On Tuesday, January 27, 2009, this author attended the NAIC Capital and Surplus Relief Working Group public hearing in Washington, D.C. The Working Group met to discuss its draft recommendations on nine insurance industry proposals offered by the ACLI designed to provide capital and surplus relief on life insurers’ December 31, 2008 statutory financial statements. One proposal offered by ACLI requested that regulators allow insurers to utilize the 2001 CSO Preferred Mortality Tables for contracts based on the 2001 CSO Mortality Table and issued prior to the January 1, 2007 effective date on which the Mortality Tables were set to become applicable. The Technical Group assigned to consider this proposal expressed concern that some companies may already be addressing the overly conservative reserves through a questionable reinsurance accounting practice. The Technical Group recommended that Insurance Commissioners consider requiring companies to demonstrate that they have not used such reinsurance accounting practices before allowing the company to utilize the new Mortality Tables. Another proposal related to collateral for reinsurance transactions. After spirited discussion among regulators, industry representatives, and consumer advocates, the Working Group formally approved each of its prior draft recommendations and forwarded its recommendations to the NAIC Plenary Body.
On Thursday, January 29, the NAIC Executive Committee held a teleconference vote on the proposals forwarded by the Capital and Surplus Relief Working Group. The Executive Committee, in a near unanimous vote, rejected the Working Group’s recommendations noting that neither the ACLI nor any insurance company provided sufficient information to justify enacting these proposals on an emergency basis.
The Executive Committee concluded that NAIC Working and Technical groups should continue to provide feedback and guidance during the current financial crisis. The Committee commented that companies should continue to work with their state regulators to maintain sufficient capital, and that the NAIC was open to considering these issues again in the future. Read the NAIC's release on the action.