Olsen Named Executive Director of New Mexico GA
The New Mexico Life Insurance Guaranty Association (NMLIGA) is pleased to announce that Pamela Epp Olsen is its new Executive Director, effective March 1, 2024. Ms. Olsen is also the Administrator and Legal Counsel of the Nebraska Life & Health Insurance Guaranty Association and the Executive Director of the Minnesota Life & Health Insurance Guaranty Association. She currently serves on the NOLHGA Board of Directors and also chairs or serves on numerous insolvency task forces; she is also a former MPC Chair. The NMLIGA anticipates a seamless transition under Ms. Olsen’s experienced leadership.
Mike Batte is retiring after many years of outstanding, dedicated service as the Administrator of the New Mexico association. The NMLIGA thanks Mike for his many contributions to the guaranty system, and we wish Mike and his wife Wanda all the best.
Staff Contact - Sean McKennaNAIC Updates
The following are updates on various NAIC activities:
ESG Statement Adopted: On February 21, 2024, the NAIC announced that the membership had unanimously adopted a statement on Environmental, Social, and Governance (ESG) policies. The statement notes that the NAIC “does not anticipate developing regulatory policy to require or prohibit insurance companies from adopting ESG policies that govern insurers’ underwriting, investing, or other business decisions. However, we have extensive work underway on climate risk, race and insurance, corporate governance, and other related factors to the extent they directly pertain to our responsibility to protect policyholders and supervise the financial health of insurers.”
The statement also encourages insurers, regulatory bodies, and other groups that adopt ESG policies to “consider the reliability of metrics and the impact of ESG policies on the financial condition of insurers and the availability and affordability of insurance products and services.” In addition, the NAIC encourages legislators and other policymakers “to contact state insurance regulators when considering ESG-related legislation or executive action to discuss the potential impact of proposals on the solvency and financial stability of the insurance sector.”
Working Group Reviews Recommendations for Single MSA Actuarial Approach: On February 20, the NAIC’s Long-Term Care Actuarial Working Group reviewed recommendations (developed after regulator feedback) on a single multi-state actuarial (MSA) rate review approach. The purpose of the meeting was to determine whether there is enough consensus to build a single actuarial approach.
The recommendations consisted of six recommendations with apparent consensus among regulators and two that yielded contrasting views. The six “consensus” recommendations are:
- Generally have lower rate increases for those at very advanced ages with high-duration policies that have had substantial past rate increases.
- Do not dismiss aspects of proposals labeled as “non-actuarial” by the ACLI.
- Balance between consumer protection and preventing further financial distress for insurers.
- Continue including a catch-up provision in a single actuarial approach for attaining a similar rate level between states.
- Continue to encourage buy-in from states on the MSA actuarial approach.
- Pre-approve and phase in rate increases over a reasonable period of time as opposed to requiring annual re-filings.
The two recommendations that yielded split views among regulators are:
- If-knew weighting and additional cost-sharing considerations.
- Maintain the flexibility of having a solvency provision but continue having the application be very rare.
The working group intends to continue discussing the recommendations, especially the two items without obvious consensus, at the Spring National Meeting in Phoenix on March 15.
Risk Evaluation Ad Hoc Group Continues RBC Preamble Discussions: The risk-based capital (RBC) ad hoc group of the NAIC’s Capital Adequacy Task Force received updates from its three subgroups (purpose of RBC, asset concentration, and geographic concentration), with most of the call focused on proposed changes to the RBC preamble. The ad hoc group is tasked with taking a high-level review of RBC in light of the fact that it has not received a comprehensive overhaul in decades; any proposals will be brought to the Capital Adequacy Task Force and will go through the typical notice and comment process.
Discussion of the preamble focused on whether the language in it would prevent an insurer from sharing RBC ratios with ratings agencies or reinsurers—an issue industry representatives were concerned about in the initial review of the proposed changes—and suggestions to remove language from the preamble which provides that RBC instructions should be considered confidential. These changes, as well as a suggestion to remove the RBC ratio components (total adjusted capital (TAC) and authorized control level (ACL)) from annual statement blanks, will be discussed on the group’s next call.
SAPWG Continues Bond Definition Implementation & Collateral Loan Work: The Statutory Accounting Principles Working Group (SAPWG) took the following action during its call last week (you can find a PDF file with the materials for the call here):
Re-exposed changes to SSAP 21R regarding residual reporting and measurement: NAIC staff incorporated most of industry’s proposed changes to the prior exposure. Among other things, the revisions 1) add transition guidance, 2) clarify that once an investment is classified as a residual it should continue to be reported as such until disposed of by the insurer, and 3) incorporate other-than-temporary impairment (OTTI) guidance. The proposal contains an option for early adoption as of December 31, 2024. The revisions are being exposed for a shortened timeframe, with comments due March 7.
Re-exposed revisions to Schedule BA reporting categories: Despite industry opposition, NAIC staff continues to propose elimination of the “Non-Registered Private Funds” category and incorporation of those investments into the “Joint Ventures, Partnership, and LLC Interests” category. NAIC staff suggested that many of the investments insurers are reporting in the “Non-Registered Private Funds” category (e.g., warehouse loans, intercompany loans, and loans fully guaranteed by the U.S. government) should instead be reported as collateral loans. A new item has been exposed related to this issue (see below). Comments are due April 19.
Directed a modified blanks proposal for Schedule BA reporting that was exposed at the Blanks Working Group Call (see below).
Adopted revisions to the SSAP 21R disclosure: The disclosure will require companies to report collateral loans by collateral type. The working group will sponsor a blanks proposal to capture this information for year-end 2024.
Exposed revised Schedule BA reporting lines for collateral loans and requested feedback from regulators and industry on whether collateral loans backed by certain types of collateral should flow differently through the asset valuation reserve (AVR) for RBC impact: Comments are due April 19.
Received a memo from the Life RBC Working Group regarding a Repurchase Agreement proposal: The proposal from the Life RBC Working Group would essentially treat conforming Repurchase Agreement Programs the same as securities lending programs. SAPWG’s proposed response to this referral asks that the Life RBC Working Group defer consideration to allow for an assessment and convergence of accounting and reporting requirements for securities lending and repurchase agreements.
Staff Contact - Sean McKenna