IAIS Issues Report on AM Comparability Assessment

On November 14, 2024, the International Association of Insurance Supervisors (IAIS) released its Report on the Aggregation Method Comparability Assessment, which found that the aggregation method (AM) provides a basis for U.S. implementation of the insurance capital standard (ICS). The assessment was a multi-year project to determine whether the AM, which was developed by the United States and other interested jurisdictions, provides comparable outcomes to the ICS. The NAIC’s comment on the report can be found here.

The finalization of the ICS and conclusion of the AM comparability assessment will be officially affirmed during the IAIS’s upcoming meetings in Cape Town, South Africa, this December.

  Staff Contact - Sean McKenna

NAIC Updates

The Financial Analysis Solvency Tools Working Group (FASTWG) adopted a number of substantive changes to the Financial Analysis Handbook last week, including:

Recovery & Resolution Planning: Although ComFrame provides that a group-wide supervisor (GWS) should require an Internationally Active Insurance Group (IAIG) to develop a recovery plan, the new guidance does not go that far. The initial draft language was amended to clarify the regulators’ intent and emphasize that a GWS of a U.S. IAIG should look first at ORSA reports and other ERM-related reports because the information provided in these reports “should generally satisfy the requirement to develop a recovery plan for an IAIG.” After that review, a GWS should determine, through an activities-based approach and in consultation with the group’s Crisis Management Group, whether to require a stand-alone recovery plan.

Surplus Notes: The working group incorporated most of the ACLI’s proposed edits to the draft guidance, notably new language emphasizing that state laws and regulations supersede the guidance set forth in the Handbook. Regulators and the ACLI came to a compromise on language, and a revised draft was circulated via email (not available on the website) shortly before the call. In a handful of recent instances, revised drafts of proposals have been circulated shortly before a call and voted on without an additional exposure period.

Capital Maintenance Agreements: The working group did not receive any comments on the capital maintenance agreement (CMA) guidance. The new guidance sets forth the following situations where it may be appropriate for a regulator to request a parental guarantee or CMA:

• During the Form A process, if necessary
  
• When an insurer has triggered a Hazardous Financial Condition/RBC action level
  
• When an insurer has applied for a primary or foreign licensure in a state
  
• Where there are material concerns with affiliated agreements within the group

Companies in Runoff: This guidance was previously adopted by the Risk-Focused Surveillance Working Group and was adopted without any comments from stakeholders or working group members.

The Blanks Working Group exposed the following items for comment:

• 2024-20BWG, a proposal sponsored by NOLHGA and the NCIGF, which would add a company contact information field to the annual and quarterly Jurat page for guaranty association assessment contacts
  
• 2024-13BWG, which includes a number of editorial items related to the new principles-based bond definition
  
• 2024-14BWG, which updates the investment schedules and instructions beginning with year-end 2025 reporting for “debt securities issued by funds” to reflect recent Statutory Accounting Principles Working Group (SAPWG) changes—for 2025 quarterly statements, a memo containing the guidance will be posted to the Blanks website (it is too late in the year to make changes to the 2025 quarterly Blanks)
  
• 2024-15, which removes disclosures from the Supplemental Health Care Exhibit related to the ACA transitional reinsurance program and the ACA temporary risk corridors program
  
• 2024-16BWG, which removes an interrogatory for reporting mortgages and real estate in short-term investments (as those assets are no longer permitted to be reported as short-term investments)
  
• 2024-17BWG, which adds a line to the MCAS premium exhibit for pet insurance
  
• 2024-18BWG, which adds a footnote to the Supplemental Health Care Exhibit (SHCE) related to the reporting of premium deficiency reserves to ensure that the SHCE ties to the Accident and Health Policy Experience Exhibit
  
• 2024-19BWG, which updates Schedule BA for reporting of collateral loans—note that the SAPWG workstream related to the reporting of collateral loans is ongoing, so any changes included in this exposure will be updated

Comments on the exposed items are due February 6. The working group also adopted its editorial listing and 2025 charges, which remain unchanged from its 2024 charges.

The Privacy Protections Working Group (PPWG) is accepting comments until November 25 on Article III of the Chair’s Draft Amendments to Model #672. Article III includes Sections 6 (Access, Correction, and Deletion of Nonpublic Personal Information), 7 (Sale of Nonpublic Personal Information), and 8 (Use and Disclosure of Sensitive Personal Information). The working group prefers redline edits where possible.

In other news, on November 5, 2024, the NAIC held a call to preview its 2025 budget. The proposed budget includes three key items:

• One full-time employee and analytical software to support the NAIC’s modeling of collateralized loan obligations (CLOs) (see the fiscal impact statement on pages 78–81 of the proposed budget)
  
• Resources to support an update to the long-term care insurance morbidity experience study, previously conducted by the Society of Actuaries (see pages 82–85 of the proposed budget)
  
• A proof of concept for the modernization of the NAIC’s financial data repository (FDR), which includes tools for regulators to identify potential insolvencies and monitor the overall health of the insurance market (see pages 86–89 of the proposed budget)

Comments on the proposed budget are due November 25, and a public hearing will be held on December 10. Following that hearing, the budget will be presented to the Executive Committee and NAIC plenary on December 18.   Staff Contact - Sean McKenna

AI Activity

Iowa has become the 18th jurisdiction to adopt the NAIC's AI model bulletin.

  Staff Contact - Sean McKenna