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VI. Principal Regulatory Developments Affecting Insurance Companies
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noted below, much of this model law activity arose out of the 2010 FSAP review of the U.S. insurance regulatory system or in preparation for the 2015 FSAP review.
a. ORSA
In 2012, the NAIC adopted the Risk Management and Own Risk and Solvency Assessment Model Act (the “ORSA Model Act”). The ORSA Model Act included a proposed effective date of January 1, 2015 as part of a concerted effort to strengthen domestic insurance supervision in advance of the recently completed 2015 FSAP review. Due to the January 1, 2015 effective date, the first ORSA Summary Reports were submitted by insurers in 2015. As of November 17, 2015, the NAIC’s SMI dashboard reported that 34 states had adopted the ORSA Model Act. Interested parties and the NAIC continued to debate the appropriate level of confidentiality that should be granted to an ORSA summary report under a state’s implementing legislation that would satisfy the NAIC for accreditation purposes. Due to the sensitive nature of information included in ORSA Summary Reports, interested parties initially sought for states to be required to adopt language “identical or functionally equivalent to” the confidentiality language included in the ORSA Model Act. Interested parties later clarified that they would accept a requirement that states adopt “substantially similar” confidentiality provisions, so long as such a standard would require a state’s confidentiality provisions to accomplish the same level of protection for information submitted to and in the possession of an insurance commissioner as the provisions in the ORSA Model Act. Ultimately, the NAIC adopted a proposal to make the ORSA Model Act an accreditation standard beginning January 1, 2018. The proposal requires states to adopt substantially similar confidentiality provisions applicable to information submitted to and in the possession of insurance commissioners.
b. Holding Company Act
In 2010, the NAIC adopted revisions to its Model Insurance Holding Company System Regulatory Act (the “Model HCA”) which incorporated, among other items, requirements relating to filing an enterprise risk report, also known as a Form F filing.
The 2010 revisions to the Model HCA, which became an accreditation standard on January 1, 2016, have been adopted in all states.
In 2014, the NAIC adopted further revisions to the Model HCA to authorize state regulators’ participation in the supervisory colleges and other authorities related to the group-wide supervision of IAIGs. As of November 17, 2015, the NAIC’s SMI dashboard reported that the 2014 revisions to the Model HCA have been adopted in Arkansas, California, Delaware, Florida, Louisiana, New Jersey, North Dakota, Pennsylvania, Rhode Island and Vermont. The NAIC exposed for a one-year comment period a proposal to make the 2014 revisions to the Model HCA an accreditation standard. When considering such a proposal, the NAIC may consider whether to make the 2014 revisions to the Model HCA an accreditation standard for all jurisdictions or only those jurisdictions that (i) are the group- wide supervisor of an IAIG or (ii) have a domestic company that is a member of an IAIG where the IAIG’s group-wide supervisor is another U.S. state. The NAIC will next consider this accreditation proposal at the 2017 Summer National Meeting. If adopted by the NAIC in 2017, the proposal will become effective January 1, 2020.
c. Corporate Governance Model Act
In 2014, the NAIC adopted the CG Models following a lengthy process that began in part to address findings in the 2010 FSAP report. The CG Models will require all insurers to file a Corporate Governance Annual Disclosure to provide regulators with a deeper understanding of an insurer’s corporate governance framework. The first such filings will be required in 2016. As of November 17, 2015, the NAIC’s SMI dashboard reported that the CG Model Act has been adopted by only California, Indiana, Iowa, Louisiana and Vermont. The NAIC exposed for a one-year comment period proposals to make the CG Models accreditation standards. It is expected that such proposals will, if adopted by the NAIC, become effective January 1, 2020.
Developments and Trends in Insurance Transactions and Regulation 2015 Year in Review