Crucial conversations about climate risks, coverage gaps, and more

With insurance regulatory compliance in mind

The NAIC meeting agenda was packed with presentations and opportunities to explore topics of nationwide importance, including climate risk, coverage gaps, and market solvency—all reflecting the evolving challenges faced by the insurance industry. Despite Chicago’s bustling preparations for an upcoming national political convention, the focus of the NAIC meeting remained steadfast on developing new model laws in areas such as privacy protections. Work on model laws and guidance aims to address the dynamic and increasingly complex data use marketplace. The regulators underscored the necessity of taking the requisite time to craft effective and comprehensive model laws or frameworks in various arenas while moving ahead in an efficient manner. The goal of the state regulatory working groups is to ensure that any new models or guidelines are capable of addressing the multifaceted issues that the industry faces and meet the moment. The national meeting overall highlighted state insurance regulators’ collaborative spirit and commitment to developing policies that can withstand the test of time and changing market conditions.

Developing a framework for third-party data and predictive model oversight

At the meeting, significant attention was given to the oversight of third-party data and models, spearheaded by the Third-Party Data and Models (H) Task Force. This task force is dedicated to exploring regulatory approaches to ensure the integrity and reliability of actuarial and market conduct data. The discussions underscored some views that robust data governance frameworks might be necessary to manage the increasing reliance on third-party data sources and models within the insurance industry.

Concurrently, the NAIC meeting held a session that addressed cyber risks with discussions by stakeholders on the cyber insurance market, standardizing policies, and considering a federal backstop for catastrophic attacks. The discussions highlighted the need to address vulnerabilities in outdated mainframes and legacy systems, with industry representatives advocating for leveraging technology to reduce risks and engaging in meaningful dialogues with reinsurers and the federal government for potential support.

Collective actions to address insurance market vulnerabilities

• Climate risk: Sessions focused on the economic, consumer, and insurance market impact of weather and climate disasters on homeowners insurance, discussing market stabilization in Florida, the benefits of investing in climate resilience, and preventing post-disaster fraud.
• Mitigation strategies: Insurers are leading efforts to enhance community resilience through collaborations with policymakers on infrastructure improvements, wildfire solutions, stronger building codes, land use policies, and funding research into risk mitigation.
• Addressing affordable coverage issues: Policymakers, specialists, and regulators debated what constitutes affordable coverage in the property market and discussed how to balance consumer cost reduction while ensuring insurers remain in the market.
• NAIC and FEMA collaboration: The Catastrophe Insurance (C) Working Group and the NAIC/FEMA Advisory Group discussed updates on the NAIC Catastrophe Modeling Center of Excellence (COE) Resilience Hub and solutions to weather-related policy issues.
• Financial inclusion and barriers: The NAIC Center for Insurance Policy and Research (CIPR) session examined the escalating costs of homeowner property insurance, regional premium hikes, the influence of inflation, and regulatory strategies for making insurance affordable.

Bridging regulatory gaps in international insurance

The NAIC is actively addressing the complexities of cross-border insurance regulation, preparing for a more cohesive solvency approach to international insurance markets. The discussions sought to emphasize the importance of harmonizing regulatory frameworks to ensure consistent oversight and consumer protection across different jurisdictions. These discussions foretell more work on aligning standards for solvency, market conduct, and data privacy to facilitate smoother operations for insurers operating in multiple countries.

Additionally, the NAIC continues to participate in workstreams with international regulatory bodies to share best practices and develop common guidelines. By fostering a collaborative environment, the NAIC seeks to streamline regulatory processes, reduce compliance burdens for insurers, and ultimately provide better protection for policyholders worldwide.

Focusing on the future

The NAIC will assemble again for its last national meeting of 2024 November 16–19 in Denver, Colorado. In the interim, work from the Chicago meeting will continue through virtual calls and stakeholder comments. Despite potential shifts in federal regulatory priorities due to the national election, the NAIC’s focus on privacy protections, third-party data oversight, and climate risk measurement will persist. The organization aims to modernize its solvency oversight framework to better support state regulators, with solvency and consumer protection remaining central to its mission.