Global Bankers Insurance Group (North Carolina)
Insolvency Cost Information for BLIC & CBLIC Posted
In anticipation of the upcoming liquidations of Bankers Life Insurance Company (BLIC) and Colorado Bankers Life Insurance Company (CBLIC) on November 30, 2024, NOLHGA has published its annual Insolvency Cost Information Report for those companies a few weeks earlier than the traditional publication date. The Report can be used by member insurers to establish possible accruals for insolvency costs relating to the companies. The files can be accessed in the Facts & Figures—Insolvency Cost Files section, and instructions on how to use the Report can be found on that page.
If you have any questions about the report, please contact Keith Sheridan.
Task Force Chair – John Colpean; Staff Contact - Bill O'SullivanFACI Update
The Federal Insurance Office’s Federal Advisory Committee on Insurance (FACI) met on September 26, 2024, and discussed several issues top-of-mind for the Department of the Treasury and insurers, including international activity, cyber risk, and artificial intelligence. Here are the highlights:
New Members: New members who have joined FACI since its last meeting in June include South Carolina Director Michael Wise, Brendan Bridgeland (Center for Insurance Research), Lee Shavel (Verisk Analytics), and Martin Bogue (AIG).
International Updates: The IAIS Executive Committee is reviewing the findings of the comparability analysis, which was provided to committee members during their meetings in the District of Columbia in September. Comparability discussions will continue during meetings in October. A decision will be rendered in December alongside adoption of the insurance capital standard (ICS).
Other updates included:
- In 2025, the IAIS will begin its Peer Review Process on ICP 13 (Reinsurance), which is likely to inform a view on how asset-intensive cross-border reinsurance is being supervised across jurisdictions.
- Preliminary work on the implementation assessment of ComFrame will begin in 2025.
- Targeted jurisdictional assessments are currently being conducted for six additional jurisdictions, including Bermuda. The findings will be published in 2026.
Cyber Risk: FACI heard a presentation from Marsh McLennan and Zurich on the key themes of their recently released joint report on closing the cyber risk protection gap. Cyber resilience was noted several times in the presentation as the underlying pillar to closing the protection gap. In addition, the paper encourages creating a common framework for data sharing, increased collaboration, and innovation between industry and the public sector.
Treasury staff also gave a brief update on Project Fortress, which is an effort by Treasury to enhance security and resiliency in the financial sector by providing the industry with tools to improve their understanding of the threats faced and tools that can help mitigate them.
Staff Contact - Sean McKennaFederal Updates
Senator Elizabeth Warren (D-MA) issued a report in September following an investigation into insurance industry practices that started in April. As part of the investigation, she wrote to the 15 largest annuity writers, seeking additional information about their use of incentive programs.
The report contains four findings (these are taken directly from the report):
- Kickbacks and conflicts of interest are still pervasively used in 2024—by at least 29 companies—to pay off conflicted advisors.
- Insurance companies are using third party “Sales and Marketing Organizations” (SMOs) and “Field Marketing Organizations” (FMOs) to dodge responsibility for these unethical practices.
- Current NAIC and SEC standards are not sufficiently protecting consumers.
- Companies hide behind inadequate disclosures to deflect accusations of conflicts of interest.
With the current spending deal extending federal funding until December 20, Congress will be back in session for a significant lame duck period, providing the committee with another opportunity to move the nominees should it desire. Meanwhile, current Independent Member Tom Workman continues to serve past the expiration of his six-year term, which began in March 2018.
The Department of Labor (DOL) filed notices of appeal in both the Federation of Americans for Consumer Choice and ACLI cases challenging the fiduciary rule in late September. The district courts had temporarily stayed implementation of the fiduciary rule during litigation, and the DOL is taking an “interlocutory appeal” of those rulings to the Fifth Circuit.
Filing an interlocutory appeal generally does not stay the district court proceedings while the interlocutory appeal is pending, but the parties are expected to agree to a stay of the district court proceedings (or at least to slow the proceedings in district court during the appeal); therefore, the district court stays of the fiduciary rule will remain in place while the appeal is pending unless the DOL requests otherwise, which is unlikely.
The Fifth Circuit will review the district court stay orders for an abuse of discretion, so the DOL is expected to argue that the district courts misapplied the law in granting the stays, which could meet that test. Most likely, the DOL will argue that the new fiduciary rule fits within the Fifth Circuit’s Chamber of Commerce decision or that the Fifth Circuit should overrule Chamber of Commerce.
NAIC Updates
The Financial Analysis Solvency Tools Working Group (FASTWG) adopted several revisions to the Financial Analysis Handbook related to the following topics:
- Form A Statements & Disclaimers of Control/Affiliation: Note that interested parties raised several objections to this proposal, arguing that the original language conflicted with existing laws related to control. The working group revised the proposal to track the definition of control from the Model Holding Company Act, removing the “exert influence or control” language that several interested parties highlighted as problematic.
- ORSA Guidance & Form F Exemptions
- P&C Catastrophe Reinsurance Programs
- Credit Risk Assessment
- Health Pricing/Underwriting Risk
: Following the initial exposure, regulators added a new item encouraging analysts to consider requesting projections, including the volume and type of anticipated membership, from smaller/newer health insurers participating in the ACA Exchange. - P&C Catastrophe Reinsurance Programs
- Recovery & Resolution Planning (referral from the Group Solvency Issues Working Group) – Attachment 12: The recovery and resolution planning revisions direct a group-wide supervisor (GWS) of an Internationally Active Insurance Group (IAIG) to determine whether the information provided in a company’s ORSA Summary Report or other ERM reporting satisfies the requirement for a recovery plan for an IAIG. If not, the GWS is directed to require a stand-alone recovery plan. With respect to resolution plans, the GWS and/or resolution authority, in consultation with the crisis management group, should have a process to regularly determine whether a resolution plan is necessary, including consideration of factors such as the size, risks, activities, and complexity of the IAIG.
- Surplus Notes & Capital Maintenance Agreements – Attachment 13: Regulators have recognized a dearth of guidance for the review of an insurer’s request to issue capital or surplus notes. The proposed guidance would direct regulators to assess the interest rate on the note and suggests that regulators should ask the insurer for evidence that the rate is a market rate. Guidance varies depending on whether the note is being issued to an affiliate or non-affiliate. The proposal also has new guidance for requests for principal/interest payments on capital and surplus notes—directing regulators to state law to determine situations where approval is required.
New guidance is being proposed to the Form A Statement section of the Financial Analysis Handbook related to parental guarantees or capital maintenance agreements (CMAs). The language identifies the following situations where “it may be appropriate to request an insurer/group develop and submit a parental guaranty or CMA”: 1) when an applicant has submitted a new Form A application for change in control of an insurer, if deemed necessary; 2) when the insurer has triggered Hazardous Financial Condition or an RBC action level; 3) when an insurer has applied for either primary or foreign licensure in a regulator’s state; and 4) when there are material concerns identified with other affiliated agreements within the group.
- Combined Guidance on Market Risk, Pricing/Underwriting Risk, Reputational Risk & Strategic Risk: While these changes appear voluminous, this is part of the working group’s efforts to take existing Repository guidance and incorporate it into the Analyst Reference Guide.
Staff Contact - Sean McKenna
AI Activity
On September 24, the Federal Insurance Office (FIO) hosted a closed-door roundtable discussion on the use of AI in the insurance industry. Participants included regulators, insurers, reinsurers, trade associations, consumer advocates, academics, and others (including Faegre Drinker’s Scott Kosnoff). The main topics were how industry and regulators are using AI, the risks and benefits of such use, and how AI might impact access to coverage.
Staff Contact - Sean McKennaPrivacy Updates
The National Institute of Standards and Technology (NIST) announced it is establishing a program focused on the need for standards, guidelines, tools, and practices to improve the management of cybersecurity and privacy in the age of AI. Additionally, the Federal Trade Commission (FTC) released a Staff Report on the data collection and data use practices of large social media and video streaming service platforms, describing how these companies engage in mass user data collection to monetize users’ personal information but fail to implement adequate guardrails to protect consumers from privacy risks. The Staff Report contains numerous recommendations, honing in on how companies should examine their practices regarding ad targeting based on sensitive categories of personal information.
Staff Contact - Sean McKenna