13 - National Association of Insurance Commissioners Activity
Each year, the Division of Insurance participates in a range of activities through the National Association of Insurance Commissioners (NAIC). The ability to combine information, perspective and expertise with our counterparts in other states is vital to the Division's ability to accomplish our mission. Linkages and information-sharing from state to state take place as the NAIC committees work via email, webinars and conference calls throughout the year. In addition, staff from the Division attend NAIC meetings regularly.
Property and Casualty Insurance (C) Committee
The mission of the Property and Casualty Insurance (C) Committee is to monitor and respond to regulatory issues associated with property or casualty insurance products, including issues regarding their delivery and cost. The Committee monitors property and casualty insurance markets and the surplus lines market. The Committee addresses regulatory issues associated with both personal lines (particularly auto and homeowners insurance) and commercial lines coverages. The Committee also monitors and responds to problems associated with financial reporting matters for property and casualty insurers that are of interest to regulatory actuaries and analysts and monitors and responds to problems associated with the financial aspects of the surplus lines market.
Catastrophe Insurance Working Group (C)
This working group examines catastrophes and possible strategies to spread the risk of catastrophes across state, regional and federal programs in ways that may present a more efficient method of managing the risk of catastrophic losses.
AIG Settlement Review Working Group (C)
This working group examines a settlement offer negotiated between the AIG Companies and the State of New York regarding incorrect workers' compensation reports filed by the AIG Companies that impacted their taxes, assessments and penalties in each of the states in which it does business. The work of this group led to the multi-state market conduct examination of AIG.
Large Deductible Study Implementation Working Group (C)
Under the auspices of the Workers' Compensation Task Force, the Large Deductible Study Implementation Working Group (C) is appointed to assure that the NAIC charges presented in the Findings and Recommendations of the NAIC Workers' Compensation Large Deductible Study are properly completed.
NAIC\IAIABC Joint Working Group (C)
Also under the Workers' Compensation Task Force, The NAIC/IAIABC Joint Working Group is appointed to study issues of mutual concern to insurance regulators and workers' compensation administrators and to review relevant model laws and papers and to consider possible charges in light of the joint working group recommendations.
The Working Group is composed of members from both the NAIC and the International Association of Industrial Accident Boards and Commissions (IAIABC). The Working Group studies issues of mutual concern to insurance regulators and workers compensation administrators. Through collaborative effort the Working Group has conducted surveys and written a number of white papers, as well as contributed in the development of various model laws, regulations, and guidelines for possible adoption through their respective organizations.
Staff from the Division's State Rating Bureau participated in all four of these (C) Committee working groups throughout 2008, attending NAIC quarterly meetings and participating in conference calls.
Market Conduct and Consumer Affairs (D) Committee
The (D) Committee monitors aspects impacting the market regulatory process. This monitoring includes overseeing:
- The collection of market data
- Market Information Systems
- Automated applications
- The use of desk audits, examinations, interrogatories, investigations, and other resources for monitoring market activities
- The analysis of data relevant to market issues
In addition, the (D) Committee helps identify and develop uniform regulatory standards and solutions to problems related to market issues. As part of this function, the committee facilitates interstate communication and coordinates collaborative state regulatory actions. The committee also reviews and makes recommendations regarding the underwriting and market practices of insurers and producers as those practices affect insurance consumers, including availability and affordability of insurance.
Market Analysis Working Group (D)
The Director of the Division's Market Conduct Section is one of sixteen national regulators selected to be an active member of the Market Analysis Working Group. The Group identifies and reviews insurance companies, which are, or may exhibit characteristics indicating a current or potential market regulatory issue that may impact multiple jurisdictions. The Working Group determines if regulatory action is being taken and supports collaborative actions in addressing problems identified.
During 2008, staff from the Division's Market Conduct section attended and participated in quarterly national meetings and monthly conference calls. In addition to performing its core functions, the Market Analysis Working Group drafted and finalized a policies and procedures document and best practices document for multi-state settlement agreements.
Complaint Handling & Reporting Standards Working Group (D)
The Consumer Service Section (CSS) is a member of the D Committee's Complaint Handling & Reporting Standards Working Group. The charge of this working group is to create and promote uniformity in complaint handling and reporting. Ultimately, successfully accomplishing this mission will benefit regulators, companies, and consumers alike by ensuring that complaint data are meaningfully interpretable for market analysis and public information purposes, while at the same time improving regulator response and intervention on behalf of consumers.
During 2008, staff from the CSS took part in various conference calls with their counterparts from other states throughout the year to discuss complaint handling and reporting standards.
Producer Licensing Working Group (D)
The Director of Producer Licensing is an active member of the (D) Committee's Producer Licensing Working Group. The Working Group's mission is to:
- Develop and implement uniform standards, interpretations and treatment of producer and adjuster licensees and licensing terminology
- Coordinate and consult with the National Insurance Producer Registry Board of Directors to develop and implement uniform producer licensing initiatives, with a primary emphasis on encouraging the use of electronic technology
- Monitor and respond to developments related to licensing reciprocity
As a member of the Working Group, the Director participates in regional and national SILA (Securities Insurance Licensing Administrators) meetings and occasional NAIC meetings. Participation in Working Group conference calls is ongoing throughout the year.
In 2008, the Working Group published a licensing handbook and updated the NAIC renewal applications in order to make them more user-friendly. As a result of the application changes, renewing producers no longer have to resubmit documentation of a legal nature if they have submitted and disclosed this information in past applications. This cuts down on the use of paper and streamlines the processing of renewing licensees.
Financial Conditions (E) Committee
The mission of the Financial Condition (E) Committee is to be the central forum and coordinator of solvency-related considerations of the NAIC relating to accounting practices and procedures, blanks, valuation of securities, the Insurance Regulatory Information System (IRIS), financial analysis and solvency, zone examinations and examiner training and issues concerning insurer insolvencies and guarantees.
Receivership and Insolvency Task Force (E)
The Division served as a member of the Receivership and Insolvency Task Force of the NAIC during 2007. The primary mission of this Task Force is to monitor insolvencies of insurance companies and insolvency guarantee funds nationwide. The duties associated with this group include:
- Monitoring the effectiveness and performance of state administration of receiverships and the state guaranty fund system
- Coordinating cooperation and communication among regulators, receivers and guaranty funds
- Monitoring ongoing receiverships and reporting on such receiverships to NAIC members
- Developing and providing educational and training programs in the area of insurer insolvencies and insolvency guarantees to regulators, professionals and consumers
- Developing and monitoring relevant model laws, guidelines and products
- Providing resources for regulators and professionals to promote efficient operations of receiverships and guaranty funds
Attorneys in the Legal Division represented the Commissioner of Insurance as a member of the Receivership Model Act Revision Working Group of the Receivership and Insolvency (E) Task Force. In 2008, these attorneys assisted the Working Group with amendments to the Property and Casualty Insurance Guaranty Association Model Act and the Life and Health Insurance Guaranty Association Model Act.
Financial Analysis Working Group (E)
The Division also served as a member of the Financial Analysis Working Group during 2008. This group is a subgroup of the Financial Conditions (E) Committee. The mission of the Working Group is to:
- Analyze nationally significant insurers and groups that exhibit characteristics of trending toward or being financially troubled, and determine if appropriate action is being taken
- Interact with domiciliary regulators and lead states to assist and advise as to what may be the most appropriate regulatory strategies or action(s)
- Support, encourage, promote and coordinate multi-state efforts in addressing solvency problems
- Review and make appropriate updates and enhancements to the NAIC Troubled Insurance Company Handbook
Accounting Practices and Procedures Task Force (E)
The Division served as a member of the Accounting Practices and Procedures Task Force during 2007. This task force is a subgroup of the Financial Conditions (E) Committee. The mission of the Task Force is to:
- Identify, investigate and develop solutions to accounting problems with the goal of guiding insurers in properly accounting for various aspects of their operations
- Modify the Accounting Practices and Procedures manuals to reflect changes necessitated by task force action
- Study innovative insurer accounting practices which affect the ability of regulators to determine the true financial condition of insurers
The group accomplishes this mission through various working groups, sub groups, and study groups. To facilitate their objectives, these groups hold numerous conference calls annually and meet at all of the national meetings. There were substantive revisions to SSAP 91R, SSAP 98, and SSAP 99 as well as lots of non-substantive revisions to other SSAP's during 2008.
Financial Regulation Standards and Accreditation (F) Committee
The mission of the Financial Regulation Standards and Accreditation (F) Committee is the administration and enforcement of the NAIC Accreditation Program. This work includes:
- The consideration revision and interpretation of standards for accreditation
- The evaluation and interpretation of states' laws and regulations, and departments' practices, procedures and organizations as they relate to compliance with standards
- The examination of members for compliance with standards, including the development of procedures for examination
- Selecting qualified individuals to examine members for compliance with standards
- Making decisions regarding whether or not to accredit members
Each year, the Division of Insurance includes the maintenance of NAIC accreditation among its primary goals. As a condition of maintaining and retaining NAIC accreditation, Massachusetts must complete an Interim Annual Review (IAR) Guide for the NAIC accreditation staff each year. The NAIC reviews, analyzes, and evaluates the IAR, and then makes recommendations to the Financial Regulation Standards and Accreditation (F) Committee.
In 2008, Massachusetts' Interim Annual Review Guide was received in March from the NAIC. Staff from the Division's Financial Examinations section completed and returned the Guide to the NAIC on April 16th. The NAIC Accreditation Staff stated in a memo to the Financial Regulation Standards and Accreditation Committee that Massachusetts met the requirements of the IAR and continued accreditation was recommended.
Throughout the year, staff from the Financial Examinations section receive updates on NAIC current developments and emerging issues. This is accomplished by attending the quarterly NAIC national meetings and reviewing the minutes thereof, attending the annual NAIC Financial Summit, various webinar training sessions, conference calls on specific issues, and reviewing NAIC quarterly meeting issue papers and current hot topic NAIC emails.
NAIC Pre-Accreditation Review
In April 2008, the Division underwent a comprehensive NAIC Pre-Accreditation Review performed in the Boston office by a Senior NAIC Accreditation Manager. The objective of the voluntary pre-review was to assist the Financial Examination and Financial Analysis sections in preparing for the upcoming full review scheduled for March 30 - April 3, 2009. The Accreditation Manager's visit noted "no material issues" and provided valuable insight and advice to help us prepare for the spring 2009 formal accreditation review.
Capital and Surplus Relief Working Group (EX)
In November, 2008, the American Council of Life Insurers (ACLI) sent a letter to the NAIC seeking modifications to existing statutory accounting and actuarial guidelines for the year-end 2008 reporting purposes. The NAIC formed the Capital and Surplus Relief Working Group (EX) to review the ACLI request. The Working Group then enlisted the aid of several NAIC technical groups to provide their initial analyses of the ACLI proposal. In addition to a public comment period that ended Dec. 26, 2008, the Working Group held a public hearing on January 27, 2009 to gather additional comments and information.
On January 29, 2009, the NAIC Executive Committee voted to not forward the Working Group items of relief to Plenary for vote. This action, therefore, halted the progress of the ACLI proposed items from advancing. The Executive Committee recommended that the Working Group and the Task Force Committees continue work on the proposed items and work them through the NAIC normal process.
Financial Examination management closely monitored via conference calls and e-mails, the activities of the NAIC's Capital and Surplus Relief Working Group.
Climate Change and Global Warming Task Force (EX)
The mission of the Climate Change Task Force is to serve as coordinator of the NAIC analysis of the impact of climate change on insurance consumers, insurance providers and insurance regulators. The Task Force examines the implications of climate change on insurer solvency, the availability of affordable insurance coverage for the nation's insurance consumers and its impact on insurance regulation.
Staff from the Division's State Rating Bureau participated in the Task Force throughout 2008, attending NAIC quarterly meetings and participating in conference calls.
The Administration Department completes the annual NAIC Resources Survey. This survey reports on the types of positions, salaries, number of positions, budget and revenue of the Division. The Department also completes a portion of the NAIC Interim Annual Review (IAR). The IAR reports on training programs, staff turnover, position qualifications, etc. for the financial examination and surveillance staff.
Interstate Insurance Product Regulation Commission
In 2000, members of the NAIC unanimously adopted a blueprint for significant regulatory reforms to modernize state insurance regulation. The NAIC formed the Speed to Market Working Group (EX) to address regulatory efficiency issues as insurers facing competition from financial institutions sought a more effective filing and review process. The Working Group recommended a new system featuring:
- A single point of filing and review
- The development of national standards for insurance products
- A more efficient state-based procedure for processing and filing
In 2002, NAIC members decided that the facilitation of interstate cooperation and the development of national uniform standards applicable in multiple states would best be served by an interstate compact. Throughout 2002 and 2003, the working group worked closely the National Conference of State Legislatures (NCSL), the National Conference of Insurance Legislators (NCOIL), the National Association of Attorneys General (NAAG), and other state officials to further refine and enhance the Interstate Insurance Compact Model legislation. By May of 2006, more than 26 states with over 40% of the nationwide premium volume had enacted the Compact legislation. This threshold created the Interstate Insurance Product Regulation Commission (IIPRC), thereby establishing a central point for filing various insurance products. In August of 2006, the Governor signed Chapter 223 of the Acts of 2006, allowing Massachusetts to join the Compact
Within six months of its creation, the IIPRC adopted its first Uniform Standards. In the spring of 2008, experienced regulators and actuaries joined the IIPRC staff. Annual registration fees were instituted and collected from companies filing with the IIPRC and the Commission adopted a code of ethics. In the summer and fall of 2008, additional states joined the Compact, bringing the premium volume represented to more than 50% of the premium volume nationwide. Additional uniform standards were developed and adopted, bringing the total number of standards to 46 by the end of 2008. Work continues to adopt more Uniform Standards and to enhance the procedures to receive product filings on behalf of the IIPRC Member States.
Today, the IIPRC has 35 members - including Massachusetts - representing half of the nationwide premium volume. The Interstate Insurance Compact is an important modernization initiative that benefits state insurance regulators, consumers and the insurance industry. The Compact enhances the efficiency and effectiveness of the review and approval of insurance filings, allowing consumers to have faster access to competitive insurance products. The Compact promotes uniformity through the application of national product standards embedded with strong consumer protections. The IIPRC continues to adopt additional uniform standards, outreach to more states to join the Compact, and encourage insurers to utilize the IIPRC central point of product filing
In addition to serving as a member of the Compact, Massachusetts serves on the Management and Communications Committees and participates on the Product Standards and Rulemaking Committees.