Summary

On Friday, October 25, 2013, Governor Corbett signed HB 1481 into law, which adopts provisions of the NAIC’s Own Risk and Solvency Assessment Model Act (ORSA). HB 1481 also gives much needed direction to Pennsylvania insurers on when and how insurance policy documents can be provided in electronic format.

ORSA: Beginning in 2015, individual insurers and insurer groups that meet specified size triggers (individual insurers - at least $500 million of annual direct written and assumed premiums; insurer groups - at least $1 billion of annual direct written and assumed premiums) must have in place a risk management framework for conducting ORSA and file an ORSA summary report. Under HB 1481, insurers that do not meet the size trigger may still be required to meet the ORSA requirements upon request of the Pennsylvania Insurance Commissioner under specified circumstances, including but not limited to when an insurer’s RBC is at company action level, or the insurer is deemed to be in hazardous financial condition or otherwise exhibits qualities of a troubled insurer. Although ORSA is in the process of becoming an NAIC accreditation standard, Pennsylvania joins just a handful of states that have introduced and/or adopted ORSA.

The ORSA filing requirement is one of three significant new reporting requirements arising out of the NAIC’s Solvency Modernization Initiative – of which Pennsylvania has already adopted the first two:

• Form F Enterprise Risk Report – due in March 2014.
• ORSA Summary Report – due in 2015.
• Corporate Governance Annual Report – anticipated due date of 2016 (NAIC model law currently in development).

Electronic Delivery: HB 1481 also addresses an insurance company’s electronic delivery of information and posting of policies and endorsements. Under the new law, an insurer can satisfy its obligations to deliver information/policies or provide notice to insureds and applicants if the insurer meets several requirements. For example, insureds and applicants must agree to conduct transactions electronically. HB 1481 also gives insurers the option of posting policies or endorsements to the internet to satisfy delivery requirements. This option is subject to several requirements, including that the policy/endorsement must not contain any personally identifiable information.