The National Association of Insurance Commissioners (NAIC) held its Spring 2015 National Meeting in Phoenix, Arizona from 26–31 March 2015. Set forth below are highlights from the meetings of certain NAIC groups:
The Reinsurance Task Force received an update on the status of implementation by the states of the 2011 amendments to the NAIC Credit for Reinsurance Model Law and Credit for Reinsurance Model Regulation, which allow for non-US reinsurers that are highly rated and meet other criteria to become “certified” and therefore qualify to post less than the usually required 100% collateral for their US ceding companies to receive credit for reinsurance. Only 26 states (representing approximately 60% of direct written insurance premiums in the United States) have adopted these amendments thus far. Various parties (including reinsurers, trade groups and other regulators, especially from the European Union) have expressed frustration at the slow progress and lack of uniformity in the United States with respect to non-US reinsurers and have advocated entry into a “covered agreement” by the United States with other countries’ regulators on reinsurance matters. The US Treasury Secretary and the US Trade Representative could enter into covered agreements on behalf of the United States without involving the state insurance regulators. (On this issue, on 21 April 2015, the European Union gave a mandate to its executive European Commission to negotiate such a pact with the United States.)
The Cyber security Task Force held its inaugural meeting and considered its work plan. (See previous article regarding this task force’s work.)
Responses to International Developments
The International Insurance Relations (G) Committee and the ComFrame Development and Analysis (G) Working Group continue to monitor and assess development of global insurance capital standards and supervisory requirements. The NAIC is preparing position statements setting forth US insurance regulators’ views regarding the Common Framework for the Supervision of Internationally Active Insurance Groups (ComFrame) of the International Association of Insurance Supervisors’ (IAIS) as well as the development by IAIS of a risk-based global insurance capital standard (ICS) for internationally active insurance groups (IAIGs) and basic capital requirements (BCR) and higher loss absorbency (HLA) requirements for global systemically important insurers (G-SIIs).
The Private Equity Issues (E) Working Group adopted guidance to be included in the NAIC’s Financial Analysis Handbook regarding issues and considerations for insurance regulators when reviewing an application from a party seeking to acquire control of a domestic insurer. Although the guidance is not specific to private equity acquirers, it was developed due to concerns that were raised by insurance regulators when faced with private equity acquirers seeking to make insurance acquisitions particularly following the 2008 financial crisis.