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Analysis

NAIC update: Summer 2018

Regulators ending pre-arbitration meetings, make quiet progress

The National Association of Insurance Commissioners (NAIC) 2018 Summer National Meeting in Boston was a time of quiet progress, as committees focused on priorities set earlier in the year and worked toward their resolution at the fall meeting.

NAIC national meeting update

The city that calls itself the hub of the universe was the hub of the insurance universe for four days this summer. The National Association of Insurance Commissioners (NAIC) held its 2018 Summer National Meeting in Boston on August 4-7. It was a time of quiet progress, marked by concentrated work by the committees, but little glamour.

The biggest single event at the meeting was the adoption of a bulletin banning pre-dispute mandatory arbitration and choice of venue and law clauses in personal lines contracts. Parties can still arbitrate “after the dispute arises.” This development is perceived as being a clear victory for consumers.

Life insurance sales is another area where change may be on the horizon, as the life insurance and annuities committee agreed to discuss the possibility of new standards for life insurance sales as soon as new standards for annuity sales are complete.

Committees continued to work on long-term rate setting methods, a group capital calculation for US insurers, and revisions to the credit for reinsurance models. While new issues were few, climate change held the spotlight and cannabis earned its own working group.

Differences over group capital calculation

At the Group Capital Calculation Working Group meeting, members continued their efforts to develop a group capital metric for US insurance groups, as industry representatives asked for a process that is more principles-based and less prescriptive. Topics discussed included the need to move forward with field testing, the covered agreement between the US and the EU, and a property-casualty trades memo calling for viewpoints on including or excluding a materiality threshold. After hearing many different perspectives, a memorandum on the scope of the group was exposed for a 45-day public comment period.

Photo courtesy of the NAIC

Climate change risk discussion heats up

The increasing significance of climate change and the importance of addressing associated financial risks were evident at the meeting of the Climate Change and Global Warming working group. Principals for Responsible Development (PRI) presented recommendations on developing a framework for disclosing climate-related financial information and making lending, investment or insurance underwriting decisions based on exposure. Core elements of disclosure are governance, strategy, risk management, and metrics and targets. While numerous insurers have already signed up to participate, there is a five-year time frame for implementation of these recommendations.

Photo courtesy of the NAIC

Auto insurance study raises hackles

The Auto Insurance (C/D) working group provided a lively debate over the collection and distribution of data analyzing the availability and affordability of auto insurance. Currently, data received from statistical agents is analyzed using business intelligence software to look at several factors, including coverage, frequency, and severity of incidents. As the regulators discussed the difficulty of measuring affordability, concerns were raised about raw data not being made available for public review. Trade group representatives countered that the raw data was incomplete and a high possibility of misuse exists without being put into proper legal and regulatory context.

Photo courtesy of the NAIC

Reinsurance model revisions on track for fall adoption

The task force discussing exposed revisions to the reinsurance regulations heard a number of concerns expressed, including the use of commissioner discretion, possible discrimination against some none-EU qualified jurisdictions, and mechanics, including inconsistent requirements. A representative from the US property/casualty asked for a broader recognition of the US system, and not just for group capital. All in all, the task force’s work thus far was considered “mission accomplished” and a revised regulations will be delivered for approval at the fall meeting.

Photo courtesy of the NAIC

Read the complete NAIC summer update

These are just some of the issues addressed at the NAIC summer conference in Boston. Read Deloitte’s comprehensive meeting update, which also includes a detailed summary of the actuarial, accounting, and reporting changes discussed, adopted, and exposed during the summer meeting and interim conference calls. NAIC members will move these issues forward at the last national meeting of year in San Francisco, November 15-18, 2018.

NAIC update collection

Need to catch up on the NAIC’s priorities and progress? Explore Deloitte’s collection of NAIC meeting updates.

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