Insurance Groups Want NAIC Panel to Use Existing Tools to Designate Groupwide Supervisors for International Groups
October 1, 2014 by Thomas Harman
WASHINGTON – Insurance industry groups want existing National Association of Insurance Commissioners’ guidelines to be part of proposed amendments to the Model Holding Company Act that would have states be groupwide supervisors for large international insurance groups.
The NAIC group solvency issues working group has exposed an initial draft, which is intended to become a new section within the NAIC’s Model Holding Company Act to establish a process for designating groupwide supervisors for international insurance groups. The action was prompted by urging from the International Association of Insurance Supervisors for the U.S. to have direct supervision over internationally active insurers.
Existing language concerning groupwide supervision is in the NAIC Financial Analysis and Examination handbooks that set forth principles for establishing groupwide supervision, but they are not in the formal Holding Company Model Law. State lawmakers would have to approve any changes made by the NAIC.
The working group’s draft is based on legislation passed by Pennsylvania lawmakers that gave the state the ability to act as a global groupwide supervisor (Best’s News Service, Aug. 18, 2014).
One joint comment letter from the National Association of Mutual Insurance Companies, the Property Casualty Insurers Association of America and the BlueCross Blue Shield Association said the existing Model Holding Company Act has served U.S. policyholders well in providing group-level oversight tools, such as supervisory colleges for international groups and the enterprise risk reports that address group-level risk. If the working group amends the Holding Company Act, “we believe that utilizing existing regulatory designations and tools would be most efficient,” the letter said.
Steve Broadie, the PCI’s vice president of financial policy, said the NAIC draft and the Pennsylvania law go a little too far. The industry groups want the working group to change draft language that the industry believes would allow states to take extraterritorial action by being groupwide supervisors in other jurisdictions. “We question whether or not that’s legal,” he said.
Also, the groups proposed revisions to the working group’s draft that would include procedures that are part of the NAIC’s Financial Analysis Handbook as acceptable in choosing a lead state regulator. “Adding a new designation without connecting it to the lead state regulator will only serve to create confusion in the U.S. over group supervision responsibilities,” the letter said.
And the groups seek to include provisions that would protect existing groupwide supervisor designations for groups domiciled outside the U.S. Specifically, the groups seek language that would prohibit states from challenging a groupwide supervisor’s authority in an overseas jurisdiction.
Finally, the groups seek to clarify the groupwide supervisor role to be that of a facilitator coordinating activities among domiciliary supervisors. This would be an alternative to compelling action on the part of group members over which the group-wide supervisor does not have jurisdiction, the letter said.
The American Council of Life Insurers also supports the current regulatory approach regarding the commissioners’ authority to conduct groupwide supervision activities, “emphasizing coordination and collaboration among involved supervisors to facilitate a desired outcome, as distinguished from attempting to compel action that would require extra-territorial supervisory powers,” wrote ACLI Senior Counsel Kelly Ireland.
The ACLI comments proposed changes that would use the definition of IAIGs set by the IAIS’ Common Framework for the Supervision of Internationally Active Insurance Groups, instead of using the NAIC’s definition of “international insurance groups,” the letter said. “Given this well-established and broadly supported definition of IAIGs, we believe it is appropriate to apply group-wide supervision to the set of companies meeting the ComFrame standard,” Ireland wrote. The ACLI got support on this point from comments submitted by the Reinsurance Association of America.