financial Condition Committee
- Capital and Surplus Relief Working Group
- Credit Default Swap Working Group
- Financial Analysis Working Group
- Financial Guaranty Insurance Guideline Working Group
- Investments of Insurers Model Act Revisions Working Group
- NAIC/AICPA Working Group
- National Treatment and Coordination Working Group
- Rating Agency Working Group
- Restructuring Mechanisms for Troubled Companies Subgroup
- Accounting Practices and Procedures Task Force
- Capital Adequacy Task Force
- Examination Oversight Task Force
- Analyst Team System Oversight Working Group
- Financial Analysis Handbook Working Group
- Financial Analysis Research and Development Working Group
- Financial Examiners Coordination Working Group
- Financial Examiners Handbook Technical Group
- Risk Assessment Implementation Working Group
- IT Examination Working Group
- Receivership and Insolvency Task Force
- Reinsurance Task Force
- Risk Retention Group Task Force
- Valuation of Securities Task Force
The Capital and Surplus Relief Working Group met on June 13, during which it was reported that proposals Life 1a, Life 1c and Life 2 were adopted and will be advanced to the Life Insurance and Annuities (A) Committee. These proposals include changes to Actuarial Guideline 1C, as well as three model regulations: 1) Model Regulation Permitting the Recognition of Preferred Mortality Tables for Use in Determining Minimum Reserve Liabilities (#815) 2) Actuarial Opinion and Memorandum Regulation (#822) 3) Valuation of Life Insurance Policies Model Regulation (#830).
The NAIC/AICPA Working Group met on June 14, during which it was decided that proposed revisions to the Annual Financial Reporting Model Regulation (#205), also known as the Model Audit Rule, would be open for a 30-day public comment period. The annual review of premium threshold amounts included within the Model Audit Rule was performed and changes to the Annual Financial Reporting Model Regulation Implementation Guide were adopted.
The Restructuring Mechanisms for Troubled Companies Subgroup met on June 12, during which it agreed to provide draft unbiased text for the White Paper on Alternative Mechanisms for Troubled Companies within the next two weeks. Specific subject areas of concern include an additional explanation of Rhode Island Statute and Regulation for Voluntary Restructuring of Solvent Insurers and information on benefits, risk and controls for U.S. Claimants/Policyholders when a non-U.S. insurer restructures.
During its June 14 meeting, the Accounting Practices and Procedures Task Force discussed whether there was a need to provide guidance on re-securitization of residential mortgage backed securities ("Re-REMIC") transactions. Issue Paper Number 138-Fair Value Measurements, which proposes modified adoption of FAS 157, Fair Value Measurements (FAS-157) was issued for public comment. Matters to be considered at future meetings will include how to ensure that regulators are providing the minimum information on permitted-practice requests, the issue of state by state request tracking, and the best way to handle differences of opinion between domiciliary and non-domiciliary regulators regarding requests. Twenty-three blanks proposals were adopted at the meeting and eight proposals were submitted for public comment. The comment deadline on all new proposals is Aug. 21, 2009.
During its June 13 meeting, the Emerging Accounting Issues Working Group finalized the INT 09-04-Application of the Fair Value Definition (INT 09-04) proposal clarifying the application of the current definition of "fair value" within the Glossary to the NAIC Accounting Practices and Procedures Manual in certain situations. It also approved INT 09-03-EITF 08-7: Accounting for Defensive Intangible Assets (INT 09-03), which clarifies that defensive intangible assets are recognized as assets, but are non-admitted for statutory accounting and reporting purposes. The following Interpretations rejecting Generally Accepted Accounting Principles ("GAAP") guidance as not applicable were finalized: INT 09-01-EITF 07-4: Application of the Two-Class Method under FAS 128 to Master Limited Partnerships; and INT 09-02-EITF 07-5: Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entity's Own Stock.
The Statutory Accounting Principles Working Group met on June 13, during which it began development of a new SSAP to incorporate guidance from FSP FAS 115-2 and 124-2, but may reconsider this direction if it is determined that certain items are inappropriate for statutory accounting. SSAP No. 91R-Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (SSAP No. 91R) (Ref #2009-02) was adopted as Statutory Guidance. Revisions to this SSAP adopt guidance from FSP FAS 140-3: Accounting for Transfers of Financial Assets and Repurchase Financing Transactions, which provides accounting guidance for a transfer of a financial asset and related repurchase financing. Statutory Account Revisions rejecting GAAP guidance as Not Applicable in Issue Paper No. 99-Nonapplicable GAAP Pronouncements also were finalized.
The Capital Adequacy Task Force met on June 14, during which it adopted the Life RBC short-term mortgage experience adjustment factor proposal, the property Risk-Based Capital ("RBC") annual update of the underwriting risk industry factors and changes to the RBC for Health Organizations Model Act (#315). Changes to Medicare Part D factors for the health RBC calculations also were adopted.
The Life Risk-Based Capital Working Group of the Capital Adequacy Task Force met on June 12, during which it agreed to release a year-end 2009 proposal from the American Council of Life Insurers ("ACLI") regarding derivatives collateral, with comments due by June 27.
The Examination Oversight Task Force met on June 14, during which it adopted new guidance and tools related to IT reviews for inclusion in the Financial Condition Examiners Handbook. A survey regarding progress toward states' adoption of the revised Model Regulation to Define Standards and Commissioner's Authority for Companies Deemed to be in Hazardous Financial Condition (#385) was discussed.
The Receivership and Insolvency Task Force met on June 14, during which it discussed comment letters regarding solutions to address concerns with the timing and collection of reinsurance recoverables held by insurers in receivership.
The Reinsurance Task Force met on June 13, during which it discussed a proposed amendment to the Credit for Reinsurance Model Act (#785) that would provide a domiciliary commissioner with the authority to lower the minimum trusteed surplus requirement applicable to a multiple-beneficiary trust maintained by an assuming insurer in run-off (Tawa Proposal). NAIC staff was directed to initiate the consideration process under procedures for model law development necessary to consider amendments to the Credit for Reinsurance Model Law and/or the Credit for Reinsurance Model Regulation (#786) with respect to the Tawa Proposal, along with changes to the Model Act to be adopted uniformly by each state that chooses to seek certification as a home state supervisor of national reinsurers or port of entry supervisor as required under the proposed Reinsurance Regulatory Modernization Act of 2009.
The Risk Retention Group Task Force met June 13, during which it concluded that the third guideline under the Scheduling of Examinations Standard and the first three guidelines under the Information Sharing Standard are applicable to Risk Retention Groups. It also voted to publicly release the Part B: Information Sharing Standard summary memo and the Part C: Organizational and Personnel Practices Standards for a 30-day comment period. The Task Force concluded that the first three guidelines under the Information Sharing Standard should be applicable to captive Risk Retention Groups.
LIFE AND HEALTH ACTUARIAL TASK FORCE
The Life and Health Actuarial Task Force comprises the following Working Group:
Life and Health Actuarial Task Force
During its June 11 and 12 meetings, the Life and Health Actuarial Task Force adopted a revision to the Standard Valuation Law, with the recommendation that the law and the Valuation Manual be adopted together. The Task Force also adopted the Model Regulation Permitting the Recognition of Preferred Mortality Tables for Use in Determining Minimum Reserve Liabilities (Model Regulation #815), Actuarial Opinion and Memorandum Regulation (Model Regulation #822) and Valuation of Life Insurance Policies Model Regulation (Model Regulation #830). The Task Force released for comment the VM-20 section of the Valuation Manual and the 2010 GRET table.
During its June 11 meeting, the Accident and Health Working Group adopted an updated version of the Medicare Supplement Insurance Model Compliance Manual and requested an extension to work on the Medicare supplement refund formula in the Model Regulation to Implement the NAIC Medicare Supplement Insurance Minimum Standards Model Act. The Working Group formed three Subgroups: to review the Actuarial Opinion section of the health Annual Statement Instructions for 2010; to discuss long-term care provisions under the federal Pension Protection Act of 2006; and to study the issue of component rate increase analysis.
FINANCIAL STANDARDS AND ACCREDITATION COMMITTEE
The Financial Regulation Standards and Accreditation Committee met on June 13, during which it adopted the following: the release of 2008 revisions to the Model Regulation to Define Standards and Commissioner's Authority for Companies Deemed to be in a Hazardous Financial Condition for public comment during a one-year period; 2006 revisions to the Risk-Based Capital for Insurers Model Act as an amendment to the current significant element required for accreditation with an effective date of Jan. 1, 2012; immediate revisions to the Part A Receivership accreditation standard regarding state law and insurance companies found to be insolvent as set forth in the Insurer Receivership Model Act; 2006 revisions to the Annual Financial Reporting Model Regulation as new significant elements required for accreditation within the CPA Audits Part A standard with an effective date of Jan. 1, 2010; and new accreditation standards related to change in ownership and company licensing with an effective date of Jan. 1, 2012.
- Internal Administration Subcommittee
- Joint Property and Casualty Insurance and Market Regulation and Consumer Affairs Committees
- International Insurance Relations Committee
- NAIC/Consumer Liaison Committee
- NAIC/Industry Liaison Committee
- NAIC/State Government Liaison Committee
- SERFF Board of Directors
NAIC Industry Liaison Committee
The NAIC Industry Liaison Committee met on June 14, during which it discussed what constitutes insurance consumer protection; the role of insurance in society; the goals of insurance regulation; how to best ensure availability and affordability of regulation and what is effective and efficient; and what recent experiences with insurance regulation could best achieve the above-mentioned objectives, including experiences with insurance scoring, rate and form regulation, international developments, and solvency. Other issues addressed included NAIC meetings and stakeholders concerns, the NAIC rating agency proposal, the NAIC budget and looking at zero-based budgeting, and moving forward on cooperative efforts in disaster reporting.
NAIC/State Government Liaison Committee
The NAIC/State Government Liaison Committee met on June 13, during which it was joined by U.S. Representatives Robert Damron (KY), George Keiser (ND) and Brian Kennedy (RI). Federal activity related to systemic risk regulation was discussed. A review of the NAIC market conduct proposal emphasized the need to balance the concerns of industry with providing consumers information regarding market conduct.
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