NAIC 2014 Fall National Meeting and Congressional Hearing on Global Standards in Insurance Regulation

The National Association of Insurance Commissioners (NAIC) met for its Fall National Meeting in Washington, D.C. from November 14th through November 19th. As with prior meetings, competition among state, Federal and international regulators for leadership in setting regulatory policy and standards was a driving force behind much of the work. The occasion of the presence of state regulators in the Capitol presented an opportunity for a Congressional hearing on the effect of international activity on the U.S. A summary of that hearing is included with our report.

A.        General Interest

  1. Group-wide Supervision for Internationally Active Insurance Groups
  2. Group Capital Standards for Internationally Active Insurance Groups
  3. Reinsurance – Reduced Collateral
  4. Captive Reinsurance Companies – Accreditation of Multistate Reinsurers
  5. Corporate Governance
  6. Market Conduct Accreditation Standards
  7. Receivership and Insolvency (E) Task Force

B.         Issues of Particular Interest to Life Insurers

  1. Unclaimed Life Insurance Benefits
  2. Contingent Deferred Annuities 
  3. Indexed Universal Life Illustrations
  4. Index-Linked Variable Annuities
  5. Principle-Based Reserving

C.        Issues of Particular Interest to Property and Casualty Insurers

  1. TRIA Reauthorization 
  2. Mortgage Insurance

D.         Briefly Noted

  1. Executive Task Force on Cyber Security
  2. Climate Change and Global Warming
  3. NAIC Internal Governance
  4. NAIC 2015 Officers

E.         Congressional Hearing on Global Standard-Setting in Insurance Regulation

A.         General Interest

1.   Group-wide Supervision for Internationally Active Insurance Groups

The Group Solvency Issues (E) Working Group (GSIWG) met to discuss ongoing work on changes to the NAIC’s Model Insurance Holding Company System Regulatory Act (HCA) to authorize the designation of a group-wide supervisor for internationally active insurance groups (IAIGs). This work is propelled by the NAIC’s desire to dodge further criticism of the U.S. state-based system of insurance regulation due to the absence of legal authority to supervise groups, a concept embedded in the International Association of Insurance Supervisors (IAIS) Insurance Core Principles (ICPs) that are being used as the basis for evaluating the adequacy of the U.S. regulatory framework under the Financial Sector Assessment Program (FSAP).

Various GSIWG members have indicated their objective is to meet international standards, but without any intention to change current practices for supervising insurance groups. In an effort to placate industry concerns about a grant of direct authority over holding companies to a group supervisor, Deputy Commissioner Danny Saenz (Texas), Chair of the GSIWG, commented that the GSIWG is “trying to meet international standards and expectations of what a group-wide supervisor should be, but not to ‘go crazy’ taking over our holding companies.” This view is also apparent in the NAIC’s contribution to the recently completed self-assessment of the U.S. regulatory framework for the next FSAP. The NAIC defends the current system as adequate, but also cites work on the HCA amendments as evidence of U.S. compliance with IAIS standards - even though the work is not complete and has no effect unless adopted by the NAIC and by the various states.1

Key drafting issues for the amendments are (1) the definition of an IAIG, (2) the selection of a state insurance commissioner to serve as the group-wide supervisor, and (3) the powers and responsibilities of the group-wide supervisor.

The core issue with the definition of an IAIG is whether the HCA should follow the Common Framework for the Supervision of Internationally Active Insurance Groups (ComFrame) expected to be adopted by the IAIS, or whether it should allow U.S. regulators discretion to designate insurers for group supervision even though the group does not meet the ComFrame definition of IAIG. That definition would result in designation of only a narrow segment of the U.S. insurance market. Not surprisingly, representatives of the U.S. insurance industry are concerned with creeping expansion of group-wide supervision to a broader segment of the market. The GSIWG punted this issue to the ComFrame Development and Analysis (G) Working Group, so it was not resolved during the Fall meeting.

With regard to the selection of the group supervisor, the issue presented to the GSIWG is whether states will follow the same process used for designation of a lead state for financial examinations, or adopt a “tiered” approach that gives different weight to different factors. Deputy Director Christy Neighbors (Nebraska), the GSIWG Vice Chair and principal draftsperson for the HCA amendments, noted a lack of consensus among industry participants and observed that those most likely to be affected by the HCA changes are in favor of the tiered approach.

The powers and responsibilities of the group-wide supervisor under the proposed amendments consist nearly entirely of information gathering and analysis and coordination among interested regulators. The Pennsylvania statute that served as the starting point for the HCA amendments authorizes the Supervisor to engage in group-wide supervision activities to “compel development and implementation of reasonable measures designed to ensure that the IAIG is able to timely recognize and mitigate enterprise risks to members of the IAIG that are engaged in the business of insurance” (emphasis added). After industry opposition to the breadth of this direct authority over holding companies, the language in the HCA amendment was modified so that it is exercisable only “through the authority of the regulatory officials of the jurisdictions where members of the internationally active insurance groups are domiciled.” The sole remaining issue regarding the direct powers of the group-wide supervisor involves a “catch-all” clause that gives the supervisor authority for group-wide supervision activities not otherwise specified. Industry representatives requested this be limited to coordination of group-wide supervision activities necessary to assess enterprise risk. Deputy Commissioner Saenz rejected this as falling short of what is needed to meet international standards. Other members of the GSIWG were largely silent and no action was taken on the draft during the Fall meeting. A conference call has been scheduled for Wednesday, December 3.

2.   Group Capital Standards for Internationally Active Insurance Groups

The ComFrame Development and Analysis (G) Working Group (referred to as “C-DAWG”) received an initial draft “concepts” paper for a group capital standard for internationally active U.S. insurance groups, entitled “U.S. Group Capital Methodology Concepts Discussion Paper.” The paper was prepared by NAIC staff with input from a variety of sources. The paper was exposed for comment with a comment deadline of December 5, 2014.2

The paper sets out three basic approaches. The first is labeled “RBC Plus” and would follow the same base methodology used for risk-based capital analysis of individual insurance companies, but would use consolidated GAAP financial statements and additional factors pertinent to internationally active groups. The second approach is labeled “Cash Flow” and assesses the adequacy of cash flows over the lifetime of a portfolio. This was described as similar to what is currently used by life companies for asset adequacy testing. The third approach is a hybrid of RBC Plus and Cash Flow testing.

RBC Plus was described as having as the following principal advantages: (i) familiarity on the part of U.S. insurance regulators with a risk-based capital (RBC) framework; (ii) use of a single audited consolidated balance sheet, while the use of a factor-based methodology should yield verifiable and auditable information; (iii) use of existing RBC elements should make it less costly and time consuming to implement; and (iv) the relationship between group and legal entity results should be more intuitive because of the common methodology. The disadvantages are: (i) the resources needed to calibrate new factors; (ii) the challenges of translating overseas risks into RBC factors; (iii) the work required for appropriate diversification and co-variance adjustments; and (iv) the translation of different accounting bases.

The advantages cited for Cash Flow are: (i) it is accounting agnostic, that is, it can be used for any country, regardless of accounting; (ii) it is line of business/business segment agnostic; (iii) life companies are familiar with the methodology; and (iv) there is less time lag compared to RBC Plus for identifying and calibrating new risk factors. The disadvantages are: (i) it requires significant use of internal models and by so doing involves a major shift from existing practices within the RBC framework; (ii) it may not be as transparent or easily understood compared to a factor-based approach; and (iii) the work and time required to calibrate stress testing.

The reaction of industry representatives was mixed. Representatives from life companies were more comfortable with a pure cash flow testing, while property and casualty representatives noted that while they use cash flow testing in their models, it is not the only element. One representative asked if different methodologies should be used for life and property and casualty. Commissioner Kevin McCarty (Florida), Chair of the Working Group, replied that use of different methodologies would not be an “easy sell” at the international level. Others expressed concern about to whom the standards would apply, and what regulatory action would ensue if the standards are breached.

3.   Reinsurance – Reduced Collateral

During the meeting of the Reinsurance (E) Task Force, Director John Huff (Missouri), chair of the Task Force, provided a status report on state implementation of the revised Credit for Reinsurance Model Law and Regulation (Reinsurance Models). The Reinsurance Models allow highly rated non-U.S. reinsurers to reinsure U.S. domestic cedents with reduced collateral requirements. According to Director Huff, 23 states representing more than 60 percent of direct insurance premiums have adopted the revised Reinsurance Models, and five additional states are expected to adopt the revised Reinsurance Models in 2015, bringing the total direct insurance premiums of adopting states to more than 80 percent of the U.S. total. Director Huff also noted that more than 30 reinsurers have become certified under the Reinsurance Models.

Deputy Commissioner John Finston (California) provided the report of the Qualified Jurisdiction (E) Working Group. The Working Group recently exposed for public comment a notice recommending that Bermuda, France, Germany, Ireland and the United Kingdom be approved as Qualified Jurisdictions. The comment period is scheduled to end on November 26th. Assuming that there are no significant issues raised during the comment period, Deputy Commissioner Finston expects that these jurisdictions will be submitted to the Reinsurance (E) Task Force for approval during a mid-December conference call. Following the Task Force’s approval, the jurisdictions will be submitted to the Executive (EX) Committee for final approval, which Deputy Commissioner Finston expects will occur before year-end.
Deputy Commissioner Finston also explained that the Qualified Jurisdiction (E) Working Group is continuing to evaluate Japan and Switzerland as potential Qualified Jurisdictions. According to Deputy Commissioner Finston, it is likely that Japan and Switzerland will also be ready for final approval by year-end.
During the 2014 Summer National Meeting, the draft Uniform Application Checklist for Certified Reinsurers was sent back to the Reinsurance Financial Analysis (E) Working Group. During the report of the Reinsurance Financial Analysis (E) Working Group in Washington, D.C., it was explained that the Working Group received nine comment letters. One issue that arose is whether a Form CR-1 should be required with every certified reinsurer renewal application, or only with the initial certified reinsurer application. Given the number of comment letters, along with Deputy Commissioner Steve Johnson’s (Pennsylvania) absence from the meeting, the Reinsurance (E) Task Force adopted a motion again sending the draft application checklist back to the Reinsurance Financial Analysis (E) Working Group for further consideration.
The meeting of the Reinsurance (E) Task Force concluded with discussion led by the Reinsurance Association of America (RAA) on the uniformity of the states’ adoption of the Reinsurance Models. The RAA explained that a plateau has been hit with respect to state adoption of the Reinsurance Models. The RAA largely attributed this to the fact that adoption of the Reinsurance Models is only an “optional” accreditation standard. “Optional” means that states are not required to allow reduced collateral, but if states opt to include reduced collateral provisions, the provisions must be substantially similar to the Reinsurance Models. The RAA requested that adoption of the Reinsurance Models no longer be only an optional accreditation standard.

4.   Captive Reinsurance Companies – Accreditation of Multistate Reinsurers

Superintendent Joseph Torti’s (Rhode Island) proposal to include “multistate reinsurers” in the definition of a “multistate insurer” in the Part A and Part B standards for state accreditation continued to receive significant attention. Currently, multi-state reinsurers, including captive reinsurers, are excluded from the definition of a multi-state insurer in the Part A and Part B Preambles. However, the Financial Regulation Standards and Accreditation (F) Committee exposed proposed amendments during the 2014 Spring National Meeting that would remove the exclusion for reinsurers that are licensed in a single state, but assume business written outside of that state, and include “multistate reinsurers” in the definition of a multi-state insurer.

During the 2014 Summer National Meeting, Superintendent Torti acknowledged that the proposed definition of multistate insurer was too broad. At that meeting, Superintendent Torti stressed that it was not his intention to incorporate every type of captive within the definition of multistate insurer. Director Huff stated that the (F) Committee would evaluate the 34 comment letters it received, most of which were in opposition to the proposed amendments, and determine how to proceed at the 2014 Summer National Meeting.

In Washington, D.C., the (F) Committee discussed a memorandum from NAIC staff recommending that the (F) Committee direct them to prepare new and completely revised Part A and Part B Preambles that will clarify the scope of the NAIC accreditation standards, including their proposed applicability to reserve financing transactions, variable annuities and long term care insurance. The American Council of Life Insurers (ACLI) commented that the amendments to the Part A and Part B Preambles should not impact any captives other than those engaging in reserve financing transactions that were addressed in the Rector Report. Therefore, ACLI expressed concern over including variable annuities and long term care insurance in any proposed amendments.
The (F) Committee concluded the meeting by adopting a motion directing NAIC staff to draft new proposed Part A and Part B Preambles. It was requested these proposed amendments be ready for review by year-end.

5.   Corporate Governance

The Executive (EX) Committee formally approved the Corporate Governance Annual Disclosure Model Act and the Corporate Governance Annual Model Regulation (Corporate Governance Models), which had been finalized by a lower tier committee at the 2014 Summer National Meeting.

The Corporate Governance Models require that, on each June 1, beginning in 2016, every insurer, or the insurance group of which the insurer is a member, submit a Corporate Governance Annual Disclosure (CG Annual Disclosure) to its lead state or domestic regulator. In the CG Annual Disclosure, insurers must document, in narrative form, highly confidential information about their corporate governance framework, including the structure and policies of their boards of directors and key committees, the frequency of their meetings, and procedures for the oversight of critical risk areas and appointment practices, among other things. Insurers must also disclose the policies and practices used by their board of directors for directing senior management on critical areas, including a description of codes of business conduct and ethics, and processes for performance evaluation, compensation practices, corrective action, succession planning, and suitability standards.3
As its last act, the Corporate Governance (E) Working Group, which developed the Corporate Governance Models, recommended they become part of the NAIC’s accreditation standards. The only controversy surrounding this recommendation related to confidentiality of the CG Annual Disclosure. The Corporate Governance Models declare the CG Annual Disclosure to be confidential and not subject to discovery or admissible in evidence in any private civil action (although the Commissioner can use the CG Annual Disclosure in actions brought as part of the Commissioner’s official duties). The accreditation standard recommended by the Working Group requires confidentiality protection “similar” to this clause in the Corporate Governance Models. Florida objected to this language. Florida explained that its legislature declined to adopt a similar clause in the insurance holding company act and that it was sufficient that the CG Annual Disclosure not be subject to subpoena from the state insurance commissioner. Industry representatives, in turn, pressed for clearer direction that an accredited state’s confidentiality provisions be “functionally equivalent” to those in the Corporate Governance Models. They commented that the industry only offered support for the Corporate Governance Models on the basis that the CG Annual Disclosure would be kept strictly confidential and not subject to subpoena.

Finally, the Financial Condition (E) Committee adopted a motion disbanding the Corporate Governance (E) Working Group due to the fact that the Working Group has completed its primary charges.

6.   Market Conduct Accreditation Standards

The new Market Regulation Accreditation (D) Working Group, chaired by Commissioner Therese Goldsmith (Maryland), held its first public meeting in Washington, D.C. The Working Group’s charge is to develop a formal market conduct regulation accreditation proposal. The proposal will include (i) accreditation standards; (ii) a process for the state implementation of the accreditation standards; (iii) a process to measure the states’ compliance with the accreditation standards; and (iv) a process for future revisions to the accreditation standards. The Working Group has proposed to have a final document ready for consideration by early 2016.
At the November 18 meeting, the Working Group agreed to expose two documents for public comment. The first document is a timeline for drafting the market conduct regulation accreditation proposal. The second document sets forth the Working Group’s objectives and principles, which include: (i) to provide a process to enhance and objectively monitor state regulation of insurers’ conduct; (ii) to create “substantially similar” standards for market conduct regulation among NAIC member jurisdictions; and (iii) to develop a formal market conduct regulation plan with recommendations for accreditation standards.4

7.   Receivership and Insolvency (E) Task Force

The Receivership and Insolvency (E) Task Force received and adopted a report from the Receivership Model Law (E) Working Group on the adoption of certain receivership and guaranty fund models among NAIC member jurisdictions. The models evaluated included the Insurer Receivership Model Act (Model 555), the Life and Health Insurance Guaranty Association Model Act (Model 520) and the Property and Casualty Insurance Guaranty Association Model Act (Model 540). The Working Group’s report concluded that guaranty fund coverage limits are generally substantially similar across the states. The Task Force requested that regulators and interested parties submit comments to identify key concepts and critical elements for consistency in multi-state insurer receiverships.

The Task Force also adopted a motion to disband the Federal Home Loan Bank Legislation (E) Subgroup, the Receivership Reinsurance Recoverables (E) Working Group, the Receivership Separate Accounts (E) Working Group and the SEC Consideration (E) Subgroup.

B.         Issues of Particular Interest to Life Insurers

1.   Unclaimed Life Insurance Benefits

The Life Insurance and Annuities (A) Committee previously adopted a charge directing the Unclaimed Life Insurance Benefits (A) Working Group to develop a model law for unclaimed life insurance benefits. Although the Working Group did not meet during the 2014 Fall National Meeting, unclaimed insurance benefits remain a contentious issue for both insurance regulators and the life insurance industry.

The life insurance industry has repeatedly called on the NAIC to develop a coherent framework to govern unclaimed life insurance benefits in light of recent court cases in West Virginia, Florida and Kentucky that have been favorable to the industry. Despite these developments, many states, particularly members of the current NAIC Task Force investigating unclaimed life insurance benefits, continue to press life insurers for market conduct examination settlements. These states assert that life insurers that have used the Social Security Administration Death Master File asymmetrically have violated states’ unfair claims practices statutes.
The NAIC has come under increasing pressure to act in this area as other standard-setting bodies, such as the National Conference of Insurance Legislators (NCOIL) and the Uniform Law Commission, have begun to address the issue. At the NAIC, however, there has been little indication of what form a model unclaimed insurance benefits law might take. One possible approach would be to adopt a framework similar to the model that NCOIL has developed and which has been adopted in approximately 15 states. Another approach may be to codify the terms of the Regulatory Settlement Agreements that the states have entered into with some life insurance companies. The Working Group’s activity in the coming months will surely shed light on this question.

2.   Contingent Deferred Annuities

At the 2014 Fall National Meeting, there were significant discussions and actions taken with respect to finalizing a state regulatory framework for contingent deferred annuities (CDAs), including steps to develop and adopt: (i) a guidance document to assist state regulators in modifying their annuities laws to clarify their applicability to CDAs; (ii) revisions to four model regulations to clarify their applicability to CDAs; and (iii) a framework for nonforfeiture values or cancellation benefits for CDAs.

The Life Insurance and Annuities (A) Committee adopted the Contingent Deferred Annuity (A) Working Group’s amendments to four model regulations to clarify their applicability to CDAs. The four model regulations that the Working Group amended are: (i) the Annuity Disclosure Model Regulation (Model 245); (ii) the Suitability in Annuity Transactions Model Regulation (Model 275); (iii) the Advertisements of Life Insurance and Annuities Model Regulation (Model 570); and (iv) the Life Insurance and Annuities Replacement Model Regulation (Model 613). In general, the amendments seek to afford SEC-registered CDAs the same regulatory treatment that the NAIC affords to SEC-registered variable annuities.

The Working Group continues to develop a guidance document to assist state regulators in modifying their annuities laws to clarify their applicability to CDAs. At the 2014 Fall National Meeting, the Working Group briefly discussed comments it received on its draft CDA guidance document, but did not take any steps toward adopting the guidance document.

Both the Working Group and the Life Actuarial (A) Task Force (LATF) are considering whether to require CDAs to include nonforfeiture values or cancellation benefits. At the 2014 Fall National Meeting, LATF deferred action on this charge pending further discussion and consideration of nonforfeiture values and cancellation benefits in the CDA context.
Finally, the Working Group also considered whether CDAs should have nonforfeiture values or cancellation benefits. The renewed focus on nonforfeiture values and cancellation benefits appears to be a departure from a previous position that nonforfeiture values are not appropriate for CDAs. Commissioner Ted Nickel (Wisconsin), Chair of the Working Group, suggested that the insurer’s unilateral right to cancel a CDA may warrant the imposition of a cancellation benefit for policyholders in certain circumstances. Tomasz Serbinowski (Utah) suggested that an “in-kind” cancellation benefit, such as a longevity annuity, may be appropriate for CDAs in this context. The Working Group will consider proposals from interested parties for possible nonforfeiture/cancellation benefits for CDAs (including explanations of why nonforfeiture values and cancellation benefits may be inappropriate for CDAs).

3.   Indexed Universal Life Illustrations

In Washington, D.C., LATF continued to debate the path it would take in developing actuarial guidelines for applying the Life Insurance Illustrations Model Regulation (Model 582). The key issue that remains unresolved is how to calculate the disciplined current scale rate of return in Indexed Universal Life (IUL) illustrations. Draft guidelines prepared by the ACLI use a disciplined current scale based on a hypothetical historical look-back period of 25 years. A competing proposal from a coalition of life insurers that do not support the ACLI proposal (the Coalition) uses an indexed derivative return to support the disciplined current scale, rather than a hypothetical historical return. The Coalition argues that the ACLI proposal inadequately explains to consumers that IUL returns can be volatile despite the product’s caps and floors and may artificially inflate consumers’ expectations of their likely return on investment in IULs. However, the ACLI argues that the Coalition’s proposal ignores the leverage effects of options that often support IUL returns. At the 2014 Fall National Meeting, both the ACLI and the Coalition offered comments to LATF regarding their respective proposals. LATF also received a survey conducted by Kansas and New York that assessed the IUL market and notable IUL product features.
LATF asked that the ACLI and the Coalition attempt to agree upon a compromise proposal for LATF to review that incorporates certain core features, including, among other things: (i) maximum credited rates not more than 1.25 percent-2.25 percent higher than credited rates for traditional universal life policies and (ii) prominent side-by-side midpoint illustrations with credited rates lower than traditional universal life policies.

4.   Index-Linked Variable Annuities

At the 2014 Fall National Meeting, LATF received a report on the activities of the Index-Linked Variable Annuity (A) Subgroup from Fred Anderson (Minnesota), Chair of the Subgroup. However, LATF did not take any action with regard to Index-Linked Variable Annuities.

The Subgroup’s 2015 charge will be to provide recommendations to LATF regarding the applicability of the NAIC’s variable annuity regulatory framework to non-unitized index-linked products filed as variable annuities. The charge highlights product definition and nonforfeiture requirements as two issues about which the Subgroup must develop recommendations.

5.   Principle-Based Reserving

In 2009, the NAIC adopted a revised Model Standard Valuation Law, which authorizes principle-based reserving (PBR) and a Valuation Manual that sets forth the minimum reserve and related requirements for certain products under PBR. In 2012, the NAIC adopted the Valuation Manual, despite strong opposition from several key states (including California and New York). PBR will not be implemented 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. Eighteen states, reflecting 28 percent of total life insurance premiums written in the United States, have adopted the amended Standard Valuation Law.

In Washington, D.C., the Principle-Based Reserving Implementation (EX) Task Force adopted Actuarial Guideline XLVIII (AG 48), with New York dissenting. AG 48 sets forth standards for actuarial opinions and memorandums for the valuation of certain types of reinsurance transactions, including reserve financing transactions. New York’s representative, Deputy Superintendent Robert Easton, criticized AG 48 for what New York considers to be its lax approach to reserve financing transactions. Superintendent Joseph Torti (Rhode Island) countered New York’s assertion on the basis that the adoption of AG 48 coupled with the implementation of PBR would curb the purported abuses of reserve financing transactions.

The Task Force also voted to expose an exemption for small companies from PBR. The proposal includes an exemption threshold of $300 million in ordinary life insurance premiums for small individual companies and $600 million for insurance groups. The exposed exemption follows the ACLI recommendation, which would exempt approximately 10 percent of the life insurance market from having to comply with PBR. In recommending the ACLI proposal to the Principle-Based Reserving Implementation (EX) Task Force, LATF deferred to the Principle-Based Reserving Implementation (EX) Task Force to determine whether the individual and insurance thresholds are appropriate. The exposure period closes on January 15, 2015.

C.         Issues of Particular Interest to Property and Casualty Insurers

1.   TRIA Reauthorization

The Terrorism Risk Insurance Act (TRIA), which was last reauthorized in 2007, is set to expire on December 31, 2014, unless extended by Congress. The Senate has passed a bill (S 2244) that would reauthorize TRIA through 2021. The Senate bill would also gradually increase the insurer co-share from 15 percent to 20 percent (with 1 percent increases per year over the next five years), and gradually increase the mandatory federal recoupment amount from $27.5 billion to $37.5 billion (with $2 billion increases per year over the next five years). The House, however, has proposed a bill (HR 4871) that differs in several respects from the Senate bill. Specifically, the House bill would: (i) reauthorize TRIA only through 2019, (ii) increase the program’s trigger from $100 million to $500 million; (iii) create a new program bifurcation for nuclear, biological, chemical or radiological type of attacks; and (iv) add a small insurer opt out.

During the Terrorism Risk Insurance Implementation (C) Working Group meeting in Washington, D.C., Tony Cotto of the NAIC provided an update on the reauthorization of TRIA. Mr. Cotto explained that the NAIC’s position is that the long-term reauthorization of TRIA is imperative. There has been recent talk of a short-term reauthorization of TRIA, which the NAIC does not support.

Mr. Cotto acknowledged the possibility that TRIA will not get reauthorized before the end of the year and, instead, may go to a new Congress in January. It is expected that Senator Richard Shelby will take over as Chairman of the Senate Banking Committee and it is unclear what TRIA would look like under Senator Shelby’s leadership. The Property Casualty Insurers Association of America (PCI) also noted the possibility of a retroactive enactment of TRIA.

The Working Group concluded its meeting by discussing preparations to revise the Model Bulletin, Expedited Filing Forms and Policyholder Disclosures following any reauthorization of TRIA. These materials cannot be finalized until the Working Group has an understanding of what the final bill will look like.

2.   Mortgage Insurance

The Mortgage Guaranty Insurance (E) Working Group continues to work on amendments to the Mortgage Guaranty Insurance Model Act. During the 2014 Fall National Meeting in Washington, D.C. the Working Group discussed a September draft of an amended Mortgage Guaranty Insurance Model Act. Deputy Commissioner Finston provided several comments on the reinsurance provisions of the September draft.

Deputy Commissioner Finston began by recommending that the credit for reinsurance provisions in the September draft more closely parallel the collateral funding provisions in the Credit for Reinsurance Model Act. Additionally, Deputy Commissioner Finston noted that the September draft states that a “reinsurer that is not a mortgage guaranty insurance company is not required to establish a contingency reserve.” According to Deputy Commissioner Finston, this language could potentially lead to a situation where neither the mortgage guaranty insurer nor the reinsurer is holding any contingency reserves. Deputy Commissioner Finston recommended that the language be revised to require that either the mortgage guaranty insurer or the reinsurer hold the contingency reserves. Interested parties responded by noting that, unlike monoline mortgage guaranty reinsurers, professional reinsurers have large, diverse books of business that mitigate the need for contingency reserves. The Working Group will consider these comments and continue to work toward draft amendments that are hoped to be available for exposure by at least the 2015 Summer National Meeting.

D.         Briefly Noted

1.    Executive Task Force on Cyber Security

The Executive (EX) Committee established a task force to help coordinate insurance issues related to cyber security. The task force is specifically charged with: (i) monitoring developments in the area of cyber security; (ii) advising, reporting and making recommendations to the Executive (EX) Committee on cyber security issues; (iii) coordinating activities with NAIC standing committees and their task forces and working groups regarding cyber security issues; (iv) representing the NAIC and communicating with other entities/groups on cyber security issues; and (v) performing such other tasks as may be assigned by the Executive (EX) Committee relating to the area of cyber security.

2.   Climate Change and Global Warming

During the meeting of the Climate Change and Global Warming (C) Working Group, Ceres presented its report on insurer preparedness for the effects of climate change. The report, which is titled “Insurer Climate Risk Disclosure Survey Report & Scorecard: 2014 Findings & Recommendations,” uses the following four-tier system to grade an insurer’s preparedness: Leading, Developing, Beginning and Minimal. According the report, only three percent of insurance companies received a grade of “Leading.” Most insurers earned a grade of either “Beginning” or “Minimal.” Several trade associations expressed their disagreement with the report’s conclusions.

3.   NAIC Internal Governance

Last year, in a letter to NAIC leadership, Commissioner Thomas Leonardi (Connecticut) proposed that an outside consultant be hired to analyze existing governance procedures within the NAIC. In response, the Governance Review (EX) Task Force was created and, after considering Commissioner Leonardi’s recommendation, the Task Force ultimately recommended that an outside consultant be hired. The Executive Committee accepted the Task Force’s recommendation and issued a request for proposal (RFP) on July 21. Following the August 15 deadline to respond to the RFP, the Executive Committee appointed a subcommittee made up of five Executive (EX) Committee members to interview potential outside consultants and make a recommendation to the Executive (EX) Committee on which outside consultant to choose.

During the 2014 Summer National Meeting, Commissioner Leonardi who subsequent to the Fall meeting announced he is departing office to return to the private sector, expressed his belief that the Executive (EX) Committee hijacked from the Task Force the process of selecting an outside consultant. However, a motion requesting that the Executive (EX) Committee return the process for selecting the outside consultant back to the Task Force ultimately failed by a vote of six to three.

The Task Force met on November 18 in Washington, D.C. During this meeting, Commissioner Ted Nickel (Wisconsin) provided an update on the process of hiring an outside consultant. Commissioner Nickel is one of the Executive (EX) Committee members on the sub-committee charged with interviewing potential outside consultants. Commissioner Nickel explained that members of the sub-committee recently conducted hour-long phone interviews with six candidates, and that the sub-committee expects to soon narrow down the list to a select group of finalists. The sub-committee will then meet in person with each finalist and hopes to have a recommendation for the Executive (EX) Committee by year-end.

4.   NAIC 2015 Officers

The following officers were elected for 2015:

President: Monica J. Lindeen, Montana State Auditor and Commissioner of Securities and Insurance

President-Elect: Michael F. Consedine, Pennsylvania Insurance Commissioner

Vice President: Sharon P. Clark, Kentucky Insurance Commissioner

Secretary-Treasurer: Ted Nickel, Wisconsin Insurance Commissioner

In keeping with NAIC tradition, each officer moved up one level from the position held this year, so the only new name added to the roster of officers is that of Ted Nickel, Wisconsin Insurance Commissioner. With election of a new governor in Pennsylvania, it remains to be seen whether Michael Consedine will be able to remain in office to serve as President-Elect this year and President in the ensuing year. Many in the insurance community are hoping this will be the case.

E.      Congressional Hearing on Global Standard-Setting in Insurance Regulation

On November 18, 2014, the Housing and Insurance Subcommittee of the House Committee on Financial Services conducted a hearing entitled, “The Impact of International Regulatory Standards on the Competitiveness of U.S. Insurers, Part II.” The hearing explored issues of concern relating to the evolution of international regulation of the insurance industry, in particular the activities and procedures of the IAIS.

Witnesses at the hearing were representatives of the Federal Insurance Office (FIO), the Federal Reserve Board, the NAIC and NCOIL.

The hearing explored two main themes: the committee’s frustration with what it views as the lack of openness and inclusion at IAIS, and the need to protect the U.S. system of insurance regulation from interference by the global standard-setting actions of Europe-based institutions, especially IAIS.

Because FIO is a member of IAIS, the brunt of the criticism about accessibility, input and information-sharing at IAIS fell on FIO Director Michael McRaith. Mr. McRaith’s defense of the transparency problem at IAIS amounted largely to an attempt to assure the committee that IAIS voluntarily permits some degree of openness already and that closing of the IAIS meetings to fees-paying non-member “observers” was to end pay-to-play participation and give all stakeholders equal participation in the IAIS standards setting processes. He also emphasized that “nothing about international standards is self-executing in the U.S.” Mr. McRaith’s position did not enjoy support from the committee. Indeed, Rep. Sean Duffy (R-Wisc.) announced that he would soon introduce legislation to compel FIO to be a more active conduit between Congress and U.S. stakeholders and the IAIS—in Rep. Duffy’s words, “to put some procedures in place to be sure that there is a constant dialogue and constant feedback for you.” The measures would include: (i) the establishment of a formal advisory committee to convey to FIO the interests of U.S. stakeholders; (ii) mandatory periodic reporting by FIO to Congress; cost-benefit analyses of IAIS proposals; and (iii) a procedure to allow full public comment on any proposals before FIO makes any binding decision on them.

The preeminent concern voiced by committee members was the need for coordinated action by all parties with a stake in the U.S. insurance regulatory system to protect that system and to speak with one voice in dealing with European standard-setters who may not appreciate the virtues of the U.S. approach and might adopt measures that would undermine it. Of particularly intense concern was the threat of imposition of European bank-style capital standards on internationally active U.S. insurance companies. Thomas Sullivan, representing the Federal Reserve, led the call for multi-party dialogue, encompassing all state and federal regulators that deal with insurance matters, the NAIC, NCOIL and U.S. companies, in order to develop a consensus “Team USA” position. The “Team USA” concept immediately attracted the enthusiastic support of the NAIC and NCOIL representatives, as well as the members of the committee. Chairman Randy Neugebauer (R-Tex.) closed the hearing with a final exhortation in favor of a united effort in the face of potential foreign regulatory incursions: “we want you to be working together in representing Team USA in a unified voice.”

1 United States Self-Assessment of Observance with Insurance Core Principles, prepared by the Federal Insurance Office, National Association of Insurance Commissioners and Federal Reserve Board (August 2014) at p. 199.

2 The paper can be found in the meeting materials at Attachment B (p. 173) at

3 Copies of the Corporate Governance Models can be obtained at and

4 The project timeline and objectives can be found in the meeting materials at



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JD Supra Privacy Policy

Updated: May 25, 2018:

JD Supra is a legal publishing service that connects experts and their content with broader audiences of professionals, journalists and associations.

This Privacy Policy describes how JD Supra, LLC ("JD Supra" or "we," "us," or "our") collects, uses and shares personal data collected from visitors to our website (located at (our "Website") who view only publicly-available content as well as subscribers to our services (such as our email digests or author tools)(our "Services"). By using our Website and registering for one of our Services, you are agreeing to the terms of this Privacy Policy.

Please note that if you subscribe to one of our Services, you can make choices about how we collect, use and share your information through our Privacy Center under the "My Account" dashboard (available if you are logged into your JD Supra account).

Collection of Information

Registration Information. When you register with JD Supra for our Website and Services, either as an author or as a subscriber, you will be asked to provide identifying information to create your JD Supra account ("Registration Data"), such as your:

  • Email
  • First Name
  • Last Name
  • Company Name
  • Company Industry
  • Title
  • Country

Other Information: We also collect other information you may voluntarily provide. This may include content you provide for publication. We may also receive your communications with others through our Website and Services (such as contacting an author through our Website) or communications directly with us (such as through email, feedback or other forms or social media). If you are a subscribed user, we will also collect your user preferences, such as the types of articles you would like to read.

Information from third parties (such as, from your employer or LinkedIn): We may also receive information about you from third party sources. For example, your employer may provide your information to us, such as in connection with an article submitted by your employer for publication. If you choose to use LinkedIn to subscribe to our Website and Services, we also collect information related to your LinkedIn account and profile.

Your interactions with our Website and Services: As is true of most websites, we gather certain information automatically. This information includes IP addresses, browser type, Internet service provider (ISP), referring/exit pages, operating system, date/time stamp and clickstream data. We use this information to analyze trends, to administer the Website and our Services, to improve the content and performance of our Website and Services, and to track users' movements around the site. We may also link this automatically-collected data to personal information, for example, to inform authors about who has read their articles. Some of this data is collected through information sent by your web browser. We also use cookies and other tracking technologies to collect this information. To learn more about cookies and other tracking technologies that JD Supra may use on our Website and Services please see our "Cookies Guide" page.

How do we use this information?

We use the information and data we collect principally in order to provide our Website and Services. More specifically, we may use your personal information to:

  • Operate our Website and Services and publish content;
  • Distribute content to you in accordance with your preferences as well as to provide other notifications to you (for example, updates about our policies and terms);
  • Measure readership and usage of the Website and Services;
  • Communicate with you regarding your questions and requests;
  • Authenticate users and to provide for the safety and security of our Website and Services;
  • Conduct research and similar activities to improve our Website and Services; and
  • Comply with our legal and regulatory responsibilities and to enforce our rights.

How is your information shared?

  • Content and other public information (such as an author profile) is shared on our Website and Services, including via email digests and social media feeds, and is accessible to the general public.
  • If you choose to use our Website and Services to communicate directly with a company or individual, such communication may be shared accordingly.
  • Readership information is provided to publishing law firms and authors of content to give them insight into their readership and to help them to improve their content.
  • Our Website may offer you the opportunity to share information through our Website, such as through Facebook's "Like" or Twitter's "Tweet" button. We offer this functionality to help generate interest in our Website and content and to permit you to recommend content to your contacts. You should be aware that sharing through such functionality may result in information being collected by the applicable social media network and possibly being made publicly available (for example, through a search engine). Any such information collection would be subject to such third party social media network's privacy policy.
  • Your information may also be shared to parties who support our business, such as professional advisors as well as web-hosting providers, analytics providers and other information technology providers.
  • Any court, governmental authority, law enforcement agency or other third party where we believe disclosure is necessary to comply with a legal or regulatory obligation, or otherwise to protect our rights, the rights of any third party or individuals' personal safety, or to detect, prevent, or otherwise address fraud, security or safety issues.
  • To our affiliated entities and in connection with the sale, assignment or other transfer of our company or our business.

How We Protect Your Information

JD Supra takes reasonable and appropriate precautions to insure that user information is protected from loss, misuse and unauthorized access, disclosure, alteration and destruction. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. You should keep in mind that no Internet transmission is ever 100% secure or error-free. Where you use log-in credentials (usernames, passwords) on our Website, please remember that it is your responsibility to safeguard them. If you believe that your log-in credentials have been compromised, please contact us at

Children's Information

Our Website and Services are not directed at children under the age of 16 and we do not knowingly collect personal information from children under the age of 16 through our Website and/or Services. If you have reason to believe that a child under the age of 16 has provided personal information to us, please contact us, and we will endeavor to delete that information from our databases.

Links to Other Websites

Our Website and Services may contain links to other websites. The operators of such other websites may collect information about you, including through cookies or other technologies. If you are using our Website or Services and click a link to another site, you will leave our Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We are not responsible for the data collection and use practices of such other sites. This Policy applies solely to the information collected in connection with your use of our Website and Services and does not apply to any practices conducted offline or in connection with any other websites.

Information for EU and Swiss Residents

JD Supra's principal place of business is in the United States. By subscribing to our website, you expressly consent to your information being processed in the United States.

  • Our Legal Basis for Processing: Generally, we rely on our legitimate interests in order to process your personal information. For example, we rely on this legal ground if we use your personal information to manage your Registration Data and administer our relationship with you; to deliver our Website and Services; understand and improve our Website and Services; report reader analytics to our authors; to personalize your experience on our Website and Services; and where necessary to protect or defend our or another's rights or property, or to detect, prevent, or otherwise address fraud, security, safety or privacy issues. Please see Article 6(1)(f) of the E.U. General Data Protection Regulation ("GDPR") In addition, there may be other situations where other grounds for processing may exist, such as where processing is a result of legal requirements (GDPR Article 6(1)(c)) or for reasons of public interest (GDPR Article 6(1)(e)). Please see the "Your Rights" section of this Privacy Policy immediately below for more information about how you may request that we limit or refrain from processing your personal information.
  • Your Rights
    • Right of Access/Portability: You can ask to review details about the information we hold about you and how that information has been used and disclosed. Note that we may request to verify your identification before fulfilling your request. You can also request that your personal information is provided to you in a commonly used electronic format so that you can share it with other organizations.
    • Right to Correct Information: You may ask that we make corrections to any information we hold, if you believe such correction to be necessary.
    • Right to Restrict Our Processing or Erasure of Information: You also have the right in certain circumstances to ask us to restrict processing of your personal information or to erase your personal information. Where you have consented to our use of your personal information, you can withdraw your consent at any time.

You can make a request to exercise any of these rights by emailing us at or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

You can also manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard.

We will make all practical efforts to respect your wishes. There may be times, however, where we are not able to fulfill your request, for example, if applicable law prohibits our compliance. Please note that JD Supra does not use "automatic decision making" or "profiling" as those terms are defined in the GDPR.

  • Timeframe for retaining your personal information: We will retain your personal information in a form that identifies you only for as long as it serves the purpose(s) for which it was initially collected as stated in this Privacy Policy, or subsequently authorized. We may continue processing your personal information for longer periods, but only for the time and to the extent such processing reasonably serves the purposes of archiving in the public interest, journalism, literature and art, scientific or historical research and statistical analysis, and subject to the protection of this Privacy Policy. For example, if you are an author, your personal information may continue to be published in connection with your article indefinitely. When we have no ongoing legitimate business need to process your personal information, we will either delete or anonymize it, or, if this is not possible (for example, because your personal information has been stored in backup archives), then we will securely store your personal information and isolate it from any further processing until deletion is possible.
  • Onward Transfer to Third Parties: As noted in the "How We Share Your Data" Section above, JD Supra may share your information with third parties. When JD Supra discloses your personal information to third parties, we have ensured that such third parties have either certified under the EU-U.S. or Swiss Privacy Shield Framework and will process all personal data received from EU member states/Switzerland in reliance on the applicable Privacy Shield Framework or that they have been subjected to strict contractual provisions in their contract with us to guarantee an adequate level of data protection for your data.

California Privacy Rights

Pursuant to Section 1798.83 of the California Civil Code, our customers who are California residents have the right to request certain information regarding our disclosure of personal information to third parties for their direct marketing purposes.

You can make a request for this information by emailing us at or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

Some browsers have incorporated a Do Not Track (DNT) feature. These features, when turned on, send a signal that you prefer that the website you are visiting not collect and use data regarding your online searching and browsing activities. As there is not yet a common understanding on how to interpret the DNT signal, we currently do not respond to DNT signals on our site.

Access/Correct/Update/Delete Personal Information

For non-EU/Swiss residents, if you would like to know what personal information we have about you, you can send an e-mail to We will be in contact with you (by mail or otherwise) to verify your identity and provide you the information you request. We will respond within 30 days to your request for access to your personal information. In some cases, we may not be able to remove your personal information, in which case we will let you know if we are unable to do so and why. If you would like to correct or update your personal information, you can manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard. If you would like to delete your account or remove your information from our Website and Services, send an e-mail to

Changes in Our Privacy Policy

We reserve the right to change this Privacy Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our Privacy Policy will become effective upon posting of the revised policy on the Website. By continuing to use our Website and Services following such changes, you will be deemed to have agreed to such changes.

Contacting JD Supra

If you have any questions about this Privacy Policy, the practices of this site, your dealings with our Website or Services, or if you would like to change any of the information you have provided to us, please contact us at:

JD Supra Cookie Guide

As with many websites, JD Supra's website (located at (our "Website") and our services (such as our email article digests)(our "Services") use a standard technology called a "cookie" and other similar technologies (such as, pixels and web beacons), which are small data files that are transferred to your computer when you use our Website and Services. These technologies automatically identify your browser whenever you interact with our Website and Services.

How We Use Cookies and Other Tracking Technologies

We use cookies and other tracking technologies to:

  1. Improve the user experience on our Website and Services;
  2. Store the authorization token that users receive when they login to the private areas of our Website. This token is specific to a user's login session and requires a valid username and password to obtain. It is required to access the user's profile information, subscriptions, and analytics;
  3. Track anonymous site usage; and
  4. Permit connectivity with social media networks to permit content sharing.

There are different types of cookies and other technologies used our Website, notably:

  • "Session cookies" - These cookies only last as long as your online session, and disappear from your computer or device when you close your browser (like Internet Explorer, Google Chrome or Safari).
  • "Persistent cookies" - These cookies stay on your computer or device after your browser has been closed and last for a time specified in the cookie. We use persistent cookies when we need to know who you are for more than one browsing session. For example, we use them to remember your preferences for the next time you visit.
  • "Web Beacons/Pixels" - Some of our web pages and emails may also contain small electronic images known as web beacons, clear GIFs or single-pixel GIFs. These images are placed on a web page or email and typically work in conjunction with cookies to collect data. We use these images to identify our users and user behavior, such as counting the number of users who have visited a web page or acted upon one of our email digests.

JD Supra Cookies. We place our own cookies on your computer to track certain information about you while you are using our Website and Services. For example, we place a session cookie on your computer each time you visit our Website. We use these cookies to allow you to log-in to your subscriber account. In addition, through these cookies we are able to collect information about how you use the Website, including what browser you may be using, your IP address, and the URL address you came from upon visiting our Website and the URL you next visit (even if those URLs are not on our Website). We also utilize email web beacons to monitor whether our emails are being delivered and read. We also use these tools to help deliver reader analytics to our authors to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

Analytics/Performance Cookies. JD Supra also uses the following analytic tools to help us analyze the performance of our Website and Services as well as how visitors use our Website and Services:

  • HubSpot - For more information about HubSpot cookies, please visit
  • New Relic - For more information on New Relic cookies, please visit
  • Google Analytics - For more information on Google Analytics cookies, visit To opt-out of being tracked by Google Analytics across all websites visit This will allow you to download and install a Google Analytics cookie-free web browser.

Facebook, Twitter and other Social Network Cookies. Our content pages allow you to share content appearing on our Website and Services to your social media accounts through the "Like," "Tweet," or similar buttons displayed on such pages. To accomplish this Service, we embed code that such third party social networks provide and that we do not control. These buttons know that you are logged in to your social network account and therefore such social networks could also know that you are viewing the JD Supra Website.

Controlling and Deleting Cookies

If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

The processes for controlling and deleting cookies vary depending on which browser you use. To find out how to do so with a particular browser, you can use your browser's "Help" function or alternatively, you can visit which explains, step-by-step, how to control and delete cookies in most browsers.

Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at:

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