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March 2023 NAIC-Related Activity

Read on for a summary of NAIC activity or NAIC-related activity that occurred in March. 
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March saw a flurry of NAIC-related activities as the first National Meeting of the year was held in Louisville, Kentucky. As has been the recent pattern, attendees could attend the meeting in person or virtually. A few of the groups opted to hold their meetings virtually in the days before the National Meeting. The summaries below are in order of the meeting date.

Reinsurance Task Force – March 6, 2023 & Email Notification

The Task Force adopted three meeting reports of the Reinsurance Financial Analysis Working Group. These meetings were regulator-to-regulator, where the Working Group completed reviews of certified and reciprocal jurisdiction reinsurers. The Working Group reported there are now 55 reciprocal jurisdiction reinsurers and 41 certified reinsurers approved for passporting. A list of these reinsurers can be found online.1 Status reports were received from the Mutual Recognition of Jurisdictions Working Group and the states’ implementation of the Term and Universal Life Insurance Reserve Financing Model Regulations (#383), which became an accreditation standard on September 1, 2022. Besides adoption of the model, states may meet the requirement through an administrative practice. As of February 22, 33 jurisdictions have adopted the model, three jurisdictions are currently taking action on the model, and 11 states have indicated enforcement via administrative policy.

Via email notification, the Task Force announced that Silicon Valley Bank and Signature Bank have been removed from the List of Qualified U.S. Financial Institutions (QUSFI). The Credit for Reinsurance Model Law (#785) allows for existing Letters of Credit (LOCs) issued by these banks and used as collateral for reinsurance contracts to continue to be acceptable as security until the parties first have an opportunity to replace the credit support facility during the normal course of business. New LOCs from these entities will not be deemed acceptable security.

Blanks Working Group (BWG) – March 7, 2023

The following items had previously been exposed for comment and were acted upon during the meeting. Statement indicators used below are:

  • LAH/F – Life and Accident and Health/Fraternal statement
  • P/C – Property/Casualty statement
  • H – Health statement
  • S/A – Separate Accounts statement
  • T – Title statement
Reference #SubjectDisposition
2022-14Modifies Exhibits 1 and 8 to match line of business (LOB) detail used in Analysis of Operations by LOB. (LAH/F)Adopted, effective year-end 2023.
2022-15Revises the instructions for Schedule H – Part 5 removing the 5% premium exemption. (P/C)Adopted, effective year-end 2023.

Previous instructions had indicated that P/C companies whose accident and health premiums were less than 5% did not have to complete Schedule H – Part 5. That exemption no longer exists.

Reference #SubjectDisposition
2022-16The Supplemental Health Care Exhibit – Part 3 and the corresponding Expense Allocation Report were removed as a filing requirement. (LAH/F, P/C, H)Adopted, effective year-end 2023.
2022-17Adds an additional disclosure requirement to Notes to Financial Statements #8 for derivatives as well as additional electronic reporting columns to Schedule DB – Parts A and B. (LAH/F, P/C, H)Because of modifications made to the proposal from comments received, it was re-exposed for comment through April 18. The goal is still for year-end 2023 implementation.
2022-18Changes instructions for the handling of Exchange Traded Funds and/or Securities Valuation Office (SVO) Identified Funds in the Interest Maintenance Reserve (IMR) and Asset Valuation Reserve (AVR). (LAH/F, S/A)Adopted, effective year-end 2023.
2022-20Reorganizes the order of columns reporting dental and vision business to be consistent between the other statements. (LAH/F, H)Adopted, effective year-end 2023.

The following new items were then introduced. Please note that if adopted, not all of these items would be effective for 2023 reporting. Some items are for 2024 and some are for 2025. The comment period for items released for comment ends April 28 except for 2022-05, which has a June 30 ending date.

Reference #SubjectDisposition
2023-01Removes Pet Insurance from the Inland Marine LOB to become its own reported line of business; affects Underwriting and Investments Exhibits, the State Page, Schedule P, and the Insurance Expense Exhibit; effective 2024. (P/C)Exposed for comment through April 28.
2023-02Adds an exhibit identifying premiums reportable for the Market Conduct Annual Statement; effective 2023. (LAH/F, P/C, H)Exposed for comment through April 28.
2023-03Deletes some crosschecks from the Accident and Health Experience Exhibit; effective 2023. (LAH/F, P/C, H)  Exposed for comment through April 28.
2023-04Requires providing a contact for the appointed actuary and qualified actuary on the Jurat page; effective 2023. (LAH/F, P/C, H, T)Exposed for comment through April 28.
2023-05Eliminates identity theft insurance from the Cybersecurity Supplement; removes claims-made and occurrence breakdown, as well as first-party and third-party breakdown, deletes tail policy interrogatory; effective 2023. (P/C)Exposed for comment through April 28.

According to this proposal, entities providing the majority of identity theft coverage are not insurers; therefore, what little information is currently collected by the Supplement for identity theft is not useful. In addition, the claims-made and occurrent breakdown, as well as the first-party and third-party breakdown, also were removed. Most cybersecurity policies are written on a claims-made basis for the liability sections, making the breakdown unnecessary. In addition, since most policies include both first-party and third-party coverage in the same policy, double-counting was taking place and is being eliminated. An instructional change would clarify that cybersecurity information provided in the supplement includes a primary policy, an endorsement on a policy, or an excess policy. Definitions for those policy types are provided in the proposal.

Reference #SubjectDisposition
2023-06Splits Schedule D – Part 1 into two sections; effective 2025. (LAH/F, P/C, H, T, S/A)Exposed for comment through June 30.

This is the first major statement reporting format change to emerge from Statutory Accounting Principles Working Group’s (SAPWG) bond definition project. The development of a possible new reporting format has been a joint effort of regulators, NAIC staff, and interested parties (IPs). The proposed reporting would divide bonds into those that are credit obligations (Section 1) and those that are asset-backed bonds (Section 2). This proposal had previously been exposed by SAPWG, but not by the BWG. During the exposure period, IPs will conduct weekly meetings, giving industry a substantial amount of time to review, analyze, and discuss the proposed new reporting.

Reference #SubjectDisposition
2023-07Updates Code Column and deletes Legal Entity Identifier column in Schedules A, B, BA, D-Pt 2, D-Pt 6, and E-Pt1; effective first quarter 2025. (LAH/F, P/C, H, T, S/A)Exposed for comment through April 28. However, implementation is contingent upon adoption of 2023-06.
2023-08Clarifies reporting on Schedule Y – Part 3 indicating mutual companies should be included; effective 2023. (LAH/F, P/C, H, T, S/A)  Exposed for comment through April 28.
2023-09Adds a new Notes to Financial Statement #37 to disclose the net amount of life insurance at risk by product characteristics, effective 2023. (LAH/F)Exposed for comment through April 28.

This new Note proposal is a direct result of changes to the 2022 C-2 mortality risk in the Life Risk-Based Capital (RBC). The Note would allow for a direct link between the statement and the RBC.

The final item of action was the adoption of editorial changes suggested by NAIC staff. These items will be included in the official statement blanks and instruction publications to be released later in the year. Items adopted this time included instructional changes to the Notes to Financial Statement, Schedule T, Accident and Health Policy Exhibit, P/C and Health General Interrogatories – Part 2, and the Title Actuarial Opinion.

Both adoptions and exposures can be found on the BWG webpage.2 Adoptions are found under the “Documents” tab and then selecting “Adopted Modifications to Financial Statements and Instructions.” Exposures are listed under the “Exposures Draft” tab.

Follow-Up: On March 28, BWG released two more items for comment. Both items are posted to the BWG webpage and would be implemented at year-end 2023. Those items were:

Reference #SubjectDisposition
2023-10Update the three primary issue periods on the Long-Term Care Experience Reporting Format 2.Exposed for comment through April 28.
2023-11Adds elements to Note 7 – Investment Income. Note also will be data-captured.Exposed for comment through April 28.

At this point, the Spring NAIC National Conference occurred. The meeting was in Louisville, Kentucky. It was typical spring weather; rain, sunshine, rain, rain, flood warnings, rain, and high winds.

Health RBC Working Group – March 21, 2023

During this meeting, the Working Group adopted proposal 2022-15-H, which renumbered the lines on page XR008. This is not a format change, just a line renumbering. Proposal 2022-16-CA, which updates the underwriting factors for comprehensive medical, Medicare supplement, and dental and vision lines of business, was referred to the Capital Adequacy Task Force for a 30-day exposure period. It is necessary for the Task Force to act upon this issue, as the associated health section appears in the other RBC formulas as well. Proposal 2023-02-CA was exposed for a 20-day comment period ending on April 10.3 If adopted, instructions for the reporting of the stop loss line of business clarify that stop loss premiums are to be reported on page XR015. The Working Group received an update from the Health Test Ad Hoc Group and the work being done by the American Academy of Actuaries (Academy) on the H2 underwriting risk. The pandemic and pandemic risk in the Health RBC formula also was discussed.

Catastrophe Risk Subgroup – March 21, 2023

The subgroup heard an update on the activities of the Catastrophe Model Technical Review Ad Hoc Group. This was followed by a short discussion on the progress of the wildfire peril impact analysis. For the analysis to move forward, the group needs all involved to sign and return non-disclosure agreements, which has not yet happened. The Subgroup then reviewed its updated working agenda, noting items that had been completed and the addition of two new items. The new items include developing RBC risk factors for wildfire peril and determining the impact of flood peril to the insurance market. The meeting ended with a presentation entitled, “Climate Overview & Scenario Analysis.” Although the title might suggest this was a presentation on climate warming/change, that would not be completely accurate. The presentation did include information on climate warming, but also pointed out that other factors were present, resulting in increased risk exposure. For example, an increase in people living in coastal or wildfire prone areas, the increase in the size of homes, and aging infrastructure.

Life RBC Working Group – March 22, 2023

The Working Group heard an update, including next steps, from the Academy on the current C-2 Mortality Risk. It is hoped the work will be completed in time for 2023 implementation. The discussion then turned to the group’s working agenda and goals for 2023. During the discussion of its working agenda, the chair mentioned that it might be time to think about revisiting the co-variance calculation to determine if it is still valid. It also was decided that no changes were needed to the formula for the handling of companies in run-off.

SAPWG – March 22, 2023

This 90-minute meeting was packed with action. It began by addressing items that had previously been exposed for comment and then moved on to new items. Everything that was adopted is effective immediately. The summary below is listed in numeric order by reference number.

Reference #SubjectDisposition
2017-33Paper No. 16X—Derivatives and Hedging documents several changes made over time to Statement of Statutory Accounting Principle (SSAP) No. 86 – DerivativesAdopted.
2019-21Proposed new bond definition revising SSAP Nos. 26R, 41R, 21R, other various SSAPs and Schedule BA.  Re-exposed until June 9.

Yes, everything in 2019-21 is a result of the by now infamous principle-based bond definition project. After initial exposure of 2019-21 earlier this year, several suggested changes were made. There were enough changes that the document was re-exposed for comment. During this exposure period, NAIC staff and industry IPs will continue discussions to further refine the project. There also was a rumor that once adopted, SAPWG may ask BWG to consider reporting changes to Schedule BA for 2023 implementation. So far, no Blanks proposal has been seen.

Reference #SubjectDisposition
2022-01Conceptual framework revisions to SSAP No. 5R – Liabilities, Contingencies, and Impairment of Assets and Issue Paper No. 16X – Updates to the Definition of a Liability.Re-exposed for comment through June 9.
2022-11SSAP No. 21R – Other Admitted Assets clarifying that collateral for admitted collateral loans must qualify as an admitted asset. Audits and the use of net equity value are required when the collateral is partnerships, limited liability companies, or joint ventures.Re-exposed for comment through June 9.
2022-12Nullification of INT 03-02 – Modifications to an Existing Intercompany Pooling Arrangement effective December 31, 2023.Re-exposed for comment through June 9.
2022-14Revisions to SSAP No. 93 – Low-Income Housing Tax Credit Property Investments and SSAP No. 94R – Transferable and Non-Transferable State Tax Credits will incorporate some aspects of FASB guidance on tax equity investments, as well as IP feedback.Staff is working on further revisions to the SSAPs.
2022-15Adds affiliate reporting clarifications to SSAP No. 25 – Affiliates and Other Related Parties indicating any invested asset held by a reporting entity and issued by an affiliated entity or that includes obligations of an affiliated entity, is an affiliated investment.Adopted.
2022-16Modifies SSAP No. 100R – Fair Value to partially adopt ASU 2022-03. The modifications indicate items restricted for sale would be reported as restricted assets and subject to admissibility considerations in SSAP No. 4 – Assets and Nonadmitted Assets.Adopted.
2022-17Enhances disclosures for investment income due and accrued under SSAP No. 34 – Investment Income Due and Accrued. A proposal will be submitted to the BWG, asking for 2023 implementation.Adopted. Heads-up here. A new Blanks exposure was released for comment via email on March 28. See BWG summary above.
2022-18Rejects ASU 2017-12 and 2022-04 as not applicable to SSAP No. 105R – Working Capital Finance InvestmentsAdopted.
2022-19Addresses the possibility of IMR being reported as an admitted asset.Exposed for comment through June 9.

Although 2022-19 may look innocent enough, that is misleading. In fact, the discussion around negative IMR was the longest discussion of the meeting. A reminder might be in order here. The issue of negative IMR arose at the end of last year. Traditionally, negative IMR is reclassed and reported as an asset, but then is nonadmitted. Life/Fraternal companies were asking to have the asset remain admitted. It appeared that the Life/Fraternal companies thought the decision might be an easy one for SAPWG to make and, in fact, expected a decision prior to year-end 2022 reporting being due. That didn’t happen. The discussion has turned into a long, complicated issue that also has been referred to the Life Actuarial Task Force (LATF) and the Capital Adequacy Task Force (CAPAD). The referral to LATF has a list of five areas, with most of them focused on asset adequacy testing. The referral to CAPAD asks about the effect on total adjusted capital eliminating any admitted net negative IMR might have and the possibility of an additional sensitivity test. Being considered by SAPWG is the admission of negative IMR up to 5% of surplus but with a downward adjustment if the RBC ratio is less than 300, reviewing annual statement IMR instructions regarding excess withdrawals and non-effective hedge gains/losses, possibly requiring a special surplus account for net negative IMR, ensuring sales of bonds are reinvested in other bonds, and the addition of a footnote to both the quarterly and annual statements.

Reference #SubjectDisposition
2023-01Proposes a new project to review the Annual Statement Instructions and remove any accounting guidance contained therein.Exposed for comment through June 9.
2023-02New guidance indicates that collateralized loan obligations (CLOs) will be modeled for valuation purposes and do not qualify as legacy securities.Exposed for comment through June 9.

The SVO has already adopted language to its P&P Manual indicating CLOs will be modeled for valuation purposes. That makes this exposure a catch-up item to mirror what is happening at the SVO. Although at this time a model has not yet been developed for CLOs, the SVO says the process will be ready beginning first quarter of 2024.

Reference #SubjectDisposition
2023-03Through revisions to SSAP No. 51 – Life Contracts, SSAP No. 59 – Credit Life and Accident and Health Insurance Contracts, and SSAP No. 61R – Life, Deposit-Type and Accident and Health Reinsurance, adds a Note to Financials in the Life/Health statement to collect data needed to populate the C-2 risk in the Life/Fraternal RBC.Exposed for comment through May 5.
2023-04Develop guidance for the reporting of corporate alternative minimum tax.  NAIC and industry to continue work for later discussion.
2023-05Extends expiration date of INT 20-01 – Reference to Rate Reform to December 31, 2024.Exposed for comment through June 9.
2023-06Adds disclosure on government assistance to SSAP No. 24 – Discontinued Operations and Unusual or Infrequent Items, while also rejecting ASU 2021-10 as not applicable.Exposed for comment through June 9.
2023-07Adopts with modifications ASU 2019-08 to SSAP No. 104R – Share-Based Payments and SSAP No. 95 – Nonmonetary Transactions, adding guidance to include share-based consideration payable to customers.Exposed for comment through June 9.
2023-08Rejection of ASU 2019-07 as not applicable to statutory accounting.Exposed for comment through June 9.
2023-09    Rejection of ASU 2020-09 as not applicable to statutory accounting.Exposed for comment through June 9.
2023-10        Rejection of ASU 2022-05 as not applicable to statutory accounting.Exposed for comment through June 9.
2023-11Provides several editorial updates to various places in the Accounting Practices and Procedures Manual (AP&P Manual).Exposed for comment through May 5.
2023-12Nullification of INT 03-02 Modifications to an Existing Intercompany Pooling Arrangement. The INT is inconsistent with SSAP No. 25 – Affiliates and Other Related Parties.Exposed for comment through June 9.

SAPWG received a referral from the SVO addressing obtaining the ability to calculate analytical information. This will be discussed later. NAIC staff announced the PDF copies of the 2023 edition of the AP&P Manual will be available as part of the publication subscription. The Working Group received a request from the Academy asking for clarification on observed diversity regarding long-term care in Actuarial Guideline 51, SSAP No. 54R, and Appendix A-010. The meeting ended with updates on the International Association of Insurance Supervisors Accounting and Auditing Working Group and U.S. GAAP activities.

Items exposed for comment are listed on SAPWG’s webpage under the “Exposure Drafts” tab.4 Adopted items can only be accessed through a password-protected website for those that have purchased the AP&P Manual.

Property RBC Working Group – March 22, 2023

After adopting minutes from previous meetings, the Working Group adopted the report of the Catastrophe Risk Subgroup. (See summary above of its March 21 meeting.) Proposal 2023-02-P was exposed for comment until April 21.5 This proposal is the annual update of the Underwriting Risk, line 1 factors. Although many of the proposed factors would increase for 2023, there are a significant number of lines of business where factors would decrease. The discussion then turned to two BWG items. Blank’s proposal 2023-01 would treat pet insurance as a new line of business, separating it from inland marine for reporting purposes. (See BWG summary above.) The other item, 2022-15, has already been adopted and removes an exemption for some Property/Casualty companies for completing Schedule H – Part 5 in the annual statement. The working agenda was reviewed and adopted. Everyone then heard an update (a presentation) from the Academy on its current projects, the recalibration of the R4 and R5 components. The meeting ended with a short discussion (for now) on reviewing and analyzing Property RBC items that have not been reviewed since the formula’s development. During that discussion, it was revealed that the CAPAD, the parent of all of the various RBC Working Groups, plans on reviewing all of the RBC formulas for possible deletions as well as additions. That is expected to be a long-term project, possibly taking several years.

RBC Investment Risk and Evaluation (RBC Investment) Working Group – March 23, 2023

After receiving updates from the Valuation of Securities Task Force and SAPWG, the discussion then turned to CLOs, with the Academy providing an update on its work in this area. The Academy indicated it is still working on understanding industry practices as well as regulatory concerns to be able to design an effective model. The chair then stated the Working Group needed to establish an interim recommendation for the handling of residual tranches (which would include CLOs) in the RBC formulas to meet the charge given to it earlier by the Financial Conditions (E) Committee (E Committee). It soon became apparent that not all on the Working Group agreed with that assessment. Several members of the group indicated that an interim solution might not be necessary during the time it took to arrive at a more permanent solution. They questioned this approach because of the lack of information on the materiality of CLOs within the industry and because any interim treatment would be adopted as a Band-Aid and not supported by any statistical data. Comments from industry also indicated it was divided on the topic. This debate was the largest part of the meeting. In the end, the chair indicated the Working Group could notify the E Committee of its indecision, but at the same time come up with a compromise in case the E Committee insisted on an interim treatment. The group was reminded that time is of the essence on this matter, as any format changes to the formulas need to be adopted by April 30. NAIC staff was directed to work with the American Council of Life Insurers (ACLI) to expedite proposals for revised residual tranche structural change, as well as an associated sensitivity test.

Via a March 28 email, the Working Group released for comment proposed structural changes and a sensitivity test for the RBC handling of residual tranches. However, the proposed changes appeared to only be applicable to the Life/Fraternal RBC and did not include similar changes for the other formulas. The comment period ends April 12. The exposed documents are listed on RBC Investment webpage, under the “Exposure Drafts” tab.6

Accounting Practices and Procedures Task Force – March 23, 2023

No surprises here. The Task Force adopted the minutes from its Fall National Meeting, adopted the reports of SAPWG and BWG (see summaries above), and having no other matters to discuss, adjourned.

Executive Committee – March 23, 2023

The chair announced that the NAIC is looking for a new chief executive officer (CEO) and has hired a consultant to conduct the search for candidates. In the meantime, Andy Beal will serve as acting CEO. The Committee adopted meeting minutes of the various groups reporting to it. The Committee approved two requests for model law development. Revisions are needed to the Property and Casualty Insurance Guaranty Association Model Act (#540) to incorporate cybersecurity insurance coverage, whether from standalone policies, endorsements, or from coverage that exists in commercial general liability or other business policies. The second approval was to revise the Uniform Trade Practices Act (#880). The revisions to this act would apply to the regulation and oversight of health lead generators. The NAIC Designation Program Advisory Board provided its annual report. For those who may not be familiar with the Designation Program, it is a credentialling program designed for regulators. A status report on the implementation of State Connected indicates it is close to finalizing the next iteration of the strategic plan, which is the development of a connected hub for NAIC membership and their staff. The meeting concluded with an update on several model laws in development and reports from the National Insurance Producer Registry and the Interstate Insurance Product Regulation Commission.

Valuations of Securities Task Force (VOSTF) – March 23, 2023

The Task Force began its meeting by hearing an update on the work being done by RBC Investment as it pertains to similar issues being worked upon by VOSTF. The next agenda item was a proposed amendment to the Purposes and Procedures Manual of the NAIC’s Investment Analysis Office (P&P Manual) regarding structured equity and funds. The proposal had previously been exposed for a 60-day period. The adoption decision was deferred for further discussion. In the meantime, a referral was sent to SAPWG asking that it consider including a definition of structured equity and funds in its residual guidance. NAIC staff was directed to draft an amendment outlining procedural steps for the reviewing of filing exempt investment securities where there were concerns about the NAIC Designation. This would include steps insurers would have available to clarify and/or rebut the SVO’s concerns. NAIC staff provided an update on the CLO modeling project. It is worth noting here that there appears to be two different groups working on CLO modeling. The Academy is devising a model for the RBC, while the NAIC’s Structured Securities Group also is working on a model for valuation. The SVO had developed a list of questions for the Credit Rating Providers (CRPs) on their various policies that was made available as part of the materials for this meeting. The questions cover a variety of issues, including the role of credit ratings now and in the future and how the CRPs feel their ratings align to the NAIC’s objective of measuring statistical tail-risk. Anyone having additional items they feel should be added to the list was directed to contact the SVO. With the current deterioration of some banks, a proposed amendment to the P&P Manual was exposed for a 15-day comment period ending April 10, after which the Task Force will conduct an e-vote. The exposure can be found on the VOSTF webpage under the “Exposure Drafts” tab.7 The amendment would establish additional situations under which a financial institution that appeared on the SVO’s List of Qualified U.S. Financial Institutions could be removed from that list. The Task Force then received reports on year-end carry-over filings and work being done by SAPWG.

Life Insurance and Annuities (A) Committee – March 23, 2023

This was a “business as usual” meeting. After adopting or receiving reports from the Life Actuarial Task Force and the Accelerated Underwriting Working Group, the ACLI and the Society of Actuaries (SOA) provided a presentation on the current state of life insurance. The presentation is part of the Committee’s goal of incorporating informational sessions on the industry that would be of interest to everyone, not just regulators, as a regular part of its meetings. The ACLI covered trends in the insurance industry, while the SOA presentation concentrated on mortality trends. There was an opportunity for questions after the presentations. At the conclusion of the meeting, Peter G. Gallanis, who is retiring from the National Organization of Life & Health Insurance Guaranty Associations, was recognized for his more than three decades of service to insurance regulation.

Health Insurance and Management Care (B) Committee – March 23, 2023

After adopting reports from its subgroup, working groups, and task forces, presenters discussed the possible implications of data from the Kaiser Family Foundations brief, “Claims Denials and Appeals in ACA Marketplace plans in 2021.” The discussion then moved to the Medicaid unwinding process as presented in the State Health and Value Strategies’ brief, “Secrets to a Successful Unwinding: Actions State-Based Marketplaces and Insurance Departments Can Take to Improve Coverage Transitions.” The meeting concluded with an update from the federal Center for Consumer Information and Insurance Oversight (Center). Included in the update were activities related to the Medicaid unwinding, the implementation of the federal No Surprises Act, health equity initiatives, and the Center’s new planned management certification modernization project.

Capital Adequacy Task Force – March 23, 2023

After adopting the minutes of its various working groups, the Task Force took the following actions.

Reference #SubjectDisposition
2022-09-CA Revises the reporting structure and instructions for affiliated investments, resulting in consistency in all of the RBC formulas.    Adopted for 2023 implementation.

Let’s be clear here; this adoption changes the structure and makes the instruction uniform as far as definitions, examples, annual statement references, etc., but it does not change any of the factors. The different RBC formulas do not use the same factors for the categories of affiliated investments. Those differences still remain.

Reference #SubjectDisposition
2022-13-CAHealth Premiums and Underwriting Risk Premium references in the PRBC updated to match recent changes in the Property/Casualty annual statement reporting.Adopted for 2023 implementation.
2022-14-HRevises the instructions to the trend test in the Health RBC.Adopted for 2023 implementation.

When the trend test was first added to the Health RBC, a footnote on that page and the instructions indicated it was for information only and would not require any official response until all of the states had adopted the trend test. All of the states have now adopted the trend test. Removal of that footnote and the instruction is just the cosmetic change. The real change is in possible action required by the reporting company. If the trend test triggers any level of action, even if the original RBC calculation resulted in a “None” level of action, the reporting company must take the appropriate action for the triggered action level.

Reference #SubjectDisposition
2022-15-HRenumbers the lines on the Health RBC, page XR008.Adopted for 2023 implementation.

The Task Force reviewed and adopted its working agenda and then discussed the response from the Health RBC Working Group regarding the RBC treatment of runoff companies. In essence, the Health RBC Working Group agreed with the Life and Property/Casualty RBC Working Groups in that all felt no changes were needed to the RBC formulas. In an update on the annual statement health test, the group learned that there are still some concerns with the test after last year’s revisions. Further analysis has indicated that a change in the calculation of the ratio is probably needed, as the current calculation mixes both gross and net numbers. It is hoped that further work will be finalized by the end of April. The Task Force announced its formation of an ad hoc group to work on several issues pertaining to all of the RBC formulas. Those issues include review of current non-investment factors (particularly those that have not been reviewed since inception), risks that might be missing from the current formulas, and the modernization of the asset concentration. The chair asked that those interested in joining the ad hoc group contact him or NAIC staff. As a reminder, ad hoc groups are not necessarily regulator-only groups; industry also can have representation. The Task Force concluded with discussions on two referrals from VOSTF, a referral from SAPWG on negative IMR (which was subsequently referred to the RBC Investment), a revised form for submitting proposals to the RBC groups, and the current turmoil in the banking industry. Exposures and adoptions can be found on the Task Force’s webpage.8 Exposures are under the “Exposure Drafts” tab, while adoptions are found under the “Documents” tab and then selecting “Adopted Proposals to the Risk-Based Capital Formulas.”

Financial Conditions (E) Committee – March 24, 2024

After adopting the reports of its various task forces and working group, the E Committee then discussed a referral from the VOSTF. The referral was not just sent to this Committee but also was sent to other NAIC groups. The referral addresses the SVO’s perceived need for additional market and analytical information for bond investments. VOSTF asked for a response by May 15, while the chair of the E Committee asked committee members to review the referral and provide feedback. The Committee then voted to approve the addition of CLO modeling to provide an NAIC Designation for those investments. The Mortgage Guaranty Insurance Working Group was granted an extension in the development of a model law until the Fall National Meeting. The Committee agreed to merge the Restructuring Mechanisms Subgroup and the Restructuring Mechanisms Working Group into the Working Group. The chair then asked if they had set a new record for conducting its business in the shortest meeting time but was told it was not a record. The group disappointedly adjourned.

Executive/Plenary – March 25, 2023

This is always the last session of any National Meeting, as Plenary is the highest level of the NAIC groups in the NAIC hierarchy. The chair announced she was aware of a bet between North Dakota and Connecticut on whether the meeting would be completed by 10 a.m. (the meeting started at 9 a.m.). The chair then announced that her goal was adjournment by 9:58 a.m. The meeting followed its usual routine by hearing and/or adopting reports from various NAIC committees that directly report to Plenary. As is usual, certain specific items were handled separately from the various groups’ minutes. The following items were adopted by this process:

  1. Revisions to Actuarial Guideline XLIX-A – The Application of the Life Illustrations Model Regulation to Policies with Index-Based Interest Sold on or After December 14, 2020 (AG 49-A).
  2. Actuarial Guideline LIV – Nonforfeiture Requirements for Index-Lined Variable Annity Products (AG 54).
  3. A publication for consumers entitled Regulator Resources for Consumers on Personal Lines Pricing and Underwriting.
  4. The Rate/Rule Filing Checklist for use by regulators when reviewing rate requests submitted by insurers.

Plenary heard an update on state implementation of NAIC-adopted model laws and regulations. During the meeting, the chair kept reminding everyone of her goal for conclusion. The meeting ended in 39 minutes, well under the chair’s goal. It was not announced who won the bet between North Dakota and Connecticut.

For more information, reach out to a professional at FORVIS or submit the Contact Us form below.

  • 1 “Reinsurers Recommended for Passporting,”
  • 2Blanks (E) Working Group,
  • 3Capital Adequacy (E) Task Force, RBC Proposal Form,
  • 4Statutory Accounting Principles (E) Working Group,
  • 5Capital Adequacy (E) Task Force, RBC Proposal Form,
  • 6Risk-Based Capital Investment Risk and Evaluation (E) Working Group,
  • 7Valuation of Securities (E) Task Force,
  • 8Capital Adequacy (E) Task Force,

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