Regulatory Update: NAIC Spring 2021 National Meeting
1. NAIC Exposes Amendments to the Insurance Holding Company System Model Act to Add the Group Capital Calculation and Liquidity Stress Test as Accreditation Standards
During the Spring Meeting, the Financial Regulation Standards and Accreditation (F) Committee voted to expose a referral from the Financial Condition (E) Committee to add the NAIC’s recently adopted group capital calculation (GCC) and liquidity stress test (LST) to the NAIC’s accreditation program standards.
2. NAIC Continues Discussion on Amendments to the Purposes and Procedures Manual to Require the Filing of a Private Letter Rationale Report for Privately Rated Securities
The Valuation Securities (E) Task Force (VOS Task Force) continued to discuss comments on a proposed amendment to require the filing of private rating letter rationale reports with the Securities Valuation Office (SVO) for privately rated securities. The rating rationale report would be provided along with the private letter rating to furnish the SVO with a better understanding of the security and a more in-depth analysis of the transaction structure and methodology used to arrive at the private rating.
3. NAIC Continues Discussion of Proposed Revisions to Statements of Statutory Accounting Principles
The Statutory Accounting Principles (E) Working Group (SAP Working Group) continued its ongoing work related to the following Statements of Statutory Accounting Principles (SSAPs): SSAP No. 25 — Affiliates and Other Related Parties; SSAP No. 71 — Policy Acquisition Costs and Commissions; and SSAP No. 43R — Loan-Backed and Structured Securities while also considering new issues related to disclosure of pension risk transfer and registered indexed linked annuity transactions and the treatment of cryptocurrencies as admitted assets.
4. NAIC Continues Efforts to Address Innovation and Technology in the Insurance Sector
Several NAIC task forces and working groups are evaluating the intersection of technology and insurance, including in the areas of the use of predictive modeling in rate filings by property and casualty insurers, the application of antirebating laws, and the application of e-commerce laws.
5. NAIC Disbands Annuity Disclosure (A) Working Group
During the Spring Meeting, the NAIC decided to terminate efforts to revise the Annuity Disclosure Model Regulation (Model 245) to impose additional restrictions on indices used in annuity illustrations. Accordingly, the Annuity Disclosure (A) Working Group (ADWG), which was charged with drafting such revisions, was disbanded.
6. Receivership Law (E) Working Group Adopts Amendments to Insurance Holding Company Act to Ensure the Continuity of Essential Services and Functions for Insurers in Receivership
The Receivership Law (E) Working Group adopted amendments to Model 440 and the Insurance Holding Company System Model Regulation with Reporting Forms and Instructions (Model 450), which are intended to ensure the continuity of essential services and functions provided by affiliates for insurers in receivership.
7. Long-Term Care Insurance (EX) Task Force Exposes Operational Sections of Long-Term Care Insurance Multistate Rate Review Framework
The Long-Term Care Insurance (EX) Task Force exposed sections of a draft long-term care insurance (LTCI) multistate rate review framework for a 45-day public comment period ending May 24, 2021. The framework is intended to institutionalize a voluntary multistate actuarial (MSA) LTCI rate review process that produces nationally consistent rate recommendations in the form of an MSA Advisory Report for the benefit and use of all state insurance departments. The framework is divided between operational and actuarial aspects.
8. NAIC Continues Development of the Pharmacy Benefit Manager Licensure and Regulation Model Act
During its conference call on March 18, 2021, the Regulatory Framework (B) Task Force adopted the Pharmacy Benefit Manager Licensure and Regulation Model Act (PBM Model), which was then forwarded to the Health Insurance and Managed Care (B) Committee ((B) Committee) for consideration. At the Spring Meeting, the (B) Committee deferred adoption of the PBM Model.
9. NAIC Adopts the Real Property Lender-Placed Insurance Model Act
The Executive (EX) and Plenary Committee adopted the Real Property Lender-Placed Insurance Model Act (the LPI Model Act), which the Property and Casualty Insurance (C) Committee adopted at the 2020 Fall National Meeting. The LPI Model Act establishes a legal framework within which lender-placed insurance on real property (LPI) may be written in a state and includes provisions to (i) maintain the separation between mortgage lenders and servicers, on the one hand, and insurers and insurance producers, on the other hand, and (ii) minimize the possibilities of unfair competitive practices in the sale, placement, solicitation, and negotiation of LPI.
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