NAIC Update
The Financial Condition (E) Committee adopted a proposal that gives regulators (through the Credit Committee of the NAIC’s Securities Valuation Office) a challenge right over rating agency ratings of filing-exempt securities (the “Challenge Framework”). In introducing the Challenge Framework, Carrie Mears (IA) highlighted several changes that have occurred since the proposal’s initial draft, including language to 1) emphasize that regulators have ultimate authority over any challenge; 2) ensure participation from an insurer’s domiciliary regulator; and 3) encourage rating agency involvement in the process. Mears also emphasized that this is part of the committee’s broader Framework for the Regulation of Insurer Investments and that the challenge tool will be used sparingly, especially once the due diligence framework over rating agencies is in place (an RFP to hire a third party to assist in the development of a due diligence framework over rating agencies is currently out for comment).
It will take significant time to operationalize the Challenge Framework; the current changes set forth a January 1, 2026, effective date but leave the door open for a later date if implementation takes more time. One interested party representing a rating agency proposed a change to require notice to a rating agency when its rating is under review by the Credit Committee, but the committee did not adopt that change.
Staff Contact - Sean McKennaIAIS Updates
A report on the technical analysis of comparability between the insurance capital standard (ICS) and aggregation method (AM) has been sent to the International Association of Insurance Supervisors’s (IAIS) ICS and Comparability Task Force, which reviewed the report during its September 3 meeting. The task force has scheduled additional meetings throughout September and October to form a recommendation for the Executive Committee, which will inform the committee’s decision on comparability. The IAIS has also posted a series of brief videos (“ICS Explained”) that provide a comprehensive overview of the ICS and expected future activity.
On August 29, 2024, the Macroprudential Committee hosted a roundtable with large international insurance group CROs and CIOs to discuss the Global Monitoring Exercise and the 2025–2026 Roadmap. Topics covered include key macroeconomic risks, insurers’ shift to alternative investments, and life insurers’ increased use of asset-intensive reinsurance.
Finally, Commissioner Grace Arnold (MN) has been appointed as the Vice Chair of the Climate Risk Steering Group.
Staff Contact - Sean McKenna