The National Association of Insurance Commissioners (NAIC) held its 2022 Spring National Meeting from March 4 to 8 in Kansas City, Missouri. Although the meeting was held in a hybrid in-person and remote format, roughly 1,500 stakeholders attended the event in person.

The agenda for this National Meeting was again limited, with a number of NAIC committees, working groups and task forces meeting in the weeks prior to the Spring National Meeting. Consequently, in this report, we offer highlights from both the Spring National Meeting and other meetings that took place recently. Notable developments include the following:

• The new Innovation, Cybersecurity, and Technology (H) Committee announced the creation of a “Collaboration Forum” to ensure that NAIC activities pertaining to innovation, cybersecurity and technology are identified, coordinated and transparent across all relevant NAIC committees and working groups. The first project of the Collaboration Forum will be to study unfair bias in artificial intelligence/machine learning decisional systems and complex predictive models.
• The Big Data and Artificial Intelligence (H) Working Group announced its intention to review third-party data and modeling providers and determine the appropriate regulatory oversight of information they provide to insurers.
• The NAIC Executive and Plenary adopted a new Climate Risk Disclosure Survey that better aligns with the Task Force on Climate-Related Financial Disclosures (TCFD) framework.
• The Financial Stability Task Force and Macroprudential (E) Working Group continued to discuss a draft list of 13 Regulatory Considerations Applicable (But Not Exclusive) to Private Equity (PE) Owned Insurers.
• The Life Insurance and Annuities (A) Committee adopted an Accelerated Underwriting White Paper with the goal of developing additional regulatory guidance in the future.

We do not cover every meeting in this report; rather, we comment on select noteworthy developments and matters of interest to our clients.

1. Technology, Cybersecurity and Privacy              
   1. Innovation, Cybersecurity, and Technology (H) Committee Holds Inaugural Meeting
      1. H Committee “Collaboration Forum” to Focus on Algorithmic Bias
      2. H Committee Launches Innovation, Cybersecurity, and Technology Database
   2. Big Data and Artificial Intelligence (H) Working Group to Focus on Four Workstreams
      1. Workstream 1: Collect Big Data Information for Home and Life Business; Draft White Paper
      2. Workstream 2: Consider Proper Regulatory Oversight of Third-Party Data and Model Vendor Information
      3. Workstream 3: Study Big Data Tools for Use by Insurance Regulators
      4. Workstream 4: Consider Drafting AI Model Guidance
   3. Accelerated Underwriting (A) Working Group Finalizes Accelerated Underwriting White Paper
   4. Property and Casualty (C) Committee to Publish Parametric Insurance White Paper
2. Environmental, Social and Corporate Governance (ESG)
   1. Special (EX) Committee on Race and Insurance Receives Workstream Reports
      1. Workstream 1: Engage with U.S. House Financial Services Committee on Industry DEI Efforts
      2. Workstream 2: Collect DEI Information from State Insurance Departments
      3. Workstream 3: Consider Disparate Impact and Proxy Discrimination
      4. Workstream 4: Analyze Access and Affordability in Marketing and Distribution of Life Products
      5. Workstream 5: Identify Demographic Barriers to Health Insurance
   2. NAIC Adopts Redesigned NAIC Climate Risk Disclosure Survey
   3. Connecticut Exposes Proposed Climate Guidance
3. Financial Issues of Particular Interest
   1. Financial Stability (E) Task Force Continues Development of PE Regulatory Considerations List
   2. SVO Proposes Adding Market Data Analytical Fields for Bond Investments to Annual Statement Instructions
   3. Valuation of Securities (E) Task Force Considers Use of SVO Securities Designations by Foreign Jurisdictions
   4. RBC Investment Risk and Evaluations Working Group Holds Initial Meeting to Discuss RBC Treatment of Asset-Backed Securities
   5. Blanks (E) Working Group Exposes Crypto Interrogatory
4. Property and Casualty Insurance Items of Particular Interest
   1. Executive (EX) Committee Establishes Catastrophe Modeling Center of Excellence
   2. Restructuring Mechanisms (E) Working Group to Consider Revisions to P/C Guaranty Association Model Act to Account for Corporate Division and Insurance Business Transfer Transactions
   3. Surplus Lines (C) Task Force to Amend the NAIC Nonadmitted Insurance Model Act
5. Life Insurance Items of Particular Interest
   1. VM-22 (A) Subgroup Continues Development of PBR Framework for Fixed Annuities
   2. Index Linked Variable Annuity Subgroup Continues Work on Actuarial Guidelines
6. Other Items of Particular Interest
   1. Reinsurance (E) Task Force Encourages States to Adopt Amended Credit for Reinsurance Models by July 1, 2022

Long-Term Care (EX) Task Force Receives Report on LTC Multistate Actuarial Rate Review Framework

A. Technology, Cybersecurity and Privacy

1. Innovation, Cybersecurity, and Technology (H) Committee Holds Inaugural Meeting

The Innovation, Cybersecurity, and Technology (H) Committee held its inaugural meeting in Kansas City on April 5, 2022. The H Committee’s 2022 charges provide that the Committee’s mission is to:

• Provide a forum for state insurance regulators to learn and have discussions regarding cybersecurity, innovation, data security and privacy protections, and emerging technology issues;
• Monitor developments in these areas that affect the state insurance regulatory framework;
• Maintain an understanding of evolving practices and use of innovation technologies by insurers and producers in different lines of business;
• Coordinate NAIC efforts regarding innovation, cybersecurity and privacy, and technology across different committees; and
• Make recommendations and develop regulatory, statutory or guidance updates, as appropriate.

With respect to the fourth objective, Committee Chair Commissioner Kathleen Birrane (MA) outlined four approaches the Committee will take to interface with existing working groups and coordinate overlapping efforts of the Committee and those of other “related groups”:

• Awareness and monitoring of work focus – Instances where a related group’s work has no obvious overlap with H Committee but can inform the Committee’s work;
• Overlapping representation – Instances where a related group’s work is more directly related and where the related group and the H Committee should be aware of the other’s work;
• Joint products/projects – Instances where the related group is working on a project that “clearly” overlaps with the H Committee, and the groups should share work product; and
• Absorption into the Committee – Instances where the related group is absorbed into the H Committee.

To that end, Commissioner Birrane announced that the Privacy Protections Working Group would be transferred from the Market Regulation and Consumer Affairs (D) Committee to H Committee. H Committee also serves as the committee of jurisdiction for the Big Data and Artificial Intelligence (H) Working Group, the Speed to Market (H) Working Group, the E-Commerce (H) Working Group and the Cybersecurity (H) Working Group.

H Committee “Collaboration Forum” to Focus on Algorithmic Bias

Commissioner Birrane also announced the creation of a “Collaboration Forum” to be housed within H Committee that will serve as a collaborative platform for innovation, cybersecurity and/or technology issues where multiple NAIC working groups are conducting related or overlapping work. The objective of each project within the Collaboration Forum will be to create a consensus-driven common framework for issues that are of broad interest to NAIC members.

The first “test case” for the Collaboration Forum will be a project to address so-called “algorithmic bias” in artificial intelligence- (AI) and machine learning- (ML) driven decisional systems and predictive modeling, and to study proper governance frameworks and best practices for eliminating or mitigating the risk of such bias. The project will be focused on methods that can be used or relied upon by state insurance regulators in evaluating models used by insurers for unfair bias. A series of educational sessions will be hosted with the objective of developing a practical guide for state insurance regulators that identifies the concerns and provides viable options and tools for state insurance regulators to use. A subsequent step will be to bring together all related NAIC groups to determine whether there are any foundational concepts, definitions or elements that underlie each of the related groups’ work, and/or to develop common framework.

H Committee Launches Innovation, Cybersecurity and Technology Database

Commissioner Birrane also announced the launch of the Innovations, Cybersecurity and Technology (ICT) Hub that will permit users to identify the various innovation, cybersecurity, data privacy and/or technology work products that have been or will be developed by the NAIC.

2. Big Data and Artificial Intelligence (H) Working Group to Focus on Four Workstreams

On April 5, 2022, Big Data and Artificial Intelligence (H) Working Group Chair Superintendent Beth Dwyer (RI) summarized four workstreams that will be the focus of the Working Group’s efforts in 2022:

• Workstream One, led by Acting Commissioner Kevin Gaffney (VT), will focus on the continued analysis of the Big Data Auto Survey that was sent to nearly 200 auto insurers in 2021, and the development of a similar study for Home and Life lines of business. The Working Group expects to send the Home and Life surveys to certain companies in June and August, respectively, and noted that responses will be collected on a confidential basis. The Working Group expects to publish a draft AI/ML white paper containing the findings for each of the three lines of business prior to the 2022 Fall National Meeting.
• Workstream Two, led by Commissioner Doug Ommen (IA), will focus on review of third parties providing data and models to determine the appropriate regulatory format for monitoring and overseeing information provided by such vendors to insurers. The Workstream’s efforts will focus on identifying third-party data and information providers, whether those entities are licensed, and the potential development of exam standards or questions that state insurance regulators can use to engage with the vendors. Commissioner Ommen noted that the scope of the term “data provider” was broader than rating services organizations and could be defined as including any vendor that provides data or modeling to insurers. It is anticipated that the Workstream’s initial review will be completed prior to the 2022 Fall National Meeting.
• Workstream Three, led by Superintendent Adrienne Harris (NY), will focus on tools and resources state insurance regulators can use to evaluate and monitor insurer AI/ML systems (i.e., “SupTech”).
• Workstream Four, led by Commissioner Amy Beard (IN), will focus on how to implement the expectations outlined in the NAIC Principles on Artificial Intelligence (AI Principles) and provide suggestions for next steps. The AI Principles were finalized in August 2020 after considerable discussion by industry and regulators. The AI Principles did not provide specific expectations or guidance, but rather outlined the following five “key tenets”:
  • Fair and Ethical: respecting the rule of law and implementing trustworthy solutions.
  • Accountable: responsibility for the creation, implementation and impacts of any AI system.
  • Compliant: have knowledge and resources in place to comply with all applicable insurance laws and regulations.
  • Transparent: commitment to responsible disclosures regarding AI systems to relevant stakeholders as well as ability to inquire about and review AI-driven insurance decisions.
  • Secure/Safe/Robust: ensure reasonable level of traceability of datasets, processes and decisions made and implementation of a systematic risk management process to detect and correct risks associated with privacy, digital security and unfair discrimination.

Next steps will include evaluating whether an AI model regulation or model guidance is necessary. The Working Group expects to hold a meeting in May or June 2022 to discuss the subject further and outline additional progress.

3. Accelerated Underwriting (A) Working Group Finalizes Accelerated Underwriting White Paper

The Life Insurance and Annuities (A) Committee met on April 7, 2022. Chair of the Accelerated Underwriting (A) Working Group Commissioner Grace Arnold (MN) reported that the Working Group had completed the Accelerated Underwriting White Paper and that its next step would be to develop more concrete accelerated underwriting “regulatory guidance” for regulators to utilize. Although the Committee approved the white paper, New York abstained and expressed concern that the Working Group’s sole charge was not met and that there was more work to do on the use of external data in underwriting. The Working Group does not plan to develop an accelerated underwriting model law at this time.

4. Property and Casualty (C) Committee to Publish Parametric Insurance White Paper

The Property and Casualty (C) Committee met on April 7, 2022. During the meeting, Chair Mike Chaney (MS) announced that the Committee intends to receive presentations from parametric insurance providers in the near future and that it will begin drafting an outline of current parametric products and potential regulatory issues associated with such products. The Committee intends to publish a parametric insurance white paper by the end of 2022.

B. Environmental, Social and Corporate Governance (ESG

1. Special (EX) Committee on Race and Insurance Receives Workstream Reports

The Special (EX) Committee on Race and Insurance met during the Fall National Meeting and received reports from each of its five workstreams, which are summarized below:

• Workstream One (DEI within the industry) reported that the NAIC is monitoring efforts by the US House of Representatives Financial Services Subcommittee on Diversity and Inclusion, which sent letters to certain property & casualty and life insurance groups that requested information on their diversity, equity and inclusion (DEI) efforts. The House Subcommittee has also announced that it plans to hold a hearing on insurer DEI efforts, and that it intends to publish a report that analyzes the state of DEI efforts in the insurance industry. To that end, NAIC staff met with House Financial Services Committee Chair Maxine Waters’ (D‐CA) office about the NAIC’s DEI efforts. Responses to the Subcommittee’s data request were due on May 6, 2022.
• Workstream Two (DEI within state insurance departments and the NAIC) reported that it was gathering survey responses from the NAIC geographic zones and examining best practices and initiatives that state insurance departments may wish to consider when promoting internal DEI efforts. The Workstream will soon meet to discuss a method and forum to share DEI best practices among state insurance regulators.
• Workstream Three (access to property & casualty insurance) reported that it has spent a significant amount of time considering how to address its charge to research and analyze insurance, legal and regulatory approaches to addressing unfair discrimination, disparate treatment, proxy discrimination and disparate impact in property & casualty underwriting and rating practices. The Workstream is also considering whether to recommend associated changes to NAIC model laws or regulations. In conjunction with the algorithmic underwriting discussion covered in Section A.1. above members of the Workstream also met with Cathy O’Neil (O’Neil Risk Consulting & Algorithmic Auditing) to discuss algorithmic auditing and what tools or education state insurance regulators might need to better identify and address any unfair bias that can occur in algorithms or other models.
• Workstream Four (access to life insurance) reported that while it has yet to meet in 2022, the co‐chairs have been meeting to discuss how best to focus its efforts in 2022. The Workstream currently intends to focus on its charge to “continue research and analysis related to insurance access and affordability issues, including the marketing, distribution, and access to life insurance products in minority communities, including the role that financial literacy plays,” and to explore options for presentations to help the Workstream identify how state insurance regulators and the NAIC might be able to advance equity in the marketing and distribution of life insurance in underserved communities.
• Workstream Five (regarding access to insurance in the health insurance market) reported that it met in regulator‐only session to discuss its focus and full work plan for 2022. The Workstream agreed that its focus should be on identifying demographic‐based barriers to the acquisition and use of health insurance and creating strategies for mitigating or removing such barriers and understanding the role health insurance can play in addressing inequities in health outcomes and social determinants of health. 

2. NAIC Adopts Redesigned NAIC Climate Risk Disclosure Survey 

On April 8, 2022, the NAIC Executive and Plenary adopted a redesigned Climate Risk Disclosure Survey to be used by insurers for reporting climate-related risks. The redesigned NAIC survey better aligns with the international Task Force on Climate-Related Financial Disclosures (TCFD) and the TCFD’s Survey, while also requesting insurance-specific information. The basic framework of the redesigned survey is a series of closed-ended and narrative questions organized around the TCFD’s four topics: Governance, Strategy, Risk Management, and Metrics & Targets. Insurers choosing to submit the TCFD Survey will not be required to answer the narrative questions in the NAIC Survey. Fifteen states, accounting for 80% of US premiums collected, currently require insurers to submit either the TCFD Survey or the NAIC Survey. For additional information regarding the TCFD and climate-related reporting, see our Legal Alert.

3. Connecticut Exposes Proposed Climate Guidance

On April 22, 2022, the Connecticut Insurance Department opened a public comment period on a proposed bulletin that will provide guidance to insurers on how to manage the financial risks associated with climate change. The proposed bulletin details the Department’s expectations for domestic insurers and an approach to managing climate risks that considers both current and future risks and identifies the actions necessary to manage those risks. Under the current proposed bulletin, an insurer would be directed to:

• Integrate the consideration of climate risks into its governance structure at the group or individual insurer level.
• Incorporate climate risks into its existing financial risk management.
• Appropriately disclose its climate risks and engage with the TCFD, the NAIC Climate Risk Disclosure Survey and other initiatives when developing its disclosure approaches.

Comments are due to the Department by May 23, 2022. It is the intention of the Department to have a final bulletin issued “at the earliest possible date.”

C. Financial Issues of Particular Interest

1. Financial Stability (E) Task Force Continues Development of PE Regulatory Considerations List

The Financial Stability (E) Task Force (FSTF) and the Macroprudential (E) Working Group (MWG) met in a joint session on April 5, 2022, and discussed an updated version of the Regulatory Considerations Applicable (but not exclusive) to Private Equity (PE) Owned Insurers (PE Considerations List) that included a summary of regulators’ discussions regarding considerations 1 through 6. Most of these initial discussions centered on development of proper PE-related training for state insurance regulators, corporate governance and the possibility of additional (optional) disclosures associated with acquisitions of control and intercompany agreements. Following the National Meeting, on April 22, the FSTF and MWG met again in a regulator-only session, completed their discussion and released an updated PE Considerations List that reflects regulators’ discussions on all 13 considerations. MWG is seeking public comments on the updated PE Considerations List through June 13, 2022. For more information on the PE Considerations List and related state and federal developments, see our Legal Alert: NAIC updates private equity “Regulatory Considerations” List.

During the Spring National Meeting, the FSTF and MWG also adopted a Macroprudential Risk Assessment process document  to assist regulators with identifying and assessing industry-wide risks through both quantitative (e.g., aggregated NAIC annual statement data and public data sources) and qualitative (e.g., results of company surveillance efforts such as Own-Risk Solvency Assessments, industry news, internal/external research, insights from federal and international sources) reviews. The FSTF and MWG also received a report that the Liquidity Stress Test (LST) lead state instructions and template (LST Framework) had been updated and that separate accounts will be a focus of review for the next LST. Results of the 2021 LST for in-scope insurers are due by June 30, 2022.

2. SVO Proposes Adding Market Data Analytical Fields for Bond Investments to Annual Statement Instructions

The Valuation of Securities (E) Task Force received a report from Charles Therriault of the NAIC Securities Valuation Office (SVO) on a proposed referral to the Blanks (E) Working Group to add market data analytical fields for bond investments to the annual statement instructions. Mr. Therriault explained that the purpose of this proposal is to lessen the NAIC’s reliance on credit rating providers by looking at other measures of risk and to increase regulator reliance on the SVO for evaluating credit and investment risks. The proposed referral also reflects the findings of the SVO staff regarding the discrepancies between ratings. Those discrepancies were presented by the SVO to the Task Force in its November 29, 2021 Memo titled Rating Issues and Proposed Changes to the Filing Exemption Process.

Mr. Therriault said that not all credit-rating provider ratings reflect reasonable or consistent assessments of a security’s risk, which indicates that ratings shortfalls exist today, and suggested that an alternative way to measure a bond security’s risk would be to require insurers to report various common analytical measures that value securities by putting metrics in place (e.g., current market yield, interest rate sensitivity, spread relative to the risk, duration, complexity). Such additional analytical measures could identify securities that are anomalies. The proposed referral was exposed for a 45-day comment period to allow additional discussion on the various fields that are being proposed before the referral is actually made. Comments were due to NAIC staff by May 20, 2022. Any such measures would be implemented no earlier than 2023.

3. Valuation of Securities (E) Task Force Considers Use of SVO Securities Designations by Foreign Jurisdictions

The Valuation of Securities (E) Task Force discussed comments received on an NAIC staff report titled Use of NAIC Designations by Other Regulatory Jurisdictions  that expresses concern about the use of SVO securities designations by non-US jurisdictions (e.g., Japan and Bermuda) in the regulation of insurers. NAIC staff explained that the NAIC Practices and Procedures Manual specifically states that NAIC designations are intended only for NAIC members and noted that NAIC designations are not the functional equivalent of the credit ratings of a nationally recognized statistical rating organization (NRSO). The American Council of Life Insurers (ACLI) spoke in favor of the use of NAIC designations by non-US jurisdictions in which US-based groups operate, arguing that it is a great opportunity for international regulatory cooperation. Task Force Chair Carrie Mears (IA) directed NAIC staff to forward the proposal to the Executive Committee with a request to provide guidance on whether it supports use of NAIC designations by non-US jurisdictions for their regulatory purposes and, if so, whether a form of Memorandum of Understanding should be drafted to establish terms and conditions for such a use.

4. RBC Investment Risk and Evaluations Working Group Holds Initial Meeting to Discuss RBC Treatment of Asset-Backed Securities

The Financial Condition (E) Committee met on April 5, 2022. Chair of the Committee Commissioner Scott White (VA) restated regulators’ concern that the NAIC’s risk-based capital (RBC) framework may be contributing to the behavior of insurers searching for higher yields in the persistent low interest rate environment. Consequently, regulators are considering the need for additional safeguards to strengthen the Solvency Framework to ensure that companies meet their obligations. Commissioner White noted that the Risk-Based Capital Investment Risk and Evaluation (E) Working Group was formed to address whether increased charges for structured credit should be considered. Structured credit currently receives the same RBC treatment as corporate bonds.

The new Risk-Based Capital Investment Risk and Evaluation (E) Working Group met on March 22, 2022, in lieu of the Spring National Meeting to discuss RBC treatment of certain asset-backed securities (ABSs) and stakeholder comments regarding the same. The Working Group proceeded to discuss comments pertaining to its review of the RBC treatment of ABSs, including collateralized loan obligations (CLOs), collateralized fund obligations (CFOs) and other similar securities carrying similar types of tail risk. All commenters – ACLI, Bridgeway Analytics, Risk & Regulatory Consulting and the Florida Office of Insurance Regulation – agreed that a review of the RBC framework is appropriate to ensure that structured securities and/or other securities with similar tail risk have RBC charges that appropriately reflect that risk. The Working Group concluded that it would continue to hold calls and outline specific agendas for each with the goal of developing a project plan.

5. Blanks (E) Working Group Exposes Crypto Interrogatory

The Blanks (E) Working Group met virtually on March 29, 2022, in lieu of the Spring National Meeting to discuss a number of issues, including the proposal of a new general interrogatory within the annual reporting blanks that is specific to the use or acceptance of cryptocurrencies. Examples of inquiries within the proposed cryptocurrency interrogatory include (1) whether cryptocurrencies are held by an insurance reporting entity (and if so, on which reporting schedules are the cryptocurrencies reported); and (2) whether cryptocurrencies are accepted for the payment of premiums. The interrogatory was requested after the Statutory Accounting Principles (E) Working Group’s May 2021 adoption of Interpretation (INT) 21-01: Accounting for Cryptocurrencies, which established that directly held cryptocurrencies do not meet the definition of an admitted asset for statutory accounting. Comments on the cryptocurrency interrogatory were due by April 25, 2022.

D. Property and Casualty Insurance Items of Particular Interest      

1. Executive (EX) Committee Establishes Catastrophe Modeling Center of Excellence

During the Executive (EX) Committee’s April 6 meeting, the Committee adopted a proposal from the Climate and Resiliency (EX) Task Force to establish the Catastrophe Modeling Center of Excellence (COE) within the NAIC Center for Insurance Policy and Research (CIPR). The COE will have the following three goals:

• Provide insurance departments with access to catastrophe modeling documentation and aid state insurance regulators in distilling technical information;
• Work with catastrophe model vendors to develop education and training materials for state insurance regulators; and
• Conduct applied research using models to explore options for improving resilience to natural hazards.

2. Restructuring Mechanisms (E) Working Group to Consider Revisions to P/C Guaranty Association Model Act to Account for Corporate Division and Insurance Business Transfer Transactions

The Restructuring Mechanisms (E) Working Group met on March 28, 2022, in lieu of the Spring National Meeting. The Working Group adopted a referral to the Receivership and Insolvency (E) Task Force to consider a proposed new Model Law Development Request related to the NAIC Property and Casualty Insurance Guaranty Association Model Act (#540). The current proposal would amend Model Act #540 to ensure that policyholders are able to retain guaranty fund coverage subsequent to a corporate division (CD) or insurance business transfer (IBT) transaction. The Task Force exposed the Model Law Development Request for a 30-day comment period that ended May 6, 2022.

The Working Group also discussed stakeholder comments on the latest draft of the Restructuring Mechanisms White Paper that details guaranty fund coverage subsequent to CD and IBT transactions, as well as state CD and IBT laws. Comments on the latest draft were due on April 29, 2022. It is expected that the Working Group will incorporate comments into the white paper prior to the 2022 Summer National Meeting.

3. Surplus Lines (C) Task Force to Amend the NAIC Nonadmitted Insurance Model Act

Surplus Lines (C) Task Force Commissioner Jim Donelon (LA) reported to the Property and Casualty (C) Committee that the Task Force has not yet met in 2022 but that it intends to consider revisions to the NAIC Nonadmitted Insurance Model Act (#870) to bring it in line with the federal Nonadmitted and Reinsurance Reform Act (NRRA). A Task Force meeting is scheduled for May 23, 2022.

E. Life Insurance Items of Particular Interest

1. VM-22 (A) Subgroup Continues Development of PBR Framework for Fixed Annuities

The Life Actuarial (A) Task Force (LATF) met on March 31, 2022, in lieu of the Spring National Meeting. VM-22 (A) Subgroup Chair Ben Slutsker (MN) provided updates on the Subgroup’s work pertaining to development of a principle-based reserving framework (PBR) for non-variable (fixed) annuities. Mr. Slutsker noted that the Subgroup received eight comment letters on the ARCWG VM-22 Framework that was exposed in 2021. Since that time, the Subgroup categorized the 378 comments it received into four tiers. A call regarding the first tier (i.e., comments of a foundational, substantive nature) was held on April 13, 2022. The Subgroup now intends to work through comments in the other three tiers. Chair Slutsker reported that the Subgroup is targeting a VM-22 field test in the fall of 2022 to be run jointly by the American Academy of Actuaries, the NAIC and ACLI. The current timeline would have an optional implementation beginning January 1, 2024, with mandatory implementation beginning January 1, 2027. 

2. Index Linked Variable Annuity Subgroup Continues Work on Actuarial Guidelines

Index Linked Variable Annuity (ILVA) Subgroup Chair Pete Weber (OH) reported that the Subgroup is developing an actuarial guideline (ILVA AG) on interim value requirements related to registered index-linked annuities (RILAs), which he characterized as “rigid” and “prescriptive.” Given the industry practice of filing RILAs as variable products exempt from the standard nonforfeiture requirements specified in the NAIC Standard Nonforfeiture Law for Individual Deferred Annuities (Model #805), he characterized the exercise of preparing an actuarial guideline as one of providing for a formulation for RILA interim values that will assure that they are “variable enough.” He characterized the revised AG as “far less prescriptive” insofar as it would allow for any RILA interim value methodologies so long as they provide values that are “materially consistent” with the interim value methodology set forth in the revised AG. Put another way, he said it comes down to whether particular RILA interim values are “close enough” to be considered variable. Chair Weber indicated that the Subgroup was not bringing the revised AG to LATF for consideration at this time. Rather, he published a Chair exposure of the revised AG with a deadline of May 2, 2022. 

F. Other Items of Particular Interest

1. Reinsurance (E) Task Force Encourages States to Adopt Credit for Reinsurance Models by July 1, 2022

On March 22, 2022, the Reinsurance (E) Task Force received reports from the Reinsurance Financial Analysis (E) Working Group (ReFAWG) and NAIC staff noting that, as of the date of the Task Force meeting, 48 states have adopted the 2019 amendments to the NAIC Credit for Reinsurance Model Law (#785) and 34 states have adopted the 2019 amendments to the NAIC Credit for Reinsurance Model Regulation (#786). The Task Force continued to “strongly encourage” states to adopt the amendments by July 1, 2022, in order to give the Federal Insurance Office ample time to complete its preemption analysis prior to the September 2022 deadline prescribed by the Covered Agreements.

In addition, ReFAWG reported that it has approved 14 Reciprocal Jurisdiction Reinsurer Applications for passporting, and that it intends to hold a number of additional meetings in 2022 to consider additional reinsurers for passporting.

2. Long-Term Care (EX) Task Force Receives Report on LTC Multistate Actuarial Rate Review Framework

The Long-Term Care (EX) Task Force met on April 6, 2022, and received a report on the Long-Term Care Insurance Multistate Actuarial Rate Review Framework (LTCI MSA Framework), the goal of which is to bring a consistent national approach to LTC policies and pricing. The LTCI MSA Framework was adopted by the NAIC Executive and Plenary, and the NAIC expects the program to be fully implemented by September 2022. The ACLI reported that the multistate actuarial pilot process had changed the conversation in that states seem more informed on the issues and challenges specific to LTC, but it has not necessarily moved the needle on speed and consistency on the approved amounts. Some states are not willing to forgo their own review methodologies, making companies feel that the process simply added another layer of review. Because companies need certainty, the ACLI asked that individual commissioners indicate whether they support the process, what the process will be and how it will work.

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