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IN THIS EDITION:

• NAIC 2024 Fall National Meeting
• Receivership and Insolvency (E) Task Force
• Life Actuarial (A) Task Force (LATF)
• Long-Term Care Actuarial (B) Working Group
• Big Data and Artificial Intelligence (H) Working Group
• Statutory Accounting Principles (E) Working Group (SAPWG)
• Long-Term Care Insurance (B) Task Force
• Financial Stability (E) Task Force
• Privacy Protections (H) Working Group
• Special (EX) Committee on Race and Insurance (SCORI)
• Valuation of Securities (E) Task Force
• International Insurance Relations (G) Committee
• Annuity Suitability (A) Working Group
• Accounting Practices and Procedures (E) Task Force
• Capital Adequacy (E) Task Force
• Pharmaceutical Benefit Management Regulatory Issues (B) Working Group
• Cybersecurity (H) Working Group
• Third-Party Data and Models (H) Task Force
• Life Insurance and Annuities (A) Committee
• Financial Condition (E) Committee
• Health Insurance and Managed Care (B) Committee
• Innovation, Cybersecurity, and Technology (H) Committee
• CIPR Event: Commercial Real Estate – Assessing Insurers’ Short- and Long-Term Exposure
• NAIC/Consumer Liaison Committee
• Joint Meeting of Executive (EX) Committee and Plenary followed by 2025 Officer Election

NAIC 2024 Fall National Meeting

The NAIC held its 2024 Fall National Meeting on November 15–19. Below is a summary of the guaranty association–related activity at the meeting.

Receivership and Insolvency (E) Task Force

Downplays GRID Proposal: RITF heard a consumer proposal to expand the NAIC’s Global Receivership Information Database (GRID), which collects and publishes nationwide information on receiverships. Jacob Stuckey (Chair – IL) said most information in the proposed expansion was either publicly available elsewhere or raised confidentiality issues. Likewise, there was no appetite to move states’ voluntary participation in GRID over to an accreditation standard. The task force did propose that the consumer work with longtime regulator and contract receivership staff Doug Hartz on more practical ideas. The task force also agreed to: (1) update the GRID webpage to include receivership contact information and a link to NAIC insurance data services; and (2) remind states more frequently to update information in GRID.

International Update: Bob Wake (ME), one of the NAIC’s representatives to the IAIS Resolution Working Group, gave a recap on international activity. Wake described what is coming to a head on resolution—the EU’s Insurance Recovery and Resolution Directive final text expected to be published soon, which will trigger Member State adoption processes; the IAIS Insurance Core Principles revisions related to recovery and resolution expected to be approved and published in December; and the IAIS Resolution Working Group meeting in April 2025 to start the process of updating guidance material on recovery and resolution planning.

Life Actuarial (A) Task Force (LATF)

AAT for Reinsured Business Document Exposed: The task force exposed a document summarizing the task force’s decisions from Day One of the LATF meeting related to the draft Actuarial Guideline (AG) on Asset Adequacy Testing (AAT) of reinsured business. Here are the key elements of the exposure:

• Affiliated vs. Non-Affiliated Treaties: The exposure suggests there may be treaties designated as non-affiliated for some purposes that may be considered affiliated for purposes of the AG and requests feedback on this issue. The language suggests that the task force will address issues with affiliated arrangements first and then move on to non-affiliated treaties.
  
• Disclosure vs. Additional Reserves: The exposure recognizes that for 2025, the AG will focus on disclosures (including cash flow testing in some instances) but will not contain expectations on additional reserves as a result of the additional analysis. That said, task force members continue to emphasize that states have the authority to take certain actions in the event issues are identified.
  
• Aggregation: The exposure calls for feedback on the task force’s current viewpoint on aggregation. Aggregation generally will be allowed with respect to a single counterparty; where the company or regulators have concerns about aggregation within a single counterparty, separate cash-flow testing results by line of business or product should be produced. The Appointed Actuary should provide support for their aggregation approach.
  
• Feedback on Case Study: Fred Andersen (MN) walked through a case study of a reinsurance arrangement resulting in a reserve reduction at the end of the Day One meeting (see pages 108-115 of the Supplemental Materials). The task force is requesting feedback on the case study, particularly regarding the amount of starting assets that would be part of the cash flow testing to test the post-reinsurance reserve for adequacy.

Comments on the exposure are due January 15, 2025.

Ongoing VAWG Reviews of AG 53 Submissions: As has become customary at National Meetings, Andersen provided an update on the Valuation Analysis Working Group’s (VAWG’s) review of 2023 AG 53 reports (see the presentation beginning on page 88 of the Supplemental Materials). A major takeaway: several companies have been identified as new “outliers” based in large part on increased assumptions for 2023 filings; regulators have reached out to those companies for additional information and are reviewing responses. Assuming companies continue to be cooperative with regulators and reduce assumptions, as deemed necessary, LATF will not take additional action. Alternatively, if concerns become more widespread, LATF may pursue assumption guardrails in AG 53.

Additionally, regulators are reviewing models to ensure they have the appropriate rigor and capture all risks associated with Projected High Net Yield Assets. Concerns have been raised regarding the amount of excess spread companies are including for illiquidity risk, and regulators will take a closer look at this next year. Finally, VAWG members are reviewing the impact of the changes to the 2023 guidance related to payment-in-kind (PIK) and tranche-level information. The revised 2024 guidance contains additional guidance on PIK features.

Update on VM-22 Field Test: The task force received an update on the development of VM-22 and recent model office testing. While a handful of material VM-22 components remain undecided (e.g., reinvestment guardrail, additional SPA assumptions, longevity reinsurance, purpose of SPA), LATF is still on track to adopt VM-22 next year, with a January 1, 2026, effective date (with a 3-year optional implementation period). Most of the outstanding items will be discussed during the subgroup’s December calls.

Ernst & Young walked through initial results of the model office broken down by product type (SPIA, PRT, fixed deferred annuities [with and without guaranteed lifetime withdrawal benefits], and fixed indexed annuities [with and without guaranteed lifetime withdrawal benefits]), comparing VM-22 reserves under the model office to current stat reserves under CARVM (see page 13 of the Supplemental Materials for a summary of this analysis). The only product showing an increase in reserves at this point is fixed indexed annuities without guaranteed lifetime withdrawal benefits. The variance within the PRT block is noteworthy—with the structured settlement sub-block showing a decrease in the reserve, while a retired block shows an increase from CARVM. The presenter emphasized that the model currently assumes a 50/50 blue-to-white collar mix of retired business. The presentation provides a detailed analysis of each product type, noting the drivers of any change (mortality, asset performance, etc.).

Update on GOES Field Test: The GOES Subgroup provided an update to the task force on the field test, key discussion topics, and next steps.

• The field test was completed over the summer, and participants delivered their results confidentially to regulators from July to October. Model office testing results for variable annuity and life were presented in June and August, and overall the model office testing was successful in relaying the impacts of the generator.
  
• Decisions still need to be made on several discussion topics (see page 36 of the Supplemental Materials) that are likely to be discussed during the subgroup’s December calls (a schedule of planned topics will be distributed in advance). Equity calibration and GFF options were discussed (see pages 48–53), but no decisions were made. Decisions on the final items will be tested with the model office. Mike Yanacheak (IA) emphasized that the model office will be analyzed on an ongoing basis for future changes, and a model governance program is under development.
  
• To keep GOES on track for adoption, LATF will need to adopt related VM amendments by mid-2025 and the Life RBC Working Group will need to adopt blanks changes by mid-year 2026. The current workplan suggests work will begin in early 2025 on an APF to modify the VM, followed by the Life RBC work, but the ACLI proposed addressing those on parallel tracks to the extent possible, which Yanacheak and Rachel Hemphill (Chair – TX) supported.

Actuarial Organization Update: The task force heard a number of updates from actuarial organizations on their recent work. Here are a few takeaways from those discussions:

• The Society of Actuaries (SOA) recently released: (1) an individual life mortality experience report; and (2) an experience study with LIMRA on fixed indexed annuity policyholder behavior. The SOA/LIMRA research and analysis is moving to a subscription model in 2025.
  
• The Academy is holding an investment symposium in the Spring of 2025 in New York City (registration opening soon).
  
• Most of the recent updates from the Actuarial Standards Board are available in its Boxscore.
  
• Finally, the task force exposed revised Life Knowledge Statements for Qualified Actuaries for a comment period ending on January 8 (see Attachment 16 of the Supplemental Materials).

Adopted APF 2024-14 (Surrender Charge Waivers) with the understanding that the meeting minutes will reflect that regulators have a broad interpretation of the “historical data” requirement and will be flexible with companies.

Re-exposed APF 2024-13 (IMR Clarification) for 14 days.

Exposed APF 2024-15 (SPA mortality correction with little or no company experience) for 21 days.

Long-Term Care Actuarial (B) Working Group

The working group adopted a proposed cost-sharing framework to accompany a planned exposure draft to amend the MSA framework. The proposal would change the cost-sharing formula to address the 85/25/400 issue. The proposal would include a “5% haircut for first 100%, 20% haircut for the portion of cumulative rate increase between 100% and 400%, 80% haircut for the portion of the cumulative rate increase in excess of 400%.” Attendees expressed concern that the approach lacked flexibility and transparency in the process.

Big Data and Artificial Intelligence (H) Working Group

The working group heard the following updates and presentations:

Health Survey: The Health Insurance AI/ML survey was officially launched on November 11, with responses from participating companies due January 22, 2025. Commissioner Humphreys (Chair – PA) said the working group hopes to have the results analyzed and compiled into a report by March 17 and shared with the public around March 24.

Report on Use of AI in Utilization Management (UM): The Leukemia & Lymphoma Society and NORC at the University of Chicago presented (see page 13 of the Meeting Materials) on their report on Health Insurance Companies’ Use of AI to Conduct Utilization Management (UM). Key findings of the report include: (1) health insurers regularly use AI to conduct UM; (2) there need to be proper safeguards in place to protect consumers; and (3) the use of AI tools is outpacing regulation. At a high level, the report recommends (1) meaningful transparency—the speakers suggested a risk-based approach to transparency and disclosure could be beneficial; (2) clearer standards to identify which parties are accountable when AI is making decisions; and (3) ensuring regulators have appropriate oversight authority to review algorithms.

Presentation on Underwriting & Claims: Dr. Frank Quan of the University of Illinois walked through a presentation (see page 44 of the Meeting Materials) on use case applications of AI in insurance underwriting and claims.

2025 Charges: Humphreys reviewed the working group’s 2025 charges (see page 57 of the Meeting Materials). He emphasized that the working group is shifting its focus toward consumer outcomes (reflected in new charge C) and AI systems evaluation (reflected in new charge D). He noted that this work may lead to a gap analysis of the regulatory framework against needed consumer protections.

Statutory Accounting Principles (E) Working Group (SAPWG)

The working group adopted the following non-contested items:

• Ref #2024-11: ASU 2023-09, Improvements to Income Tax Disclosures, which rejects ASU 2023-09 and removes a disclosure from SSAP No. 101 that is no longer relevant under the current tax laws.
  
• Ref #2024-17: Clearly Defined Hedging Strategy, which amends SSAP No. 108 to update the definition of a clearly defined hedging strategy to mirror guidance in VM-01.
  
• Ref #2024-18: Clarification to NMTC Project, which updates SSAP No. 48 - Joint Ventures, Partnerships and Limited Liability Companies, SSAP No. 93 - Investments in Tax Credit Structures, and SSAP No. 94 - State and Federal Tax Credit to expand and amend statutory guidance to include all tax credit investments regardless of structure and type of state or federal tax credit program, and all state and federal purchased tax credits.
  
• Ref #2024-19: ASU 2024-02, Codification Improvements, Amendments to Remove References to the Concepts Statements, which rejects ASU 2024-02 as not applicable to statutory accounting.

Adopted the bond definition Q&A document (with edits proposed by interested parties) as a new interpretation to SSAP No. 21 – Other Admitted Assets and SSAP No. 26 – Bonds. The working group also directed NAIC staff to work with industry on a review of SSAP No. 42 – Surplus Notes to consider slight revisions related to capital notes. Finally, the working group directed NAIC staff to clarify that Issue Papers are Level 5 in the statutory hierarchy (i.e., should be applied only when they are consistent with an adopted statutory accounting principle).

Re-exposed the item on collateral loan reporting – discussions to resume after February 6, 2025. The Blanks Working Group has exposed an item to address the issues outlined in this proposal, so SAPWG will address comments received concurrently with the comments on the Blanks proposal.

Decided against making any SSAP changes related to repacks and derivative wrapper investments. Instead of pursuing additional SSAP changes, the working group directed NAIC staff to prepare a blanks change clarifying that the sale of a security to an SPV for which a debt security is acquired back from the SPV with derivative wrappers (or other components) should be shown as a disposal and acquisition. The revised item likely will be exposed at the December SAPWG meeting.

Exposed the following items for comment:

• Ref #2024-20: Restricted Asset Clarification, which clarifies how assets held under modified coinsurance or funds withheld arrangements should be reflected within the restricted asset disclosure in SSAP No. 1 and corresponding disclosures in Note 5L of the statutory financials. It also proposes enhanced disclosures to fully identify the extent of restricted assets within a single disclosure. NAIC staff is aware of inconsistent reporting of modco/FW assets in the restricted asset disclosure, and this item seeks to create consistency across companies. Upon adoption of revisions, SAPWG would send a referral to the Life RBC Working Group to update the life RBC formula to clarify that if an insurer uses any assets held under a modco or funds withheld agreement as collateral or a pledged asset for a purpose unrelated to the reinsurance agreement, then the reporting entity should not take any credit for those assets in the RBC formula.
  
• Ref #2024-21: Investment Subsidiary Classification, which raises questions related to the treatment of investment subsidiaries—with a possible revision to SSAP 97, a blanks proposal, or a referral to the Capital Adequacy Task Force and related working groups. Under current guidance in SSAP No. 97, the concept of a Subsidiary, Controlled, or Affiliated (SCA) entity that simply holds assets is not reflected. The working group will hold off on deciding the appropriate course of action until decisions are made regarding the outstanding questions.
  
• Ref #2024-22: ASU 2024-01, Scope Application of Profits Interest and Similar Awards, which would adopt ASU 2024-01, Compensation – Stock Compensation with certain modifications. The proposed revisions to SSAP No 104 – Share-Based Payments are included in the exposure.
  
• Ref #2024-23: Derivative Premium Clarifications, which clarifies that derivative premium costs cannot be capitalized into IMR (through the IMR project, NAIC staff has learned that there is some confusion among industry regarding whether insurers are able to capture derivative premium costs in the calculation of realized losses for the derivative transaction).
  
• Ref #2024-24: Medicare Part D – Prescription Payment Plan, which would create a new Interpretation (INT 24-02) and edit INT 05-05 to address changes to the Medicare Part D prescription drug program. The revised Medicare Prescription Payment Program (MP3) requires insurers to pay pharmacies at the point of sale the out-of-pocket costs of enrollees who have opted into MP3 and then seek reimbursement from enrollees. The draft interpretation would require that MP3 recoverables be accrued and reported on asset line 24 Health care and other amounts receivable when the related pharmacy out-of-pocket payment is incurred. MP3 receivables less than 90 days overdue generally are admitted assets; uncollected MP3 recoverables more than 90 days overdue are nonadmitted. SAPWG directed NAIC staff to coordinate with the Blanks Working Group on a proposal in the interim and to develop disclosures for future reporting. Referrals also will be sent to the Health Insurance Committee and Health RBC Working Group.
  
• Ref #2024-25: SSAP No. 16 ASU Clarification, which would amend SSAP No. 16 – Electronic Data Processing Equipment and Software to include direct references to relevant ASUs.
  
• Ref #2024-26EP: Fall 2024 Editorial Revisions

Comments are due January 31, 2025, for all items (except for the Editorial Revisions, which have a December 9 comment deadline).

Received updates on the following workstreams:

• IMR ad hoc subgroup: The group continues to meet regularly and has been focused on IMR from reinsurance transactions; the group is reassessing existing guidance on this topic. Dale Bruggeman (Chair – OH) noted that they are driving hard on this to try to conclude by year-end 2025.
  
• Reinsurance exposures: Agenda items 2024-05, 2024-06, and 2024-07 (described above) are related to the prior exposures related to modified coinsurance, funds withheld, and risk transfer for combo reinsurance arrangements. The prior exposures have had their comment deadlines extended at the request of the ACLI. The ACLI continues to work with working group members and suggested creating a small drafting group as a possible next step. Bruggeman noted that these issues may be discussed further on the December call but, if not, will be addressed in the first quarter next year.
  
• Use of third-party vendors to determine bond definition compliance: Kevin Clark (IA) and Bruggeman both urged companies to be cautious when using third-party tools to apply the principles-based bond definition—emphasizing that anything purporting to set black-and-white standards may conflict with the principles-based aspect of the definition. “Trust but verify,” urged Bruggeman.
  
• Bond definition implementation: The Bond Small Group has concluded its regular meetings but will resume them in the future based on issues or questions raised.
  
• NAIC staff reported that Lloyds has gotten rid of a number of syndicates. NAIC staff is working with Lloyds on this and may issue a memo to Blanks clarifying this item.

The working group will hold a December 17 call to discuss items exposed with November deadlines, along with some of the items discussed at the Fall National Meeting.

Long-Term Care Insurance (B) Task Force

The task force voted to adopt the LTC Actuarial Working Group’s report regarding the updated cost-sharing approach to the MSA framework. The task force expected to release an exposure draft of the MSA framework with the new cost-sharing approach within two days following the meeting. Comments will be accepted through December 13, with a meeting and vote for adoption the week following. The task force will be disbanded at the end of the year.

The task force also heard a report from the Center for Insurance Policy Research on research and modeling conducted on reduced benefit option letters to see what factors are significant in consumer choices. A full report is expected to be released before the end of the year.

Financial Stability (E) Task Force

MWG Activities – Focus on Cross-Border Reinsurance: Bob Kasinow (NY) reported that the Macroprudential Working Group (MWG) met in regulator-only session to discuss cross-border reinsurance issues. Earlier in the year, working group members had requested additional information from NAIC staff related to cross-border reinsurance, including the products being reinsured, location of reinsurers, and information about affiliate transactions. During the discussion, regulators requested additional analysis, including educational sessions on Schedule S (for life and health insurers), reinsurer concentration information, and micro/macro dashboards. The working group will continue to work on these items and anticipates public disclosures next year. In response to an interested party comment, Kasinow noted that the working group is coordinating this activity with the Reinsurance Task Force.

LST Framework Exposed: The task force exposed a revised version of its liquidity stress test (LST) framework. There were no substantive changes from last year’s framework. Regulators reviewed whether additional reporting should be required for separate account business and have concluded that no changes to the framework are necessary at this time. Comments are due December 17.

Update on LST Results: Kasinow also walked through the NAIC’s summary of 2023 LST results, which continue to show that the amount of potential assets sold under the five scenarios would not be significant given historical average daily trading volumes by asset type.

FSOC Activities: Director Dwyer (RI) provided an update on the activities of the Financial Stability Oversight Council—as always, limited by what she can say in a public forum. Notably, the Council continues to monitor credit risk, the commercial real estate market, and the broader macroeconomic trends. With respect to insurance, the Council recently discussed the state of the P&C market and the NAIC’s PCMI data call. The FSOC Annual Report is scheduled to be published in early December.

VAWG AG 53 Reviews: Fred Andersen (MN) discussed regulators’ reviews of 2023 AG 53 (Asset Adequacy Testing) reports. Andersen gave a similar presentation at LATF, both of which emphasized regulators’ continued focus on net yield assumptions and reinsurance collectability. Andersen noted that regulators are reviewing year-end 2023 submissions that include new tranche-level data and information about payment-in-kind (PIK) features. Looking ahead, Andersen anticipates guidance regarding how investment teams are communicating with actuarial teams, specifically regarding PIK features.

International Activities: Tim Nauheimer (NAIC) provided an update on IAIS activity. The GIMAR is scheduled to be published next month, which will provide more context and analysis of the key 2024 risk themes, including risks stemming from the challenging and uncertain macroeconomic environment and structural shifts in the life insurance market. The Macroprudential Supervision Working Group is scheduled to issue a public consultation on structural shifts in the life insurance sector early next year.

Privacy Protections (H) Working Group

Drafting Extension: The working group approved an extension until Fall 2025 for the completion of revisions to Model #672.

Clarification on Exposures & Next Steps: Comments on Article III of the Chair’s Draft of Revisions to Model #672 were due November 25. Superintendent Dwyer (Chair – RI) explained that several trade groups requested a comment extension until December 6, which was denied. The working group believes that trades have had sufficient time to solicit feedback from members since the entire draft has been available since August 5. Dwyer said the working group is unable to provide 30-day comment periods for each section and intends to move quickly. Trades are encouraged to gather all comments in advance to comply with short exposure deadlines. Dwyer also reminded the group that the revised Section 5 was released on November 11, but additional comments will not be received on that section until the entire model is exposed for comment at the end of the drafting process.

Consumer Rep Privacy Principles: NAIC consumer representatives presented eight privacy principles intended for regulators to keep in mind during the model law revision process. According to the consumer reps, the revised Section 5 currently aligns well with these principles.

Federal Legislation: Shana Oppenheim (NAIC) provided a brief federal update that included an overview of the CFPB’s regulation restricting how financial institutions handle consumer financial information and pending congressional legislation. The bottom line is that none of these items are expected to survive the incoming Administration and shifts in congressional leadership.

Special (EX) Committee on Race and Insurance (SCORI)

The committee received the following updates:

• Update for 2025: Commissioner Mais (Chair – CT) said the committee has not published 2025 charges yet because he and incoming president Godfread (ND) think the work of the SCORI workstreams should be transitioned to the letter committees (which was the plan from SCORI’s inception). Discussions with committee leadership are ongoing, and updates will be provided.
  
• Health Insurance Workstream: The health insurance workstream will soon meet in regulator-only session to discuss the presentations from its recent calls on race and ethnicity data collection and discuss potential year-end deliverables.
  
• Life Insurance Workstream: The committee adopted the life insurance workstream’s Endorsement of Financial Literacy Courses in High School (see page 6) that endorses the completion of financial literacy and personal finance coursework as a prerequisite for high school graduation. The endorsement was adopted with an added sentence from consumer representatives in the Financial Literacy in Schools Through an Equity Lens section: “An equity lens also raises the need for personal finance courses to be as universally available and accessible as possible, taught using a variety of approaches and to all students, including those with developmental or intellectual disabilities.”

Valuation of Securities (E) Task Force

The task force adopted the following items:

• Removal of Subscript S and Credit Risk References: In light of the changes to the NAIC Designation definition (which was expanded beyond credit risk to all investment risk), the task force removed references to Subscript S and other references suggesting that NAIC Designations are limited to credit risk. The task force deleted paragraphs 50–58 in Part II of the P&P Manual as proposed by interested parties to ensure that the P&P Manual accurately reflects the task force’s decisions at the Summer National Meeting.
  
• Clarification on Use of CRP Rating in FE Process: This item clarifies that the NAIC uses credit ratings in the filing exempt (FE) process only for those classes of credit ratings for which a Credit Rating Provider (CRP) is registered with the SEC as a Nationally Recognized Statistical Rating Organization, as identified in the P&P Manual. SVO staff has emphasized that this is simply a clarification and does not change the current policy of the SVO. Interested parties voiced their support of this change.
  
• Periodic Review of Regulatory Transactions: This item provides for an annual review of Regulatory Transactions (as defined in the P&P Manual) by the SVO or Structured Securities Group (SSG). Interested parties voiced their support of this change.

The task force also received the following updates:

• Status of Private Rating Letter (PLR) Rationale Report Filings: The most material update came from Charles Therriault (SVO) on implementation of changes related to the submission of private letter rating (PLR) rationale reports. Insurers are required to submit PLR rationale reports to the SVO for privately rated securities issued after January 1, 2022. The task force has directed SVO staff to deactivate the filing exempt status for those privately rated securities issued after that date that have not had their rationale reports submitted at year-end (with a 30-day grace period for those securities renewed in December). The SVO has identified roughly 1,700 such securities and is working with industry. The SVO recognizes that its own technological issues have prevented many insurers from submitting rationale reports to date.
  
• Development of CLO Modeling Methodology: The CLO Modeling Ad Hoc Group will hold a call in the next few weeks to continue discussion of its modeling efforts. SSG staff have selected a preliminary distribution, which can be summarized as follows: (1) the SSG calculated the approximate pool RBC for each of the 1,800 CLOs they have modeled; and (2) the SSG generated a number of random probability distributions and selected the one that minimized the mean-squared error. The scenario was further fine-tuned to lower the mean-squared error. The algorithm will be presented on the upcoming call, and the SSG will be looking for comments on the proposed methodology, including ways to further lower the mean-squared error. The NAIC SSG will post its next batch of modeling results in the first quarter of 2025, which will include methodology changes proposed by industry.
  
• SAPWG Activities: Dale Bruggeman (OH) updated the task force on a number of items coming out of SAPWG that related to insurer investments, including the bond definition implementation Q&A, collateral loan reporting work, repack proposal, and conceptual item on investment subsidiaries.
  
• Insurers Encouraged to Submit SASBs: The SVO encouraged insurers to submit Single Asset Single Borrower (SASB) Commercial Mortgage Loan securitizations that do not qualify as a bond under the principles-based bond definition to the SVO to obtain an NAIC Designation. The treatment of SASBs under the revised definition is discussed in detail in the bond implementation Q&A document.

Special Session on Impact Investing: Connecticut Commissioner Andy Mais convened a special session following the VOSTF meeting to discuss the first development from a small working group of five states (California, Connecticut, Iowa, New York, and Wisconsin) and industry to address impact investing, namely investing related to affordable housing. Nuveen, in partnership with Catalytic Capital, has developed a collateralized fund obligation (CFO) with the dual objective of: (1) investing in the climate transition to increase resource efficiency, mitigate carbon emissions, and reduce waste; and (2) investing in the provision of basic services to expand access affordability and resiliency among low-income populations. Mais and other regulators involved in the process emphasized that this is “just the beginning” and regulators are open to hearing more ideas in this space, whether they fall within the current regulatory framework or not.

International Insurance Relations (G) Committee

IAIS AM Comparability Decision: The highlight of the meeting was Commissioner White’s (VA) update on the recent IAIS comparability assessment that finds the “US AM provides a basis for implementation of the ICS to produce comparable outcomes.” However, the assessment report highlights some areas of work, as part of the implementation process, that will ensure the convergence of standards (treatment of interest rate risk and timing of supervisory intervention). White emphasized that the NAIC will be responsible for that work through its existing processes; the NAIC is currently thinking through timelines and which groups will be involved. The implementation of the U.S. AM will need to follow the same timeline as the ICS implementation (baseline self-assessments in 2026 followed by targeted jurisdictional assessments in 2027). The official decision, along with the final ICS, was scheduled to be adopted at the IAIS Annual Conference in Cape Town on December 5.

The meeting was followed by the IAIS Secretariat Q&A Session with Interested Parties. Jonathan Dixon emphasized that the FSB’s upcoming list of insurers subject to resolution plans will not represent a list of global systemically important insurers. That said, the list represents global insurers subject to the FSB’s relevant Key Attributes, which apply at a minimum to global systemically important insurers but also extend to those seen as critical in failure.

Dixon also noted that several consultations and publications are expected over the next two months:

• IAIS Consultation on AI Application Paper (Published November 18; comments due February 17)
  
• IAIS Consultation on GME Ancillary Indicators (November)
  
• IAIS Publication of Application Paper on Supervising DEI (November)
  
• FSI-IAIS Brief on Parametric Insurance (late November or early December)
  
• IAIS 2024 Global Insurance Market Report (early December)
  
• FSB Annual Resolution Report that will include the list of insurers subject to resolution planning (early December)
  
• IAIS Adoption of ICS and updates to ICPs and ComFrame (early December)
  
• IAIS Members-only Risk-based Solvency Implementation Guidance (December)
  
• IAIS 2025-2029 Roadmap (January)

Annuity Suitability (A) Working Group

The working group opened its meeting to interested party comments on the Chair Draft Safe Harbor Guidance Document:

• Building on a joint trades’ comment letter, Sarah Wood from IRI advocated for a principles-based approach. She asked for greater clarity regarding an insurer’s obligations where it contracts to provide supervision, ability to rely on a screening or sampling system to ensure compliance, and flexibility to adopt a compliance process that fits its circumstances.
  
• Matt Gendron (RI) emphasized that compliance certifications are not a panacea, expressing reluctance to allow an insurer to avoid separate review of third-party policies and procedures in all circumstances.
  
• Wayne Mehlman (ACLI) echoed the IRI comments and asked that the working group develop a revised draft.
  
• Chair Doug Ommen (IA) agreed and said that the drafting group will meet to consider the joint trades’ comments and revise the draft (without providing a specific timeline).

Accounting Practices and Procedures (E) Task Force

This was a reporting up meeting; the task force heard reports from SAPWG and the Blanks Working Group.

Capital Adequacy (E) Task Force

Task Force Declines to Create New Working Group: Earlier this year, the task force received a proposal to establish a new working group to address a number of issues, including non-investment risks in the RBC formula, the possible removal of total adjusted capital and authorized control level amounts from the annual statement, and whether changes should be made to the RBC Preamble regarding the use of RBC. The task force has decided against the creation of a new working group and will analyze these issues at the task force level—keeping open the possibility of a new working group at a later date, if necessary. Expect more CapAd meetings next year to address some of these substantive issues.

Other highlights from the task force’s meeting include:

• Adopted the Severe Convective Storm Event and Cat Event Lists
  
• Exposed Proposal 2024-25-CA (Principles-Based Bond Project for P&C and Health) for 75 days. These changes incorporate the blanks changes that were made as a result of the adoption of the principles-based bond definition into the health and P&C RBC formulas.
  
• Exposed Proposal 2024-25-CA (Tax Credit Investments for P&C and Health) for 75 days. These changes update the RBC instructions and blanks to reflect SAPWG changes related to investments in tax credit structures and state and federal tax credits. This proposal addresses the structural and instructional changes adopted but does not address the potential factor change from the expansion of the scope of accounting guidance and the expansion of the types of tax credit investments captured in the guidance.
  
• Received Update on Academy’s H-2 Work: The Academy remains on track to finalize a report on its comprehensive review of H-2 underwriting risk in the Health RBC formula and present it to the Health RBC Working Group early next year.

Pharmaceutical Benefit Management Regulatory Issues (B) Working Group

PBM “101” Presentation: The bulk of the meeting was dedicated to hearing presentations from PCMA, PhRMA, NCPA, and NACDS on the role of pharmacy benefit managers (PBMs) and current policy issues surrounding pharmacy benefits. While the presentations largely covered topics that have been addressed in the group’s white paper, they were nonetheless requested by members of the working group. PCMA emphasized the cost-effectiveness of health plans using PBMs and pressures by health plans for PBMs to compete to find the lowest net cost. PCMA also noted the importance of letting the free market compete—for example, plans and programs can choose a pass-through model. PhRMA asked regulators to focus on vertical integration; “perverse incentives to favor profits”; and PBM business practices that impact patient access, such as copay accumulator and maximizer programs. PhRMA noted that Minnesota and Nevada are currently enforcing the 2020 Payment Notice rules that limit copay accumulator programs when there is a generic equivalent available, in light of a court decision overturning the 2021 Payment Notice rules permitting accumulator programs. NCPA and NACDS discussed their goal to have one pharmacist housed in each state department of insurance (or other regulatory agency that regulates PBMs). They would also like regulators to consider developing a uniform complaint form that pharmacists can use to challenge PBM reimbursement adjudication (e.g., failure to follow NADAC when required).

Coordination with Producer Licensing Uniformity Working Group: Vice Chair Ashley Scott (OK) informed the audience that the PBM Working Group plans to coordinate with the Producer Licensing Uniformity Working Group (PLUWG) as it relates to the former’s updates to the examination handbook to address PBM market conduct examinations. Specifically, the PLUWG will work in 2025 to create a new section on PBM licensure best practices and uniform standards in the State Licensing Handbook with input from the PBM working group.

Cybersecurity (H) Working Group

CERP Update: The Cybersecurity Working Group decided to work with the NAIC to explore the creation of the Cybersecurity Event Repository & Portal (CERP). The first phase of this project will be focused on building a test portal to ensure the CERP can meet the obligations under Model #668. Most of the meeting was spent discussing concerns raised by NAMIC, which views the CERP as potentially bringing on unintended systemic cyber risk for the industry, primarily due to the centralization of information leading to concentration risk. Many regulators touted the NAIC’s ability to hold confidential information more securely than state insurance departments. Cindy Amann (Chair – MO) stated that many concerns are likely to be mitigated once the working group is able to hold tabletop exercises to work through hypothetical scenarios.

The working group also heard a brief presentation (see page 20) on incident response management but could not address the remainder of the agenda due to time constraints.

Third-Party Data and Models (H) Task Force

State Efforts: The task force heard from Connecticut, Texas, Maine, Pennsylvania, and New York on their respective regulatory efforts and issues with third parties. Of note, Pennsylvania walked through its draft regulation (currently in the pre-vetting stage) that attempts to address “unknown” and missing risk classifications, which Pennsylvania says results from insurers’ use of unregulated third parties that issue an automatic unknown classification if an applicant is not already in their database. The draft regulation would require the insurer to ask policyholders directly for certain information that comes back “unknown.”

Industry Presentation: NAMIC then raised concerns that the task force has skipped integral parts of its workplan by not clearly defining the scope and definition of third-party vendors for consideration, and urged the task force to look at existing NAIC definitions and frameworks (for instance, NAIC guidelines on advisory organizations and various working group deliverables). Commissioner Yaworsky (Vice Chair – FL) made clear that the task force is concerned about third-party involvement in insurance functions such as pricing, rating, loss costs, underwriting, claims adjustments, etc.

Next Steps: Commissioner Conway (Chair – CO) outlined the following next steps for the task force: (1) task force members will identify the most concerning risks in their markets with respect to third-party data and models; and (2) use what’s learned to determine what structure is needed to directly or indirectly regulate third-party models. The task force will meet again soon (possibly in December) to hear from Moody’s and the InsurTech Council.

Life Insurance and Annuities (A) Committee

Fiduciary Rule Update: NAIC staff provided a brief update on the status of the DOL Fiduciary Rule, which staff believe is unlikely to survive under the Trump Administration given his posture during his first term.

Fraud Presentation: The committee also heard from the Coalition Against Insurance Fraud (CAIF) about fraud in the life and annuity markets, noting that intentional misstatements of material information on applications is the most pervasive issue. Fraudulent actors are also engaging in other activities such as advance commission schemes, identity theft, use of synthetic IDs, account takeovers, submission of fraudulent documents, forged policy changes, and unauthorized surrenders. CAIF suggested insurers implement tighter controls and verification protocols and that regulators use the financial examination process to learn about insurer’s anti-fraud plans.

The committee also heard an update from the life workstream of the Special Committee on Race and Insurance (the same as presented during the SCORI meeting, see summary above) and a presentation on charitable gift annuities from ACGA.

During “any other matters,” the Committee of Annuity Insurers asked regulators to consider a framework (similar to FINRA on the securities side) that would allow for a pause when there is a reasonable belief that financial exploitation is taking place on products with a cash value.

Financial Condition (E) Committee

Approval of Qualified and Reciprocal Jurisdictions: The committee re-approved the current list of Qualified Jurisdictions (Bermuda, France, Germany, Ireland, Japan, Switzerland, and the UK) and Reciprocal Jurisdictions not party to a Covered Agreement with the U.S. (Bermuda, Japan, and Switzerland). Bob Wake (ME) emphasized that in making its determination, the Mutual Recognition of Jurisdictions Working Group did not express any reservations about this current list of jurisdictions.

Andersen Suggests Number of Treaties Subject to Reinsurance AAT AG: In his report on the Life Actuarial Task Force’s work on the draft AG for the asset adequacy testing of reinsured business, Fred Andersen (MN) suggested that approximately 100 treaties would be material enough to be scoped into the AG. This is not definitive, but it gives stakeholders a sense of the ultimate scope of the guideline. He also emphasized two points that he has made at several meetings: (1) the initial reporting requirements will be for disclosure purposes only; and (2) nothing in the AG will impact domestic regulators’ ability to work with their domestics regarding appropriate reserving levels if they find issues.

Cotrone Provides Additional Details on PLR Rationale Reports: In his Valuation of Securities Task Force report, Ken Cotrone (CT) noted that while the task force directed the SVO to deactivate the filing exempt status at year-end for private rating securities issued after January 1, 2022, if the rationale report for those securities has not been submitted to the SVO, a 30-day grace period will be given for private rating securities that were renewed in December. The SVO has identified 1,700 securities issued after January 1, 2022, that have not had their rationale reports submitted to the SVO and is working with industry to confirm this data. If material discrepancies are found with the data, the SVO will defer deactivation until the issues are remediated.

Barlow Provides Update on Structured Securities Work: Philip Barlow (DC) reported that the Academy continues to work closely with the NAIC’s Structured Securities Group (SSG) to identify “comparable attributes” to assist in analyzing CLO risk. Barlow has emphasized that these attributes may also be used to assess the risk of structured securities more generally once the CLO work is complete. Delays in getting the necessary data that pushed back the release date of the comparable attributes (originally scheduled for the Fall National Meeting) to early 2025 have been resolved. The NAIC’s Structured Securities Group (SSG) continues its efforts to develop a methodology to model individual CLOs.

Health Insurance and Managed Care (B) Committee

Minimum Standards Model Regulation Approval: Culminating a multi-year effort to update the Minimum Standards for the Model Regulation to Implement the Accident and Sickness Insurance Minimum Standards Model Act (#171) and the underlying Model Act (#170), the committee approved #171 with 12 yes votes and 1 abstention from Pennsylvania. Prior to the vote, a discussion emphasized that the model represents minimum standards for excepted benefits and short-term plans and states can—and will—go further, as indicated by Maryland’s Commissioner Marie Grant, who noted her state will exceed such standards.

2025 Charges & LTC Work Restructuring: The committee also approved its 2025 charges as well as those of its sub-components. Notably, the Long-Term Insurance Task Force will disband. Its prior work on the LTC Insurance Multistate Rate Review Framework (MSA Framework) will be moved to the Health Actuarial (B) Task Force; research and maintenance of guidance for reduced benefit options (RBOs) will move to the Senior Issues (B) Task Force; and the Long-Term Care Actuarial (B) Working Group will report to the Health Actuarial (B) Task Force.

AI Use in Utilization Management: The committee rounded off its series of informational presentations on topics of interest to the committee (pursuant to a survey at the beginning of the year). The findings of a consumer representative–commissioned study by NORC highlighted the widespread use of artificial intelligence tools (broadly defined) in utilization management. Only California, Colorado, and Utah have laws that specifically address such a use-case.

Health of Small Group Market: Committee members received a high-level overview of the “health” of the small group market by CIPR’s Kelly Edmiston and provided him with a number of ideas for future research, which will be prioritized by the committee members (and potentially shaped by new committee leadership). Moreover, ERISA Working Group Chair Bob Wake (ME) volunteered the group to be a resource for any further projects. In addition, Commissioner John King (GA) indicated interest in having an “offline” discussion with CIPR about individual coverage health reimbursement arrangements (ICHRAs) as his state, a new state-based Exchange, is exploring options.

CMS Presentation: The committee heard a brief presentation of new guidance and rulemaking by CMS-CCIIO, which includes a new grant opportunity for states with federally facilitated Exchanges to update their essential health benefits (EHB) benchmarks. The deadline to apply is January 15. Anita Fox (Chair – MI) urged Jeff Wu of CMS to release rules and guidance in a more expedited fashion, pointing to the long-pending preventive services final rule and guidance from HHS-OCR (a different component than CMS) on the applicability of Section 1557 nondiscrimination standards to excepted benefits such as Medigap.

Innovation, Cybersecurity, and Technology (H) Committee

Creation of the Data Call Study Group: The goal of the Data Call Study Group is to improve existing processes at the NAIC to address data needs, which includes developing consistent data definitions; standardizing filing deadlines for existing market intelligence data filings; and minimizing ad hoc data calls and coordinating with states when needed. The group has established a high level work plan (see page 15 of the Meeting Materials). Phase 1A of the project will involve a select group of regulators and staff inventorying data definitions and data collected by the NAIC, and Phase 1B will bring in trades and key insurers to help with respect to market intelligence data filings.

Approved PPWG Extension: The committee approved a drafting extension for the Privacy Protections Working Group until December 31, 2025.

Adopted 2025 Charges: The committee approved its 2025 charges (see page 24 of the Meeting Materials), which include (1) overseeing the work of the Data Call Study Group; (2) creating the SupTech/GovTech Subgroup; and (3) disbanding the E-Commerce Working Group and the Technology, Innovation, and InsurTech Working Group.

Presentations from FireBreak and InsurTech Coalition Members: FireBreak presented on how it uses AI to help mitigate wildfire risk (see page 31 of the Meeting Materials), followed by presentations from Clearcover and Lemonade (see page 49) on their respective AI governance frameworks.

CIPR Event: Commercial Real Estate – Assessing Insurers’ Short- and Long-Term Exposure

The Center for Insurance Policy and Research (CIPR) event explored the short- and long-term risks associated with insurer commercial real estate (CRE) investments and how the industry and regulators are addressing these challenges.

• Two professors—Xiao Lin (Associate Professor, St. John’s University) and Kyeonghee Kim (Assistant Professor of Risk Management & Insurance, Florida State University)—presented on their research paper in the Journal of Insurance Regulation, which analyzed the impact of climate risk, including sea level increases and flooding, on insurer CRE investments. Of note, based on an analysis of commercial mortgage portfolios of life insurers from 2012–2019, their research found “significant heterogeneity of loan-portfolios at the insurer level.” Although some insurers were deemed to have significant risk exposure based on the study’s scoring, these insurers were deemed an outlier to the broader industry.
  
• CIPR also hosted a panel on industry exposure to real estate, including Bob Kasinow (Assistant Deputy Superintendent, NYDFS), Carmi Margalit (Managing Director, S&P Global Ratings), Tim Nauheimer (Macroprudential Supervision, NAIC Capital Markets Bureau), and Kyeonghee Kim (Assistant Professor of Risk Management & Insurance, Florida State University). Key takeaways include: (1) insurers are significant holders of real estate investments, accounting for roughly 15% of their total cash and invested assets; (2) the insurance industry—primarily through life insurers—holds significant amounts of the overall commercial mortgage (16%) and CMBS markets (31%); (3) multi-family and office are the largest categories within insurer commercial mortgage portfolios; (4) office properties are slowly declining as a share of those portfolios; and (5) commercial mortgage extensions (to avoid delinquency) are increasing. Despite these significant holdings and the uptick in extensions, Margalit of S&P explained that life insurers’ commercial mortgages are “holding up well” and that life insurers could nonetheless “withstand deep losses on [their] office mortgages.”
  
• CIPR (Kelly Edmiston, Policy Research Manager) concluded the meeting by presenting on the role insurer real estate investments play in community development and their social impact.

NAIC/Consumer Liaison Committee

The committee presented the 2024 Excellence in Consumer Advocacy Awards to Commissioners Kreidler (WA) and Humphreys (PA) before hearing the following consumer representative presentations (all available in the Meeting Materials):

• How Regulators Can Help Consumers Reduce Risk & Reverse Non-Renewals: Amy Bach (United Policyholders) presented on property insurers’ use of aerial images and risk scores. She walked through a proposal for regulators/legislators that would require insurers to (1) provide consumers with copies of date-stamped images that show out-of-compliance home conditions or that impact the property’s risk score, what factors are included in the score, and what steps the consumer can take to reverse the decision; (2) provide an appeal process for the consumer to correct errors; (3) give the consumer a reasonable time period to cure the defects or conditions; and (4) offer a new or renewal policy to a consumer who submits proof that they’ve cured the defects or conditions.
  
• Use of Criminal History Data in Insurance Underwriting and Claims Evaluation: Peter Kochenburger (Southern University Law Center) described issues with insurers’ use of criminal history information in underwriting. He praised the SCORI Life Workstream’s proposed survey to collect information about this from life insurers and urged other workstreams to do the same. Commissioner Humphreys (PA) agreed that other lines of business should consider how criminal history records are used.
  
• Summary of Consumer Rep Report on AI and Health Insurance: This presentation largely tracked the presentation given during the Big Data and AI Working Group and the B Committee meeting.
  
• Consumer Challenges with Accessing MA and Medicare Supplemental Plans: Bonnie Burns (California Health Advocates) discussed challenges associated with when health care providers leave Medicare Advantage and they have limited access to Medigap. Burns outlined options for state regulators, including creating state Special Enrollment Periods; monitoring industry practices; requiring agent Medicare training; and requiring products to refer applicants to state insurance, SHIP, or Medicaid departments.
  
• How Recent & Upcoming Federal Actions Will Impact State Regulation of Health Insurance: The health consumer representatives walked through key provisions in the Mental Health Parity and Addiction Equity Act (MHPAEA) final rule, the expiring Enhanced ACA Tax Credits (urging the NAIC to continue its outreach to Congress), the status of Braidwood v. Becerra, various federal rules, and changes in the 2026 Notice of Benefit and Payment Parameters.

Joint Meeting of Executive (EX) Committee and Plenary followed by 2025 Officer Election

2025 Officers: As expected, Utah Commissioner Jon Pike without opposition was elected Secretary-Treasurer of the NAIC, putting him in line to be NAIC President in 2028. He joins NAIC President Jon Godfread (ND), President-Elect Scott White (VA), and Vice-President Beth Dwyer (RI) as 2025 NAIC officers. The NAIC also announced 2025 zone officer elections (zone officers are members of the NAIC’s Executive Committee). The 2025 roster is:

• Midwest Zone: Chair – Vicki Schmidt (KS); Vice Chair – Eric Dunning (NE); Secretary – Larry Dieter (SD)
  
• Northeast Zone: Chair – Mike Humphreys (PA); Vice Chair – Justin Zimmerman (NJ); Secretary – DJ Bettencourt (NH)
  
• Southeast Zone: Chair – Sharon Clark (KY); Vice Chair – Alan McClain (AR); Secretary – Tregenza Roach (US Virgin Islands)
  
• Western Zone: Chair – Andrew Stolfi (OR); Vice Chair – Cassie Brown (TX); Secretary – Barbara Richardson (AZ)

Gaffney to Retire: Commissioner Mais also announced the resignation of Vermont Commissioner Kevin Gaffney. Gaffney’s unexpected departure opens up the Chair of the influential Innovation, Cybersecurity, and Technology (H) Committee and Big Data and AI Working Group.

Other specific actions unanimously taken include:

• Adoption of the 2025 Generally Recognized Expense Table (GRET) for use with individual life insurance sales illustrations (a routine acceptance of the Society of Actuaries recommendation).
  
• Adoption of the Revised Amendment to the Purposes and Procedures Manual of the NAIC Investment Analysis Office (the “P&P Manual”) Authorizing the Procedures for the SVO’s Discretion Over NAIC Designations Assigned Through the Filing Exemption Process.