Illinois GA Seeks Outside Legal Counsel
The Illinois Life & Health Insurance Guaranty Association (ILHIGA) is seeking an experienced Illinois-barred attorney or firm to serve as outside counsel. The ideal candidate will have expertise in insurance regulation, insurer insolvencies (rehabilitations and liquidations), and guaranty association operations.
Interested parties should contact ILHIGA Executive Director Janis D. Potter at [email protected] for the Outside Legal Counsel RFP package.
Staff Contact - Sean McKennaFSOC Improvement Act Passes House
Last week, the House unanimously passed H.R. 3682, the Financial Stability Oversight Council Improvement Act of 2025, by voice vote. If passed by the full Congress, the bill would require the Financial Stability Oversight Council (FSOC) to consider alternative oversight approaches before determining that a U.S. nonbank financial company should come under supervision by the Federal Reserve. Identical, bipartisan legislation (S.3578) is in the Senate, signaling a strong likelihood of the legislation being enacted this Congress.
Staff Contact - Sean McKennaDOL Alternative Assets Rule Review Deadline Passes
The deadline for the White House Office of Management and Budget (OMB) to review a rule on fiduciary duties related to alternative assets (Fiduciary Duties in Selecting Designated Investment Alternatives) came and went on February 3, 2026. The Department of Labor (DOL) submitted its proposed rule—which is not yet public—to OMB on January 13. The expectation was that OMB would review the rule by February 3 in response to a 180-day deadline set by a Trump administration Executive Order from August 2025 directing review of alternative assets for defined contribution plans.
Staff Contact - Sean McKennaNAIC Updates
The Big Data and AI Working Group, now led by Commissioner Houdek (WI), met on February 9, 2026, to discuss the updated AI Systems Evaluation Tool and proposed pilot process.
Pilot Details: The following states have volunteered to participate in the pilot program: Colorado, Connecticut, Florida, Iowa, Pennsylvania, Rhode Island, Virginia, Vermont, and Wisconsin. Here are some important details:
- The pilot is expected to run from March to September 2026.
- The states will use the tool across market conduct exams and reviews, financial analysis, and financial exams; the states will attempt to be as consistent as possible in implementation, but they have the authority to modify the tool to meet their needs.
- States will use the tool with domestic insurers and coordinate with other states to minimize duplicative requests.
- Regarding confidentiality, states will leverage their exam authority; information will be protected under the confidentiality rules of the state conducting the exam.
- While the pilot’s structure is still being discussed, insurer participation is likely mandatory.
- The ACLI asked whether findings would trigger compliance penalties; NAIC staff responded that no decision has been made on how findings will be treated, and that enforcement will ultimately be up to each state. The NAIC expects dialogue between states and insurers to clarify how the tool will be used and what will be expected of companies.
- Updates will be provided at each National Meeting to the Financial Condition Committee; Market Regulation and Consumer Affairs Committee; and the Innovation, Cybersecurity and Technology Committee.
Next Steps: The working group will accept additional edits to the tool and conduct a fatal flaws walk through during the February 17 meeting. NAIC staff said the tool’s scope requires further discussion and suggested making it a key focus of the pilot, supported by presentations throughout the year. There will be no vote on the tool prior to the pilot; it is likely to change throughout the process (subject to stakeholder feedback), with final adoption expected at the end of 2026 for states to begin using on a voluntary basis in 2027.
In other NAIC news, on February 10, the RBC Model Governance Task Force issued a Request for Comments related to its comprehensive gap analysis and consistency assessment of the RBC framework. The task force notes that this work will ultimately inform the process for future RBC adjustments. Generally, the request calls for comments on (1) gaps that result in material risks not being captured by the current formulas and (2) inconsistencies across components within a formula that run counter to RBC’s purpose or meaningfully limit regulators’ assessment of the solvency risk for all or an identifiable segment of companies. The request contains specific questions related to these two broader topics. While the task force’s initial focus has been on investment components of the life RBC formula, regulators are requesting comments on all components of all three formulas. Notably, at the Fall National Meeting, the task force and its consultant reported significant progress on the gap analysis project and previewed engagement with the American Academy of Actuaries (the Academy); it is unclear how this request for comment fits into those updates from December. Comments are due March 12.
The Life RBC Working Group met on February 10 to discuss the proposal related to collateral loans. Generally, the proposal contemplates look-through treatment for all collateral loans, resulting in a risk charge based on the underlying collateral as opposed to the current 6.8% charge for all collateral loans. There seems to be a consensus among regulators and industry to move forward in this direction. Two substantive items still need to be resolved: (1) the effective date of any changes and (2) the credit insurers receive for overcollateralization.
On timing, both the ACLI and Security Benefit Life called for a later effective date to give companies time to adjust their investment strategy, noting that permitted practices are not available for RBC issues. Meanwhile, Kevin Clark (IA) and Philip Barlow (DC) suggested a 2026 effective date given that a large concentration of these investments sits in a small number of companies. Working group members will be asked to take a position on this issue on a March working group call.
On overcollateralization, the current proposal would include a 20% haircut to the RBC factors for collateral loans backed by residuals or investments in JVs/LPs/LLCs. This topic will be discussed further, but regulators voiced a preference for a “simple” solution given the size of this asset class at an industry level. Comments are due March 6.
The working group also exposed the following items:
- 2026-01-L, which would incorporate certain changes to asset valuation reserve (AVR) that are currently being considered by the Blanks Working Group (the Blanks exposure related to the reporting of CLOs is available here).
- 2026-02-L, which would treat unaffiliated Schedule BA mortgages in good standing the same as affiliated Schedule BA mortgages in good standing.
The Life RBC Working Group and Variable Annuities Capital and Reserve Subgroup held a joint call on February 11 to discuss proposed changes to the C-3 Phase I and Phase II calculations and instructions that would incorporate the revised Generator of Economic Scenarios (GOES). Brian Bayerle (ACLI) voiced appreciation for several components of the updated draft proposal, namely the calibration to CTE(98) with a 25% scalar. Bayerle emphasized that the Net Asset Earned Rate (NAER) discounting approach for C-3 Phase I and the removal of the voluntary reserves from C-3 Phase I necessitate additional conversation. Key regulator voices agreed that both issues require additional analysis. Both topics will be discussed throughout the group’s C-3 harmonization project. Comments on the revisions are due March 6.
The working group also exposed scope clarification language for VM-21 for VA contracts in payout phase that are administered as payout contracts, which can be reserved for under VM-21 with approval from a company’s domestic regulator. Comments are also due March 6.
On February 9, the Privacy Protections Working Group exposed until March 11 Article VII (Rules for Health Information) of the Chair’s Draft Revisions to Model #672. The new language makes clear that a licensee subject to HIPAA and HITECH that maintains nonpublic personal information in the same manner as protected health information is deemed compliant with the Model requirements. The working group also published the revised Article VI (Exceptions to Limits on Disclosures of Nonpublic Personal Information) informed by feedback received during the comment period last fall. Comments are not requested now; interested parties can comment at the end of the drafting process when the entire revised Model is exposed.
The Cybersecurity Working Group has exposed a revised Project Request Form to create a portal for licensees to report cybersecurity events to satisfy reporting obligations under the Insurance Data Security Model Law. The project contemplates a secure, centralized portal hosted by the NAIC to receive, manage, and track cybersecurity event notifications from licensed entities in states that have adopted the Data Security Model. A licensee that experiences a cybersecurity event would complete a single, standard notification form and select which states should be notified. Regulators would then be able to access the notification. The portal should significantly streamline compliance and reduce compliance costs for industry. The NAIC has also suggested that the portal would reduce work for regulators as they review and track individual notifications. Industry has raised concerns related to the confidentiality of information in the portal. In response, the NAIC has committed to provide a SOC 3 report annually for public review and plans to limit access to the portal. Comments on the revised Project Request Form are due March 6.
The Longevity Risk Subgroup spent most of a recent call discussing the three possible approaches (submitted by the Academy, ACLI, and New Jersey) for the C-2 treatment for longevity risk reinsurance. In the end, the subgroup decided to re-expose the Academy’s proposal with the incorporation of a floor (as proposed by Rachel Hemphill of Texas). The Academy proposed a principles-based approach where the total required assets (i.e., the TAR) required to support liabilities under an appropriate stress scenario is determined, and the capital charge is calculated to be the excess of the TAR over the reserves, originally subject to a floor of zero. Hemphill is working with the Academy to develop the revised proposal. The working group will reconvene the first week of March to discuss the matter further.
Finally, the NAIC continues to release additional committee, task force, and working group membership lists this month, compiling them in an overall Committee Report Directory on the NAIC website. Among the more significant leadership changes in February are:
- Commissioner Godfread (ND) as Chair of the RBC Model Governance Task Force, replacing Co-Chairs Houdek (WI) and French (OH), while moving Houdek to Vice-Chair. Godfread’s leadership was expected because he had initiated the workstream while NAIC President.
- Commissioner Ochs (NJ) as Chair of the Financial Stability Task Force, replacing her New Jersey predecessor; Superintendent Asrow (NY) and Bob Kasinow (NY) replace the Rhode Island team as Vice-Chair, while Kasinow remains Chair of the Macroprudential Working Group.
- Kevin Clark (IA) as Chair of the Statutory Accounting Principles Working Group; Clark had been Vice-Chair to Chair Dale Bruggeman (OH), who is now Vice-Chair. Bruggeman had been the longstanding SAPWG chair.
- Ben Slutsker’s (MN) representation of Commissioner Arnold as Chair of the Capital Adequacy Task Force, replacing Iowa representatives; and Slutsker’s appointment as Chair of the Life RBC Working Group, replacing Philip Barlow (DC), to whom Slutsker had been Vice-Chair.
- Commissioner Marie Grant’s (MD) appointment as Chair of the Regulatory Framework Task Force, replacing Grace Arnold (MN). Arnold now chairs the Health Insurance and Managed Care Committee.
- Wisconsin Office of the Commissioner of Insurance Chief Legal Counsel Lauren Van Buren’s appointment as Chair of the newly formed Annuity Buyer’s Guide Working Group.
IAIS Publishes Application Paper on Operational Resilience
On February 12, 2026, the IAIS published its final Application Paper on operational resilience objectives and toolkit informed by consultations in 2024 and 2025. At a high level, the paper discusses operational resilience governance and risk management, as well as key elements to sound operational resilience regimes, and includes guidance for supervisors on supervisory coordination and cooperation, information sharing, and stakeholder engagement.
Staff Contact - Sean McKennaPrivacy Updates
California Attorney General Bonta announced the state’s largest settlement to date with the Walt Disney Company, resolving allegations that the company violated the California Consumer Privacy Act (CCPA) by failing to fully effectuate consumers’ requests to opt out of the sale or sharing of data. Pursuant to the settlement, Disney must pay $2.75 million in civil penalties and implement opt-out methods that fully stop Disney’s sale or sharing of consumers’ personal information. The judgment also includes 60-day check-ins until certain requirements are met.
New consumer data privacy bills were introduced in Illinois and West Virginia:
- In Illinois, five new data privacy bills were introduced in early 2026, aiming if enacted to strengthen consumer protections and clarify exemptions for certain entities. SB 3220 and SB 3548 would establish new consumer privacy acts in Illinois, both exempting financial institutions, affiliates, and data subject to Title V of the Gramm-Leach-Bliley Act (GLBA), as well as protected health information and entities governed by HIPAA. SB 3603 would amend the Illinois Consumer Fraud and Deceptive Business Practices Act, granting consumers the right to opt out of personal data processing for targeted advertising and requiring data controllers to disclose such activities and offer opt-out mechanisms. HB 5221 would create a Consumer Data Privacy Act with exemptions for HIPAA-covered information, GLBA-governed data, insurance companies (but not self-insurers), insurance producers, and administrators. SB 3890 would establish the Illinois Data Privacy Protection Act, mirroring HB 5221’s exceptions but notably not exempting insurance administrators.
- West Virginia’s HB 5123, if enacted, would create the Consumer Data Protection Act, defining a “business” as any for-profit entity operating or conducting sales in the state that collects or controls consumer personal information and determines its processing. To qualify, a business must (1) have over $25 million in global annual revenue; (2) handle the personal information of at least 50,000 consumers, households, or devices; (3) derive at least 50% of its global annual revenue from selling or sharing consumer data; or (4) be affiliated with such a business. The bill would not exempt entities or data subject to HIPAA or the GLBA.