January 2025 MPC Meeting Website Goes Live
The website for NOLHGA’s January 2025 MPC meeting in San Diego is now active. The site offers both in-person and virtual attendee registration for the meeting, which will be held on January 30–31. An agenda for the meeting will be released in December, but we expect the meeting to run all day on the 30th and until noon or so on the 31st.
The meeting website also offers online hotel reservations for the Hilton San Diego Bayfront, the host hotel for the meeting. The deadline for reservations at the NOLHGA rate of $289/night plus tax is January 8, 2025. The room block could sell out earlier than that, so we encourage everyone to book their rooms as soon as possible.
If you have any questions about the meeting, please contact Sean McKenna. If you have any trouble accessing the meeting website, please contact Dan Hicks.
Staff Contact - Sean McKennaNAIC Elects New Officers
On November 19, 2024, members of the National Association of Insurance Commissioners (NAIC) elected their 2025 officers:
- President: North Dakota Insurance Commissioner Jon Godfread
- President-Elect: Virginia Insurance Commissioner Scott A. White
- Vice President: Rhode Island Department of Business Regulation Director Elizabeth (Beth) Kelleher Dwyer
- Secretary-Treasurer: Utah Insurance Commissioner Jon Pike
More on the IAIS AM Comparability Assessment Report
In last week’s NOLHGA Wire, we reported that the International Association of Insurance Supervisors (IAIS) had concluded that the U.S. Aggregation Method (AM) achieves outcomes comparable to the Insurance Capital Standard (ICS). This determination is a major milestone for U.S.-based internationally active insurance groups (IAIGs), affirming the AM as a comparable framework for assessing group capital adequacy and promoting global financial stability. More information about the IAIS’s determination appears below.
Scope of the Comparability Assessment
The IAIS conducted the comparability assessment using the Provisional AM developed by the Unted States and the Candidate ICS as a Prescribed Capital Requirement (PCR). The assessment focused on nine U.S.-based IAIGs and one U.S. non-life non-IAIG volunteer group, ensuring representation across a diverse range of business models and market conditions.
- Jurisdiction: The United States was the only jurisdiction evaluated, as the Provisional AM leverages local capital regimes to aggregate legal entity–level capital into a group-wide measure.
- High-Level Principles: The assessment applied six High-Level Principles (HLPs) focusing on risk correlation, prudence, scope, transparency, and alignment of supervisory triggers.
Convergence: Examples Where the AM & ICS Align
Here are examples where the IAIS found that the AM aligns with the ICS:
- Underlying Risk Capture: Both frameworks generally capture the same risks, albeit through differing methodologies.
- Capital Resources: Both systems apply consistent quality and eligibility standards, emphasizing prudence in composition limits and loss-absorbing capacity.
- Non-Life Insurers: The solvency ratios for non-life IAIGs are generally as prudent as or more conservative than the ICS and would result in similar triggers of supervisory action.
Despite overall comparability, the IAIS identified several areas where the AM diverges from the ICS and requires further refinement:
- Interest Rate Risk: The AM and ICS diverge in their treatment of interest rate risk for life insurers, particularly under low-yield conditions.
- Supervisory Triggers: Solvency breaches under the ICS do not always trigger corresponding breaches under the AM, which may result in delayed supervisory intervention for life insurers.
- Solvency Ratios for Life IAIGs: The AM often yields higher solvency ratios than the ICS under normal conditions, potentially signaling less prudence. However, these differences diminish under extreme stress scenarios.
- Prudence Variability: The AM demonstrates variability in prudence depending on group-specific factors. For non-life groups, the AM is at least as prudent as the ICS, but for life groups, differences in prudence between the two frameworks are more pronounced under specific scenarios.
The Group Capital Calculation (GCC) is the U.S. expression of the AM and will be, at a minimum, the starting point for the Final AM. The NAIC will consider identified divergences and determine whether any changes are merited in establishing the Final AM. Key priorities include:
- Interest Rate Risk Calibration: Revising methodologies to improve sensitivity to changing economic conditions.
- Supervisory Triggers: Aligning thresholds to ensure timely intervention across both frameworks.
- Scaling Methodologies: Potentially moving to a new scaling method, starting with the GCC scalars.
Implications for Insurers
- Life Insurers: Key adjustments will enhance the AM’s treatment of life-specific risks, addressing solvency ratio disparities.
- Non-Life Insurers: Minimal changes are expected, as the AM already demonstrates comparable or greater prudence.
- Health Insurers: Indirect effects may arise as the framework evolves, requiring careful monitoring.
The IAIS report affirms the AM’s viability as a comparable alternative to the ICS. Addressing divergences in interest rate risk and supervisory triggers will further enhance the framework’s effectiveness, ensuring global consistency in capital adequacy standards while preserving the strengths of the U.S. regulatory system. Staff Contact - Sean McKenna