A possible new corporate governance model law, recent international developments involving regulations for global insurers, and work on principles-based reserving will be among the topics of interest for industry groups at the National Association of Insurance Commissioners' Summer 2013 National Meeting set for Aug. 23-27 in Indianapolis.
Some NAIC panels are beginning work to establish final votes at the National Meeting to be held in Washington, D.C. in December. The corporate governance working group will hear testimony toward a new corporate governance model law requiring insurers to make corporate governance filings annually instead of every three to five years.
The NAIC recently gave its approval for a working group to begin drafting a model law on the matter. Property Casualty Insurers Association of America officials will be watching several groups at the NAIC as they consider various corporate governance issues.
Adam Kerns, assistant general counsel at the American Insurance Association, said the group is ready to bring the panel an industry plan, on which AIA has been meeting with working group members. The report is expected to urge the removal of redundancies in filing corporate governance information in other areas of the corporate governance system. Working Group Chairwoman Susan Donegan said the panel wants a model law that has clear rules regarding confidentiality.
PCI will be watching discussions in the international insurance relations committee concerning recent overseas developments, said David Snyder, PCI vice president of international policy.
In July, the G-20 Financial Stability Board released its first list of globally systemically important insurers who would face additional regulatory oversight and tighter capital requirements starting in January 2019. Details about the requirements are expected to be issued by the International Association of Insurance Supervisors during next year's G-20 summit. Nine GSIIs have been identified and the requirements also apply to any others identified before November 2017..
Snyder expressed concern about FSB's push to require global cap standards for companies designated as GSIIs and internationally active insurance groups. "This has consistently been opposed by insurers both here and abroad," he told Best's News Service.
The NAIC narrowly approved principles-based reserving for life insurers last December, touting it as a way to right-size reserves and having the most impact on types of captives such as special purpose vehicles and life insurers writing universal life with secondary death-benefit guarantees.
States such as New York and California have been critical of the plan, in part because of concerns that states will not have enough resources to implement reserving, and the NAIC formed a principles-based reserving implementation task force to address such concerns. In Indianapolis, the group is to hold its second meeting, in which it is expected to discuss the data collection process and time lines and receive recommendations from the captive and special purpose vehicle use subgroup that has been working on the principles-based reserving issue.
New York has called for a moratorium against all captive transactions after finding some captives had made $48 billion in transactions in other states and offshore locations. The Department of Financial Services said the NAIC and other groups should conduct investigations in the same manner as New York's to determine the scope of such work nationwide (Best's News Service, June 17, 2013). The Indianapolis meeting follows the passage of a White Paper on captives approved in July by the NAIC financial condition committee and the development of the task force's implementation plan.
The white paper's recommendations are under consideration by the principles-based reserving task force and by a reinsurance task force. "We are fully supportive of the NAIC white paper recommendations on captives and that we continue to work with the various working groups established by the NAIC to develop an effective plan to implement [principles-based reserving] and ensure that there are adequate resources available to ensure that there is adequate regulatory oversight of the implementation of [principles-based reserving]," said California Insurance Commissioner Dave Jones in a statement.
In other areas, the conference also will feature the first meeting of a new Affordable Care Act medical professional liability working group.
Brian Atchinson, president and chief executive officer at the PIAA, formerly the Physicians Insurance Association of America, is preparing testimony for the Sunday, Aug. 25 meeting concerning the potential for increased liability faced by medical practitioners under the new Affordable Care Act rules set to take effect Jan. 1 2014.
The new panel is charged with studying the potential impact of the new ACA on professional liability exposures of medical providers. Special attention would be given to potential increases in such exposures as a result of provisions that discourage the practice of defensive medicine. It is regarded as an important task for the NAIC.
Atchinson said a Government Accountability Office report in 2012 covered some of the same ground, but did not reach any conclusion, indicating that ACA implementation would have to occur before any definitive answer could be given. PIAA is concerned that various provisions in the ACA could be considered as a new standard of care and there is legislation in Congress to prevent that from happening.
And the NAIC's catastrophic working group is scheduled to hear a presentation on catastrophic savings accounts. PCI is one of the groups supporting the catastrophic savings accounts, an idea that already has been introduced into some Gulf Coast states. Legislation passed in Alabama provides a state income tax deduction for those who can save money to build up funds for catastrophic savings. Legislation in Congress, HR 549, does essentially the same thing.
Conversations such as these are welcomed, said David Kodama, senior director, research and policy analysis at PCI. "The consumer is struggling to get the financial resources to pay for these deductibles," Kodama said. "Here's one mechanism to ease that burden." He said the public needs to be better educated about the availability of the program and how it can participate. Mitigation efforts are vital, because for every $1 of mitigation efforts, $4 is saved in total economic damage costs, he said.