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Insurance Update

Regulatory Update: National Association of Insurance Commissioners Fall 2024 National Meeting

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The National Association of Insurance Commissioners (NAIC) held its Fall 2024 National Meeting (Fall Meeting) November 16–19, 2024. This Sidley Update summarizes the highlights from this meeting in addition to interim meetings held in lieu of taking place during the Fall Meeting. Highlights include continued development of guidance on asset adequacy testing for reinsurance, efforts to develop guidance regarding the implementation of the revisions to the Suitability in Annuity Transactions Model Regulation, and consideration of revisions to the Long-Term Care Insurance Multistate Rate Review Framework.
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1. NAIC Task Force Reexposes Draft Actuarial Guideline on Asset Adequacy Testing for Reinsurance

The Life Actuarial (E) Task Force discussed comments received on its exposure of a draft actuarial guideline (Proposed Guideline) that proposes enhancements to reserve adequacy requirements for life insurance companies by requiring asset adequacy testing (AAT) using a cash-flow testing methodology for certain reinsurance transactions. The Proposed Guideline is intended to assist regulators in understanding the specific assets, reserves, and capital supporting long-duration reinsurance business that relies heavily on asset returns (referred to in the proposed guidance as “asset-intensive business”). The Proposed Guideline is expected to be effective for reserves reported in the December 31, 2025, Annual Statement and for asset adequacy analysis of the reserves reported in all subsequent Annual Statements. 

2. NAIC Continues Efforts to Develop Guidance Regarding the Implementation of the Revisions to the Suitability in Annuity Transactions Model Regulation

The Annuity Suitability (A) Working Group is drafting a guidance document to address the comparable standards safe harbor included in the 2020 revisions to the Suitability in Annuity Transactions Model Regulation (SAT). The guidance document is intended for state departments of insurance to use when reviewing a life insurer’s compliance with the revised SAT.

3. NAIC Evaluates Revisions to the Long-Term Care Insurance Multistate Rate Review Framework

The Long-Term Care Insurance (B) Task Force (LTCI Task Force) exposed for comment proposed revisions to the long-term care insurance (LTCI) multistate rate review framework (MSA Framework). Key amendments include limiting the MSA Framework to a single rate review methodology (based on the Minnesota approach and removing references to the Texas approach) and updating the cost-sharing formula that increases the insurer burden with cumulative rate increases.

4. International Association of Insurance Supervisors Adopts Insurance Capital Standard and Concludes Aggregation Method Comparability Assessment

The International Insurance Relations (G) Committee announced that on November 14, 2024, the Executive Committee of the International Association of Insurance Supervisors (IAIS) approved the final version of the Insurance Capital Standard (ICS) as a prescribed capital requirement (PCR) for Internationally Active Insurance Groups (IAIGs) under the Common Framework for the Supervision of Internationally Active Insurance Groups (ComFrame) and concluded that the U.S.-developed Aggregation Method (AM) provides an outcome-equivalent approach for implementation as a PCR in lieu of the ICS for U.S.-based IAIGs. The final ICS was subsequently adopted at the IAIS Annual General Meeting on December 5, 2024. 

 

5. NAIC Takes Action Regarding Various Investment-Monitoring Activities

During the Fall Meeting, the NAIC adopted an amendment to the Purposes and Procedures Manual (P&P Manual) authorizing regulator discretion over NAIC Designations assigned through the filing exemption (FE) process. In addition, the Valuation of Securities Task Force (VOS Task Force) adopted amendments to the P&P Manual to (i) require an annual review of Regulatory Transactions (as defined in the P&P Manual), (ii) update the list of NAIC credit rating providers (CRPs) and clarify the NAIC’s use of CRP credit ratings, and (iii) remove references to Subscript-S and update references to investment risk following the VOS Task Force’s prior adoption of an updated definition of “NAIC Designation.” The VOS Task Force also heard an update on the status of the review of private rating letter reports by the NAIC Securities Valuation Office (SVO) and the collateralized loan obligation (CLO) modeling project. 

6. NAIC Progresses Revisions to Statements of Statutory Accounting Principles

At the Fall Meeting, the Statutory Accounting Principles (E) Working Group (SAP Working Group) adopted question-and-answer guidance on the implementation of the recently completed bond project and exposed a concept agenda item with requests for public comment on a new proposal to clarify accounting requirements applicable to investment subsidiaries and reexposed revisions to Schedule BA Other Invested Assets for Collateral Loans to provide more granular reporting lines. The SAP Working Group also directed NAIC staff to modify a previously exposed proposal regarding embedded derivatives to clarify reporting when a bond is sold and reacquired from a special purpose vehicle with derivative wrappers (or other components). Finally, the SAP Working Group received updates on reinsurance-related proposals, including revisions to SSAP No. 61R — Life, Deposit-Type, and Accident and Health Reinsurance with respect to combination reinsurance contracts and draft reinsurance reporting schedules to add reporting on funds withheld (FWH), and modified coinsurance (ModCo) assets. 

7. NAIC Continues Efforts to Address Innovation and Technology in the Insurance Sector

The NAIC continued its work to address the insurance and privacy implications of emerging technologies, including big data and artificial intelligence (AI). Key updates include the establishment of a data call study group, continued work on amendments to the NAIC privacy protections regulatory framework, and a proposal for development of a centralized cybersecurity event repository and portal at the NAIC. 

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