Insurance Groups Watching Talks on Capital Standards, Groupwide Supervision, Market Conduct at NAIC Fall Meeting
November 4, 2014 by Thomas Harman
WASHINGTON – Efforts to give states groupwide supervision authority over large international insurance groups, discussions toward a U.S. response to the call for an international capital standard, and the work of a new market conduct accreditation panel are will be on the radar of those attending the National Association of Insurance Commissioners’ Fall National Meeting.
The NAIC group solvency issues working group continues to discuss a draft document that would amend the NAIC’s Model Holding Company Act by allowing states to be groupwide supervisors of large international insurance groups (Best’s News Service, Oct. 29, 2014). The working group has scheduled a Nov. 7 conference call on the amended draft. Panel Chairman Danny Saenz said he hopes to send a final version to the Financial Condition Committee for approval during the Washington meeting.
The NAIC panel should be careful in drafting any group supervision document not to “load onto companies any additional layers of regulations. Consumers are best served with cost-effective approaches,” said David Snyder, vice president, international policy at the Property Casualty Insurers Association of America.
Adam Kerns, assistant general counsel at the American Insurance Association, told Best’s News Service a group supervision document possibly could be exposed for comment during the Washington meetings. Much will depend on the final draft, he said. “It might be close to something everybody could live with,” he said.
One of the more anticipated meetings is expected to occur at the ComFrame Development and Analysis Working Group, said Steve Broadie, PCI’s vice president of financial policy. The working group is expected to discuss developments toward a plan involving an international global capital standard proposed by the International Association of Insurance Supervisors.
The IAIS recently issued a new basic capital calculation ratio for nine insurance companies deemed too big to fail. But the IAIS is considering an additional capital standard that would apply to all internationally active insurance groups, an issue insurance industry officials said would have an even greater market impact (Best’s News Service, Oct. 23, 2014).
The IAIS held private talks about what the international capital standard, including development of some preliminary guidance document to develop one, said Phil Carson, AIA’s associate general counsel. He said the insurance industry is working on its own proposal as to what a possible ICS should look like in order to help equip the NAIC, the Federal Insurance Office and the Federal Reserve in talks with the IAIS. He said talks at the NAIC International Insurance Relations Committee meetings should feature discussion about what the IAIS actually means and expects from participants.
Also, the new market conduct accreditation working group continues initial work on standards for regulators to use when performing insurer examinations. Initial meetings have been held by conference call since August. The panel appears ready to provide an initial draft document said Lisa Brown, AIA senior counsel and director, compliance resources. “We anxiously anticipate an unveiling and look forward to the opportunity to study and comment,” Brown said.
She said the NAIC panel appears to be the path toward creating uniformity. An earlier attempt by the NAIC to create accreditation standards bogged down when the product became too complex. Brown said the first document is likely to serve as a framework for future details on implementation and how the standards are monitored following implementation.
The NAIC Governance Review Task Force is working on hiring an outside consultant to review the body’s corporate governance practices. The NAIC formed the task force to address the issue and it had made a recommendation to seek out an outside consultant. Connecticut Commissioner Thomas Leonardi and others objected at the NAIC Louisville meetings over a move by NAIC leadership to form a separate panel that would conduct interviews, but an attempt to abolish the new panel was rejected by the task force (Best’s News Service, Aug. 18, 2014). The new panel initially was expected to make a choice for its consultant as soon as late September, but as of Oct. 30, the NAIC said in an email that no choice had been made and that an update on the matter is expected during the Washington meetings.