Regulatory Update: NAIC Spring 2022 National Meeting
The newly formed Innovation, Cybersecurity and Technology (H) Committee ((H) Committee) held its first public meeting at the Spring Meeting. The (H) Committee discussed changes to certain working group reporting structures and new initiatives, including the following: (a) going forward, the Privacy Protections (D) Working Group will report to the (H) Committee rather than the Market Regulation and Consumer Affairs (D) Committee ((D) Committee); (b) the (H) Committee has created a new Collaboration Forum and determined that its first project will cover algorithmic bias; and (c) the (H) Committee appointed a new working group, the Innovation in Technology and Regulation (H) Working Group and adopted its proposed charges.
The Statutory Accounting Principles (E) Working Group (SAP Working Group) continued its ongoing work on a principle-based bond definition as well as on revisions to the following Statements of Statutory Accounting Principles (SSAPs): SSAP No. 26R—Bonds (SSAP No. 26R), SSAP No. 43R — Loan-backed and Structured Securities (SSAP No. 43R), and SSAP No. 25 — Affiliates and Other Related Parties (SSAP No. 25). The SAP Working Group also adopted an agenda item proposing to add a new general interrogatory to require disclosure related to cryptocurrencies.
3. NAIC Continues its Review of Private Equity Ownership in the Insurance Industry
The Financial Stability (E) Task Force and Macroprudential (E) Working Group met in a joint session during the Spring Meeting to discuss regulator comments on the Regulatory Considerations for Private Equity (PE) Owned Insurers (List of PE Considerations), which was previously adopted by the Financial Stability (E) Task Force during its February 22, 2022, conference call.
During its joint meeting, the Macroprudential (E) Working Group and Financial Stability (E) Task Force adopted the Macroprudential Risk Assessment process document, which was developed by the Macroprudential (E) Working Group to set forth the process for conducting the NAIC’s Macroprudential Risk Assessment as a component of the NAIC’s overall efforts to enhance regulators’ ability to monitor industry trends.
The Receivership and Insolvency (E) Task Force is considering amending the Property and Casualty Insurance Guaranty Association Model Act (#540) (Guaranty Association Model Act) to address the effect of certain restructuring mechanisms on the availability of guaranty association coverage.
At the Spring Meeting, the Executive (EX) Committee adopted the proposed redesigned NAIC Climate Risk Disclosure Survey (Climate Risk Disclosure Survey) as a voluntary tool for state use. The purpose of the redesign was to make the Climate Risk Disclosure Survey consistent with the international Task Force on Climate-Related Financial Disclosures (TCFD).
The NAIC has previously expressed concern that credit rating provider (CRP) ratings do not adequately represent the risks of privately issued securities purchased by insurers, which can affect an insurer’s RBC calculation, resulting in lower RBC charges for higher-risk investments. In an effort to address the concern, current NAIC activities include (a) exposure for comment of a proposed referral to the Blanks (E) Working Group to include additional market data fields for bond investments on insurers’ statutory financial statements and (b) formation of an ad hoc CRP study group (CRP Study Group).
During the Spring Meeting, the Executive (EX) Committee and Plenary adopted the Long-Term Care Insurance Multistate Rate Review Framework (LTCI MSA Framework), which was previously adopted by the Long-Term Care Insurance (EX) Task Force at the NAIC’s Fall 2021 National Meeting (Fall 2021 Meeting). The LTCI MSA Framework is intended to provide a consistent national approach for reviewing current long-term-care insurance rates that results in actuarially appropriate increases being granted by the states in a timely manner and eliminates cross-state rate subsidization. The LTCI MSA Framework is expected to become fully operational by September 2022.
At the Spring Meeting, the Life Insurance and Annuities (A) Committee adopted the Accelerated Underwriting in Life Insurance Educational Report (Educational Report), which was adopted by the Accelerated Underwriting (A) Working Group on March 24, 2022. The Educational Report summarizes the current state of the life insurance industry with regard to its use of accelerated underwriting, contextualizes that summary and the topic of accelerated underwriting within the NAIC’s work and standard regulatory product evaluation processes, and makes recommendations for regulators and insurers when evaluating accelerated underwriting.
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