NAIC update: Spring 2018

NAIC meeting update

The National Association of Insurance Commissioners (NAIC) held its 2018 Spring National Meeting in Milwaukee, Wisconsin March 24‒27. Outside the Wisconsin Convention Center, the recent court decision blocking implementation of the Department of Labor’s (DOL) fiduciary rule for retirement products and a rising bipartisan effort to amend the Dodd-Frank Act sowed uncertainty about federal regulatory policy. But inside the center’s walls, commissioners remained focused on plans and priorities for moving forward.

In her opening statement NAIC President Tennessee Commissioner Julie Mix McPeak recognized the opportunity that changes in federal policy could create for state regulators. “In a variety of ways, the federal government has now endorsed the primacy of state regulation for insurance and identified areas where the federal government should more clearly defer to states. As they step back, the states must step forward to fill the voids.”¹

And while agreement on what actions states should take in response was lacking at least for now, members did coalesce on the future direction of NAIC. Its three-year strategic plan, State Ahead—described as being driven by data and technological changes—and its 2018 fiscal plan counterpart were unveiled and discussed. The hope is that these plans will equip NAIC to provide the resources necessary for members to enhance their regulatory through the application of new technologies.

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Group capital calculation discussions progress

In addition to these planning accomplishments, work continued on other fronts at the NAIC national meeting. At the Group Capital Calculation Working Group meeting, members discussed the proposed treatment of nonregulated entities in the group capital calculation and the potential scope of that calculation. Topics discussed included the treatment of asset managers and registered investment advisors in the proposal, application of the risk-based capital (RBC) charge, and adherence to regulatory frameworks and standards. After hearing many different perspectives, a memorandum on the scope of the group was exposed for a 45-day public comment period.

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New course of action for best interest rule

In follow-up to the Fifth Circuit Court of Appeals striking down the DOL’s fiduciary rule on certain retirement products, the Annuity Suitability Working Group met to discuss the potential impact on its own best interest rule for annuity sales. Numerous speakers agreed that the NAIC could now take a leadership role in creating a new standard, working with the Securities and Exchange Commission (SEC). Working Group Chair Idaho Commissioner Dean Cameron said he was reopening the comment period on the current chairman’s draft and model act for 30 days. The NAIC leadership is then hoping to hold a face-to-face meeting so they can create a document for meeting with the SEC, which is preparing its own rule on the subject.

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Reinsurance adapts to covered agreement

Reinsurance industry discussions focused mainly on the effect of the US-EU covered agreement and follow-on steps from the February 2018 public hearing on the agreement. Among other measures, the task force submitted a memorandum for a model law request and several new charges. Many parties recommended amendments to the credit for reinsurance models to allow for the same treatment of EU and non-EU qualified jurisdictions. The proposed model law would reflect this approach. The goal is to develop a draft for the summer meeting, with possible adoption by the NAIC fall national meeting.

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Long-term care pricing increases spark debate

Regulators on NAIC’s long-term care (LTC) insurance task force were called on to provide actuarially justified increases for LTC products so companies can stay financially healthy. This has been a troubled marketplace, with concerns over the status of some blocks of business. LTC was developed and offered under the assumption that rate increases would be approved if the experience developed adversely, explained representatives of two industry associations. They asked that LTC rate increases be approved based on the actuarial analysis and not linked to an insurer’s overall corporate health. They called for regulators and actuaries to work together to propose common tenets to apply to the LTC rate increase process nationally.

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Read the complete NAIC spring update

These are just some of the issues addressed at the NAIC spring meeting in Milwaukee. 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 spring meeting and interim conference calls. NAIC members will work to move these and other issues forward at the next national meeting in Boston this coming August.

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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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¹The Honorable Julie Mix McPeak, “Opening session: states marching ahead,” National Association of Insurance Commissioners, March 25, 2018, http://www.naic.org/meetings1803/dn_opening_session.htm.