The National Association of Insurance Commissioners (NAIC) held its 2016 Spring National Meeting from April 1 through April 6 in New Orleans, Louisiana. As host, Louisiana provided beautiful weather and bountiful great food. The Spring National Meeting was also highlighted by spirited discussions regarding cybersecurity and big data, further consideration of the Credit for Reinsurance Model Regulation, and the potential achievement of an important milestone on the path to the implementation of Principle-Based Reserving (PBR). 

The following are some highlights from the Spring National Meeting. We do not cover every meeting in this report; rather, we comment on select noteworthy developments and matters of interest to our clients. 

1. Cybersecurity

2. Big Data
3. Issues of Particular Interest to Property and Casualty Insurers
   1. Terrorism Insurance Market Data Calls
   2. Workers’ Compensation (C) Task Force
   3. Flood Insurance
   4. Price Optimization White Paper
4. Issues of Particular Interest to Life Insurers
   1. Credit for Reinsurance Model Regulation 
   2. Adoption of Certified Reinsurance Requirements as an Accreditation Requirement
   3. PBR Update
   4. Life Insurance and Annuities (A) Committee
   5. Privacy
5. International Issues
   1. Group Capital Calculation (E) Working Group
   2. IAIS Relationship
6. Updating RBC Factors for Bonds and Common Stock
7. ORSA Summary Report/Form F Survey 
8. Briefly Noted
   1. DOL Fiduciary Rule
   2. Issues Related to Seniors
   3. Removal of MetLife’s SIFI Designation
   4. Commissioner Departures
   5. 2020 NAIC National Meeting Sites

1. Cybersecurity

A highlight of the Spring National Meeting was a spirited discussion at the Cybersecurity (EX) Task Force meeting regarding the controversial first draft of the Insurance Data Security Model Law. The draft is intended to establish “the exclusive standards for data security and notification of a breach of data security” applicable to insurance licensees within a particular state. It would require licensees to: (1) develop a comprehensive written information security program containing safeguards for the protection of personal information; (2) provide consumers with information regarding the types of personal information collected and stored by the licensee and third-party service providers it contracts with; and (3) provide regulators, affected consumers, and other parties with notice regarding data security breaches that are “reasonably likely to cause substantial harm or inconvenience to the consumers to whom the information relates.” 

The Task Force solicited comments on the draft through March 23. Due to the large number of persons interested in offering oral comments during the meeting, comments were limited to three minutes each. 

Industry representatives noted multiple major concerns with the draft and requested an open dialogue moving forward and an opportunity to work through the issues in a deliberate manner. Specific concerns were expressed regarding the information security program requirements, the breach notification provisions, and the definitions of “licensees” and “personal information.” Consumer representatives, on the other hand, seemed impressed with the proposal, with the Center for Economic Justice noting that the proposal goes a long way toward establishing a “best practices” approach to regulating cybersecurity issues. 

Despite extensive industry criticism of the draft, the Task Force intends to proceed quickly toward adoption of the Model Law given the importance of cybersecurity issues. Task Force Chair Adam Hamm from North Dakota, who would like the Model Law to eventually be an accreditation requirement, noted that the Task Force would “run a marathon as quickly as possible” in order to secure passage in 2016. He also noted in a meeting of the NAIC’s Executive Committee that he hopes the Model Law will be presented to the Executive (EX) Committee and Plenary at the NAIC’s Summer National Meeting so that states can put the Model Law in their legislative packages for 2017. 

2. Big Data 

Another highlight of the Spring National Meeting was a public hearing held by the Big Data (D) Working Group regarding the use of “big data” in the insurance industry. Although an official definition of “big data” has not been agreed upon by regulators, the term refers generally to the use of large data sets to discern patterns or trends that can be used by insurers in a variety of ways, including to market, price and underwrite policies and prevent fraud. 

The hearing was viewed as a first step for the Working Group in obtaining a broad understanding of how big data is used in the insurance industry, the potential positive and negative impacts on consumers, and how state insurance regulators can use big data to enhance the efficiency and effectiveness of insurance regulation. 

The Working Group heard presentations from panels representing academic, industry, consumer and state insurance regulator perspectives on big data. Howard Weston, an associate professor at Georgia State University, represented the academic perspective and opened the panel by discussing the lack of a consensus definition for big data and ethical parameters regarding its use. 

Industry representatives extolled the benefits of giving insurers wide latitude to use big data, citing its value in preventing fraud, improving the efficiency and decision-making of the underwriting process, and increasing the affordability of insurance products. They also expressed concern about the prospect of increased regulation. David Snyder of the Property Casualty Insurers Association of America (PCI) noted that a good balance has now been achieved with regulators and expressed concern that enhanced regulatory action could result in consumers moving to unregulated products. 

Consumer representatives, in contrast, highlighted the need for proactive regulation. Brenda Cude, a Professor at the University of Georgia, noted that the traditional NAIC approach of requiring increased disclosure to consumers will not be sufficient to regulate big data because consumers are not aware of all the activities they undertake that generate information used by insurers. On a similar note, Birny Birnbaum of the Center for Economic Justice observed that market forces will not protect consumers from unfair practices relating to big data, adding that regulatory involvement can both promote competition and protect consumers. He is recommending that regulators create a template to collect information from insurers regarding the types of big data that they use. 

The state insurance regulator panel included a presentation by Angela Nelson, Missouri’s Director of Market Regulation, regarding the use of big data by regulators in market conduct and other analytic exercises, followed by a presentation by Mike McKenney, Pennsylvania’s Actuarial Supervisor, who posed key questions regarding the use of big data by the industry touching on such topics as whether big data will be sold to third parties and the degree of faith being put into data modelers. The panel concluded with a presentation by Joel Laucher, California’s Deputy Commissioner of Rate Regulation, in which he highlighted key concerns with the use of big data by insurers, including the transparency of such use, the potential for disparate impact of low-income or disadvantaged populations, and the potential for dramatic changes in rates due to a single change in a consumer’s risk profile (referred to as the “whipsaw effect”). 

View the agenda for the public hearing and the related meeting materials.

3. Issues of Particular Interest to Property and Casualty Insurers

1. Terrorism Insurance Market Data Calls

The Terrorism Insurance Implementation (C) Working Group heard a report on the data calls to be made by participating states to collect countrywide data on terrorism risk insurance. The data calls will be made by 12 states (including Delaware, which volunteered to be added as the twelfth state during the meeting) where most of the companies writing this type of coverage are located. The first part of the state data call was to begin collecting workers’ compensation data in April, while the second part of the data call will collect commercial lines data during the fall.

As previously reported, the Federal Insurance Office (FIO) is separately undertaking a data call pursuant to Section 111 of the Terrorism Risk Insurance Program Reauthorization Act of 2015 (TRIPRA) (which reauthorized the Terrorism Risk Insurance Act (TRIA) through 2020), which requires Treasury to collect data beginning in 2016 and to provide an annual report to Congress on the state of the terrorism insurance market and the effectiveness of the TRIA program. The state data call is expected to be more detailed in nature than the FIO data call, except that the FIO data is more granular with respect to reinsurance matters. The Working Group intends to share any data it receives with FIO. 

The Working Group also heard a report from NAIC staff on various federal activities, including: (1) a Federal Register notice requesting comments on the effectiveness of the Terrorism Risk Insurance Program in order to help the FIO prepare its report for the U.S. Congress; (2) a notice of proposed rulemaking to implement changes to the Terrorism Risk Insurance Program; and (3) the first meeting of the Treasury Department’s Advisory Committee on Risk-Sharing Mechanisms. 

2. Workers’ Compensation (C) Task Force

The Workers’ Compensation (C) Task Force received a report from the Joint (C) NAIC/IAIABC (International Association of Industrial Accident Boards and Commissions) Working Group on the Large Mega/Deductible Study. 

As previously reported, the study is an update to the 2006 Workers’ Compensation Large Deductible Study that was prompted when, after the Nevada Insurance Department observed a trend in late 2014 toward the use of very large deductibles by employers in its state, the NAIC conducted a brief survey of states and determined that very few states maintained records of accounts written with large deductibles. Among other objectives, the study aims to serve as a resource to insurers, third-party administrators (TPAs), professional employer organizations (PEOs), guaranty associations and regulators showing how large deductible policies work and special issues that can arise with them. 

Sixty-eight comments were considered during the drafting phase, and an executive summary and recommendations were added to the draft. The comment period for the paper expired on April 11. Following such expiration, additional editorial changes (where appropriate) were expected to be made and the task force expected to conduct a conference call to formally adopt the paper before recommending its adoption by the NAIC’s Property and Casualty Insurance (C) Committee. 

3. Flood Insurance

The Property and Casualty Insurance (C) Committee held a panel discussion regarding potential reforms to the National Flood Insurance Program (NFIP), which is scheduled to be reauthorized in 2017. Participants in the panel expressed support for reauthorization and discussed the prospect of the eventual transfer of risk in the market to private insurance markets. Earlier in the meeting, the Committee adopted a revised proposed Blank related to the collection of private flood insurance data. The proposal would collect data on private insurance policies separately from those that are part of the NFIP and is expected to be useful to regulators and policymakers when evaluating potential reforms to the NFIP. 

4. Price Optimization White Paper

The NAIC’s Executive (EX) and Plenary adopted the Price Optimization White Paper drafted by the Casualty Actuarial and Statistical (C) Task Force. A summary of recent price optimization developments can be found at: Sutherland Legal Alert: Price Optimization: 2015 Year in Review and Look Ahead. As previously reported, the purpose of the White Paper is to aid state regulators in making decisions about actions to take regarding the use of price optimization by personal lines property and casualty insurers. It provides background on what price optimization is and how it compares to traditional ratemaking, and it identifies potential benefits and drawbacks to the use of price optimization and makes recommendations to regulators. 

4. Issues of Particular Interest to Life Insurers

1. Credit for Reinsurance Model Regulation

The Reinsurance (E) Task Force discussed comments received on the draft of the XXX/AXXX Credit for Reinsurance Model Regulation exposed on February 26. The draft had previously been subject to a 30-day comment period ending on March 27, during which the Task Force received written comments from regulators and other interested parties.

Meeting participants discussed two key issues related to the proposed regulation. First, under the proposed draft, insurers who fail to remediate shortfalls in Primary or Other Security are denied all reinsurance credit (the “all or nothing” consequence). The severity of this measure was intended to provide insurers with a strong incentive to meet the regulation’s Primary Security requirement, but a few regulators now seem open to an alternative approach. The Vermont Department of Financial Regulation, for example, issued a comment letter before the Spring National Meeting indicating that it had changed its mind on the issue and now feels that a “proportional” approach (credit for reinsurance is reduced by a proportional percentage of the shortfall in the required level of security) is more appropriate than an “all or nothing” approach if there is a shortfall in Other Security. Industry representatives are also divided on the issue; the American Council of Life Insurers (ACLI) has proposed an approach using the proportional approach for shortfalls in Primary Security and a “dollar for dollar” option for shortfalls in Other Security (credit for reinsurance is reduced dollar for dollar by the shortfall), while Northwestern Mutual and New York Life both support the “all or nothing” consequence.

Second, the Task Force discussed a proposal by ACLI that would exempt from the regulation treaties with reinsurers licensed in at least five states with an RBC ratio above 400 percent of Authorized Control Level. This exemption applicable to small reinsurers would apply in addition to the professional reinsurer exemption included in the recent amendments to the Credit for Reinsurance Model Law (#785) applicable to treaties with reinsurers with $250 million in capital and surplus that are licensed in at least 26 states (or licensed in at least 10 states and licensed or accredited in a total of 35 states). A few regulators seemed receptive to this new proposal. The representative from Arkansas, for example, expressed an interest in putting small professional reinsurers on the same playing field as large professional reinsurers and noted that the additional exemption seemed reasonable if the XXX/AXXX regulation is really targeted at captive reinsurers. 

The Task Force also received a referral of comments on the regulation from the Life Actuarial (A) Task Force (LATF). Under the current draft of the regulation, for policies issued before the Valuation Manual Operative Date, an adjustment is made to the Required Level of Primary Security for an exempt yearly renewable term (YRT) reinsurance arrangement to an assuming reinsurer, but this adjustment changes after the Operative Date. LATF is recommending revisions to the current draft to provide that, for policies issued before the Operative Date, the adjustment used before the Operative Date continues after the Operative Date. LATF also provided other recommendations for reorganizing and editing the proposal regulation.

The Task Force directed NAIC staff and consultants to work with the XXX/AXXX Captive Reinsurance Regulation Drafting Group to draft a revised regulation that considers the comments received and these discussions held during the meeting, which will be presented to the Task Force for future consideration and exposure. The Task Force also received an extension from the Financial Condition (E) Committee until the Summer National Meeting to complete drafting on the regulation. 

2. Adoption of Certified Reinsurer Requirements as an Accreditation Requirement

The Financial Regulation Standards and Accreditation (F) Committee adopted the certified reinsurer provisions from the revised Credit for Reinsurance Model Law and Credit for Reinsurance Model Regulation (Reinsurance Models) as a state accreditation requirement. The revised Reinsurance Models allow highly rated non-U.S. reinsurers to reinsure U.S. domestic cedents with reduced collateral requirements. The reduced collateral requirements are currently optional under the Part A; Laws and Regulations Accreditation Standards, but will become mandatory as of January 1, 2019. 

State adoption of reduced collateral requirements has become a priority for the NAIC (and other advocates of the state-based system of insurance regulation) since federal action on a “covered agreement” on reinsurance collateral requirements has become increasingly likely. On November 20, 2015, Treasury, assisted by the FIO and the U.S. Trade Representative (USTR), notified Congress of its intent to initiate negotiations to enter into a covered agreement with the European Union (EU) in accordance with Section 314(b)(1) of Dodd-Frank. The notice stated that the covered agreement negotiations with the EU will seek, among other things, to afford nationally uniform treatment of EU-based reinsurers operating in the United States, including with respect to collateral requirements. In February, U.S. and EU representatives met for the first time to formally discuss plans for the covered agreement, and released a joint statement agreeing to “move forward efficiently and expeditiously” and “affirmed their good faith pursuit of an agreement on matters relating to group supervision, exchange of confidential information between supervisory authorities on both sides, and reinsurance supervision, including collateral.”

Officially, the NAIC’s decision to make the certified reinsurer provisions an accreditation requirement reflects the Committee’s view that the reduced collateral requirements in the revised Reinsurance Models result in more effective financial solvency regulation and increased consumer protection to policyholders. As noted in the December 21, 2015, memo accompanying the proposed accreditation standard, this is due to several features of the provisions, including: (1) the increased financial scrutiny given to certified reinsurers by state regulators and the NAIC; (2) the review of the certified reinsurer’s domiciliary supervisory regime by the Qualified Jurisdiction (E) Working Group with respect to the effectiveness of its supervision; and (3) the process under which certified reinsurers may be “passported” for certification (which entails financial analysis conducted by the Reinsurance Financial Analysis (E) Working Group (R-FAWG) upon initial application and renewal). 

3. PBR Update

State Adoption

In 2009, the NAIC adopted a revised Model Standard Valuation Law authorizing Principle-Based Reserving (PBR) and a Valuation Manual that sets forth the minimum reserve and related requirements for certain products under PBR. The Valuation Manual was subsequently adopted by the NAIC in 2012, over strong objections from several key states (including California and New York). The effective date for PBR (i.e., the Valuation Manual Operative Date), however, will not occur until the amended Standard Valuation Law is adopted by 42 states and state adoption reflects 75 percent of total life insurance premiums written in the United States. 

At the Spring National Meeting, it was tentatively announced that this critical milestone in the implementation of PBR has now been met, making a January 1, 2017, effective date achievable. Achievement of the threshold is now subject only to the NAIC’s determination that the laws adopted by the applicable states use “substantially similar terms and provisions” to the NAIC model. This determination will be based on a multistep review process that was approved by the NAIC Executive Committee and Plenary at the Fall National Meeting. That process entails the following steps:

1. State Survey: States will complete a survey to document their conformance to, as well as any deviations from, the amended Standard Valuation Law.
2. Validation of Deviations: A designated small group (potentially comprising NAIC staff and regulators) will validate completion of the surveys and document conformance to and substantive deviations from the model.
3. Task Force Evaluation: The Principle-Based Reserving Implementation (EX) Task Force will review conformances and deviations and determine whether a state’s laws are considered “substantially similar terms and provisions” for purposes of determining the Valuation Manual Operative Date.
4. Task Force Proposal: The Task Force will recommend a list of states counting toward the threshold to determine the Valuation Manual Operative Date. Any disagreements with the list could be submitted in writing to the Plenary Committee.
5. Plenary Final Decision: The Plenary Committee will consider any disagreements with the list and will determine the NAIC’s final view of which states will count toward the threshold.

The NAIC is currently undertaking this review. Once a determination has been made that the threshold has been met, the effective date of PBR will trigger an approximately three-year implementation period for the new rules. 

PBR Experience Reporting Framework

The revisions to the Standard Valuation Law (SVL) to enact PBR include a provision for collection of data from companies to develop industry experience studies for various factors (e.g., mortality, lapse), and the Valuation Manual outlines the role of a statistical agent to collect and manage the data and produce reports. The NAIC has been considering how to implement such an experience data collection system on behalf of state insurance regulators, and is exploring the possibility that the NAIC might serve as the statistical agent. At the PBR Implementation Task Force Meeting, NAIC Chief Operating Officer and Chief Legal Officer Andrew Beal reported on the due diligence that NAIC staff has performed to assess the NAIC’s ability to perform in such a capacity. 

The prospect of the NAIC acting in the role of statistical agent is not without some controversy, as there are concerns among industry groups regarding the confidentiality of information submitted to the NAIC and the NAIC’s ability to perform such duties in a cost-effective manner. At the Task Force meeting, the ACLI commented that the selection of a statistical agent should be made after an open, competitive bidding process so that multiple entities can submit plans regarding their capabilities and cost-effectiveness in response to a request for proposal (RFP). In response, Task Force Chair Julie McPeak of Tennessee noted that the statistical agent will be appointed by the Task Force and the Executive Committee upon consideration of all relevant information and not by NAIC senior staff. 

Proposed Net Premium Reserve (NPR) Amendments.

After a lengthy discussion regarding the Net Premium Reserve (NPR) level and approach and the current process for allocating reserves to product groups and individual policies, LATF exposed four proposed amendments to VM-20 relating to NPR for a short 21-day comment period. Some regulators remain concerned about the level of reserves, particularly for term insurance, in connection with the anticipated implementation of PBR on January 1, 2017. 

4. Life Insurance and Annuities (A) Committee

The Life Insurance and Annuities (A) Committee discussed a proposed amendment to the life insurance policy illustration charge. The Life Insurance Illustration Issues (A) Working Group has a charge to “explore how the narrative summary required by Section 7B of the Life Insurance Illustrations Model Regulation (#582) and the policy summary under the Life Insurance Disclosure Model Regulation (#580) can be enhanced to promote consumer readability and understandability of life insurance policy summaries, including how they are designed, formatted and accessed by consumers.” In a comment letter, the American Academy of Actuaries (AAA) suggested expanding the charge to include review of the Life Insurance Buyer’s Guide (Buyer’s Guide) because “an exploration would not be complete without the review of all applicable disclosures.” However, because the Committee already has an existing charge to revise the Buyer’s Guide, the Committee decided not to make the suggested changes. 
On a separate note, the Committee also voted to disband the Contingent Deferred Annuity (A) Working Group.

5. Privacy

Late last year, Congress passed and President Obama signed into law the Fixing America’s Surface Transportation (FAST) Act, which became effective on December 4, 2015. The FAST Act included amendments to the Gramm-Leach-Bliley Act (GLBA) to eliminate the requirement for financial institutions to provide GLBA annual notices provided that certain conditions are met. The changes to the GLBA privacy provisions necessitate the adoption of conforming amendments to the NAIC’s model privacy regulation, the NAIC Privacy of Consumer Financial and Health Information Regulation (#672), in order for insurance companies to utilize this exemption from the annual privacy notice requirement (which other financial institutions were able to utilize immediately). 

At the Spring National Meeting, the NAIC Privacy Disclosures (D) Working Group received comments on proposed amendments to the model privacy regulation which, with minor proposed modifications, are supported by industry and consumer groups. However, given the time it will take to enact the proposed amendments throughout the states, ACLI and the American Insurance Association (AIA) urged the Working Group to consider the development and adoption of a model insurance department bulletin to clarify that a licensee of an insurance department that meets the requisite criteria is not required to provide annual GLBA privacy notices. At the Spring National Meeting, the Working Group adopted a draft model bulletin included in comments received by ACLI, and this model bulletin was subsequently adopted by the Market Regulation and Consumer Affairs (D) Committee.

5. International Issues 

1. Group Capital Calculation (E) Working Group

Since 2013, the International Association of Insurance Supervisors (IAIS), at the direction of the Financial Stability Board (FSB), has been developing group capital standards applicable to global systemically important insurers (G-SIIs). Prompted by concerns that international standards being developed fail to account for the U.S. approach to financial solvency regulation, the NAIC is now looking to develop a group capital assessment tool as well. 

At the recommendation of the ComFrame Development and Analysis (G) Working Group (CDAWG), the NAIC Executive Committee and Plenary charged the Financial Condition (E) Committee with constructing a U.S. group capital calculation using an RBC aggregation methodology. During a conference call of the (E) Committee on February 10, 2016, the new Chair, Superintendent Eric Cioppa of Maine, presented that charge to a newly created Group Capital Calculation (E) Working Group and requested that “members of the industry that have already expressed views to the Federal Reserve” share them with staff to the Working Group by March 2, 2016. 

At the Working Group’s meeting at the NAIC’s Spring National Meeting, Working Group Chair David Altmaier of Florida discussed the charge and stated that the calculation will be an assessment tool to assist state insurance regulators in providing a baseline quantitative measure for group risks. The Working Group then heard a presentation from the ACLI, based on a submission made jointly with the American Insurance Association titled An Aggregation and Calibration Approach to Insurer Group Capital. In the discussion that followed, Mr. Altmaier made it clear that the charge is to create a group capital calculation, not a capital standard, as expeditiously as possible, and that the calculation will not be implemented by model rule or statute. 

Other industry groups expressed support for the aggregation approach but raised questions about its scope, how the calculation will be used, and whether it will be field-tested before implementation. The Working Group invited other interested parties to present suggestions regarding the construction of the group capital calculation and plans to organize calls immediately after the Spring National Meeting to discuss such comments. The Working Group hopes to finalize the group capital calculation by the end of 2017. 

2. IAIS Relationship

The IAIS Secretariat, represented by Andrew Stolfi, Senior Policy Advisor and Communication Officer for IAIS, held a question and answer session for interested parties at the Spring National Meeting as part of 
IAIS’ outreach to stakeholders. 

As part of the session, Stolfi solicited feedback from meeting participants on areas where IAIS can improve its interaction with stakeholders. Meeting participants offered a number of suggestions for improvement, including: (1) adjusting the timing of stakeholder dialogues so that comments can be factored into the decision-making process; (2) providing materials to stakeholders in advance of stakeholder meetings; (3) providing greater transparency into positions taken in connection with IAIS decisions (including minority viewpoints); and (4) generally being more open and communicative. 

6. Updating RBC Factors for Bonds and Common Stock

Shortly before the start of the Spring National Meeting, the Investment Risk-Based Capital (E) Working Group exposed an “A Way Forward” document that discusses guiding principles for the Working Group and includes a proposed approach for possible revisions to the treatment of bonds and common stocks within the RBC formulas for all statement types (not just life insurance statements, as was previously discussed by the Working Group). The document was exposed for a 45-day public comment period ending May 19. 

The document proposes: (1) updating the number of bond factors from the current six to 20 (which factors will be based upon analysis performed by the American Academy of Actuaries (AAA) relating to corporate bonds; (2) using an RBC factor for common stock that is the same for life, property and casualty (P&C), and health; and (3) increasing the P&C and health factors for common stock from the current 15 percent to 19.5 percent (the life factor of 30 percent would remain unchanged because it is believed that this factor puts life insurers on an equal footing with P&C and health insurers after adjusting for differences in tax treatment). The goal is to have the updated bond and common stock factors in place by year-end 2017.

At the Task Force’s meeting, some industry representatives and the AAA suggested that it doesn’t make sense to have the same factors for life, P&C and health, as there are differences in duration of assets, accounting treatment and reserve offsets in statutory policy reserves for these types of insurance. After reiterating that the Working Group is aiming for consistency, Kevin Fry of Illinois, the new Chair of the Working Group, said that the Working Group will listen to arguments as to why some of what has been proposed might need to be changed. 

7. ORSA Summary Report/Form F Survey

A majority of states have now formally enacted the NAIC Risk Management and Own Risk and Solvency Assessment Model Act (#505), and most of the adopting states required an Own Risk and Solvency Assessment (ORSA) Summary Report to be filed by the end of 2015. The ORSA Summary Report is a regulatory reporting tool intended to foster effective enterprise risk management (ERM) and provide a group-level perspective on risk. All states are expected to adopt Model #505 by the end of 2017, when the Model becomes an accreditation requirement for state insurance departments. 

In 2010, the NAIC adopted revisions to the Insurance Holding Company System Model Act (#440) and the Insurance Holding Company System Model Regulation (#450) requiring holding company groups to submit an annual filing (Form F) to provide information on exposures that could produce enterprise risk. Form F reporting requirements became required for NAIC accreditation purposes as of January 1, 2016. As a result, most states have received at least one Enterprise Risk Report (Form F) from their domestic insurers as required under the revisions to Model #440. 

The states are now in a position to begin evaluating the effectiveness and value of the Form F reporting process. Therefore, the NAIC Group Solvency Issues (E) Working Group developed a draft survey to gather information from states on their experiences in collecting and utilizing information reported through the Form F process. At the NAIC Spring National Meeting, the survey was revised based on comments received from industry. The biggest change in the survey was the addition of a question relating to potential redundancies between the Form F and the ORSA reporting process. Although the target filer for each report is different (all insurers that are part of a holding company group must file a Form F, while only those above a specified premium threshold must file an ORSA Summary Report), the Working Group agreed to incorporate a question about redundancies between the two reports into the survey. The revised survey will be distributed to the states with responses due by May 20.

8. Briefly Noted

1. DOL Fiduciary Rule

At the April 5 meeting of the NAIC/Industry Liaison Committee, the committee heard presentations from the Insured Retirement Institute (IRI), the National Association of Insurance and Financial Advisors (NAIFA) and the ACLI regarding the U.S. Department of Labor’s new “fiduciary rule” that was released on April 6. A discussion of the proposed new rules can be found at: Sutherland Legal Alert: The Final Rule: DOL’s Expanded Definition of Investment Advice Fiduciary Under ERISA and Revised Complex of Exemptions. The industry groups expressed concern that the rule would limit access by IRA consumers to educational materials and products and would limit the range of options available to consumers due to its bias toward fee-based arrangements. 

2. Issues Related to Seniors

The Market Regulation and Consumer Affairs (D) Committee held a discussion regarding issues related to the financial exploitation of seniors. The Committee discussed whether it should recommend that the NAIC develop informational materials for state regulators or insurance industry professionals to raise awareness about identifying and reporting suspected financial exploitation of seniors or other adults with diminished capacity and whether the NAIC should explore the development of a guideline or model act to provide a safe harbor for insurance professionals who report suspected financial exploitation or forego processing a policy change request because of suspected financial exploitation. The Committee did not adopt any recommendations and will revisit these issues again during an interim conference call. 

3. Removal of MetLife’s SIFI Designation

At the opening session of the Spring National Meeting, Missouri Insurance Commissioner John Huff acknowledged a federal district court judge’s recent order rescinding MetLife Inc.’s designation as a systemically important financial institution (SIFI) by the Financial Stability Oversight Council (FSOC) in 2014. Commissioner Huff noted that it was an important development that validated the NAIC’s original objection to the designation. 

4. Commissioner Departures 

The Spring National Meeting in New Orleans was the last National Meeting for Commissioners Kevin McCarty of Florida and Susan Donegan of Vermont. Commissioner McCarty has been involved in NAIC matters for over 25 years, was President of the NAIC from 2012 to 2013, and most recently served as Chair of the International Insurance Relations (G) Committee. Commissioner Donegan was Chair Designee of the International Insurance Regulation (G) Committee, and also served on the Financial Condition (E) Committee, the Cybersecurity (EX) Task Force and the Big Data (D) Working Group.

5. 2020 NAIC National Meeting Sites

The Executive (EX) Committee selected the meeting locations for the 2020 national meetings. The Spring Meeting will be held in Phoenix, Arizona; the Summer Meeting will be held in Minneapolis, Minnesota; and the Fall Meeting will be held in Kansas City, Missouri.