The NAIC has a task force that addresses issues related to insolvency of companies, including rehabilitation of troubled companies, the liquidation/receivership process for insolvent companies and the operation of the guaranty funds that pay the claims of policyholders of insolvent companies. These issues arise both in the U.S. context and in the international standards set to address resolution and recovery of global companies that operate across borders.
More particularly the task force duties include: monitoring the effectiveness and performance of state administration of receiverships and the state guaranty fund system; coordinating cooperation and communication among regulators, receivers and guaranty funds; monitoring ongoing receiverships and reporting on such receiverships to NAIC members; developing and providing educational and training programs in the area of insurer insolvencies and insolvency guarantees to regulators, professionals and consumers; developing and monitoring relevant model laws, guidelines and products; and providing resources for regulators and professionals to promote efficient operations of receiverships and guaranty funds.
The product from this task force relates to NAMIC members especially through the costs of insolvencies members incur from guaranty fund assessments. If the practices of the receiverships managing insolvent companies are inefficient and unnecessarily costly there will be fewer assets remaining to pay policyholder claims and more will have to come from the insurance marketplace.
NAMIC follows the issues that affect companies from the criteria for deeming a company in hazardous financial condition to the attempts at rehabilitation, efforts to liquidate and the operations and costs of guaranty fund. Insolvencies in the industry affect the reputation of the entire industry so NAMIC supports a strong, effective and efficient solvency regulatory system. Also, due to our members’ ultimate obligation to pay assessments to the guaranty fund NAMIC has an even stronger interest in the continued solvency of the companies operating in the insurance market.
Our advocacy goal is to maintain basic solvency, but not to prop up poorly managed companies. Consequently, once the regulatory decision is made that a company cannot be saved, we want the receivership/liquidation process to work as efficiently as possible to preserve assets that can protect the policyholders. If adequate assets do not remain in the insolvent company to meet basic policyholder obligations, then we support an efficient guaranty fund process to protect those policyholders and pay the claims incurred under the insolvent company. Overall, the main concern must be the protection of the policyholder.
May 22, 2020 The Statutory Accounting Principles (E) Working Group continues to propose and implement accounting interpretations related to COVID-19. An issue of great interest to NAMIC members relates to guidance on how to account for premium refunds issued in... Read more
May 22, 2020 The NAIC distributed a data call letter on May 11 to property/casualty insurers in 48 states, the District of Columbia, and the U.S. Virgin Islands, requesting data on business interruption coverage written in 2019 or 2020. The data call is... Read more
May 22, 2020 Development around the NAIC Group Capital Calculation, a regulatory tool to be used to consider the aggregated regulatory capital held by an insurance group, took two major steps this week. First, the NAIC exposed for a 60-day comment period... Read more
May 22, 2020 The NAIC Casualty Actuarial and Statistical (C) Task Force failed to expose for comment its expected near-final draft of a white paper on predictive analytics and modeling due to drafting errors. The task force held a previously scheduled call on... Read more
May 22, 2020 The Antifraud (D) Task Force held a call on May 20. As reflected on its agenda, the purpose was "to discuss the effects of COVID-19 as it relates to insurance fraud" and to "hear updates from state insurance departments as well as other... Read more
As part of the overall solvency efforts internationally, the IAIS is developing standards to address the possible recovery and resolution of troubled insurance companies.
Proposed recovery standards include supervisory practices including preventive measures, corrective measures and sanctions for troubled insurers. One of the preventive measures is a requirement that all insurers submit an annual prospective recovery plan to be used in the event they become insolvent. This is similar to the work at the NAIC to address companies in hazardous financial condition, failing the trend test or who meet RBC action levels. However, this recovery plan requirement will require healthy companies as well as financially troubled companies to submit a plan and it may also apply at the insurance group level.
Proposed resolution standards include details about how companies will exit from the markets including voluntary and involuntary exits based on lack of viability. These draft standards also include requirements for resolution plans for insurance companies and groups when their local supervisor deems necessary.
These issues arise both in the U.S. context and in the international standards set to address resolution and recovery of global companies that operate across borders. The NAIC has a task force as well that addresses issues related to insolvency of companies, including rehabilitation of troubled companies, the liquidation/receivership process for insolvent companies and the operation of the guaranty funds that pay the claims of policyholders of insolvent companies. The NAIC provides comments to the IAIS consultation drafts to address inconsistencies with the U.S. practice and the proposed international standards.
NAMIC follows the issues that affect companies from the criteria for deeming a company no longer viable to the attempts at recovery and efforts to resolve insurance companies and groups. Insurance insolvencies affect the reputation of the entire industry, so NAMIC supports a strong, effective and efficient solvency regulatory system world-wide. However, we do not support unnecessary, costly plans and reports that are not directed at troubled companies. We believe that sound enterprise risk management combined with own risk solvency assessments (ORSA) should be an adequate tool to identify risks and provide supervisors meaningful information about company practices in transferring, mitigating or reducing risks. We also argue that only insurance entities become insolvent, not insurance groups, so all regulation in the recovery and resolution arena should be focused on the insurance entities. Finally, we work with the NCIGF to encourage the development of policyholder protection systems like guaranty associations around the world to protect policyholders.
August 29, 2019 NAMIC submitted comments in August to the International Association of Insurance Supervisors about its recently exposed framework for the assessment of systemic risk at the global level. This exposure included significant changes to... Read more
May 21, 2019 Staff members from the International Association of Insurance Supervisors last month provided an update to the industry about the specifications that would be field-tested in 2019 for the Insurance Capital... Read more
February 21, 2019 NAMIC attended the IAIS stakeholder meeting in Basel, Switzerland, in February to learn more about the 2019 efforts concerning the Insurance Capital Standard... Read more
January 16, 2019 NAMIC submitted comments (Att. 2 – Recovery Planning Comment Letter) to the International Association of Insurance Supervisors regarding the Recovery Planning Application Paper... Read more
October 25, 2018 NAMIC is working with members on a response to the International Association of Insurance Supervisors regarding the Insurance Capital Standard 2.0 Consultation document.... Read more