February saw an uptick in the number of NAIC conference calls. Some of these calls were business as usual, while others were in lieu of an in-person meeting at the upcoming NAIC National Meeting.
Financial E Conditions Committee – February 15 via email
The E Committee released three documents for comment, with the comment period ending April 1, 2024. These materials are a follow-up to a paper previously released for comment and the comments that were received on Framework for Regulation of Insurer Investments – A Holistic Review. The Memo from E Committee to Interested Parties summarizes the next steps for moving forward to implement the Framework and emphasizes that its work will not delay any work currently being done by the Valuation of Securities Task Force or the Risk-Based Capital (RBC) Investment Risk and Evaluation Working Group. The memo highlights three points:
- Primary objective is ensuring insurer solvency
- Enhancing centralized investment experience available to regulators
- Coordination among the Committee’s various workstreams
Revisions to the original Framework, as a result of comments received and further review by regulars, are incorporated in the Investment Framework as Revised E Committee. The final paper is the Investment Framework Workplan and is considered a working document. The Committee expects work to continue over the rest of 2024 and into 2025, with probable revisions to the Framework and the Workplan. The Committee also emphasized that its work will not delay any work currently being done by the Valuation of Securities Task Force or the RBC Investment Risk and Evaluation Working Group. The three papers can be found on the Committee’s webpage under the Exposed Drafts tab.
Statutory Accounting Principles Working Group (SAPWG) – February 22, 2024
Most of the items on the agenda for this meeting needed action prior to the Blanks Working Group (BWG) meeting scheduled later in the week since SAPWG statement proposals were being considered by Blanks.
Reference # | Subject | Disposition |
|---|---|---|
| 2019-21 | SSAP No. 21R – Other Admitted Assets (SSAP No. 21R) updates accounting guidance for residuals. | Re-exposed through March 7, 2024. |
| 2023-16 | Revisions to SSAP No. 48 – Joint Ventures, Partnerships and Limited Liability Companies changes the Schedule BA reporting categories. | Re-exposed through April 19, 2024. |
It should be noted that as part of the SAPWG activity on the above issue, SAPWG will modify its currently submitted blanks proposal and ask that BWG re-expose the proposal.
Reference # | Subject | Disposition |
|---|---|---|
| 2023-28 | Additional changes to SSAP No. 21R amends both Schedule BA reporting categories and required disclosures for collateral loans. If adopted, SAPWG will sponsor a corresponding blanks proposal. | The proposal was divided into two parts. The disclosure was adopted for year-end 2024; Schedule BA reporting changes were exposed for comment through April 19, 2024. |
The discussion then turned to a referral received from the Life RBC Working Group regarding a proposal to modify the treatment of repurchase agreements in the Life RBC. The group voted to ask the Life RBC Working Group to defer the proposal for the present time to allow additional assessment and possible convergence of accounting and reporting requirements for securities lending and repurchase agreements.
Blanks Working Group – February 21, 2024
The Working Group first addressed the below items that had all been previously exposed for comment.
Reference # | Subject | Disposition |
|---|---|---|
| 2023-05 | Substantive changes to the Property/Casualty (P/C) Cybersecurity Supplement. | Adopted effective year-end 2024. |
| 2023-12 | Revisions to Schedule BA reporting categories effective first quarter of 2025 for all insurer types. | Re-exposed for comment through April 23, 2024. |
| 2023-13 | Data-capture elements added to Notes to Financial Statement #5 – Investments for the net negative Interest Maintenance Reserve for Life/Fraternal (L/F) companies; moves corresponding General Interrogatory from Part 1 to Part 2. | Adopted effective year-end 2024. |
| 2023-14 | Refinements to the Health Test in the General Interrogatories for the L/F, P/C, and Health statements. | Adopted effective year-end 2024. |
The changes to the Health Test accomplish two things. Revisions to the test itself now use all “net” amounts instead of a mixture of “net” and “gross” amounts, as well as change some of the components that are, or are not, included in the calculation. Clarifications were added to the instructions regarding transition time when a company needs to change its reporting from its current statement type to the health statement.
Reference # | Subject | Disposition |
|---|---|---|
| 2023-15 | Adds a new General Interrogatory to the L/F statement to be used for the C2 component in the L/F RBC. | Adopted effective year-end 2024. |
| 2023-16 | Expands 10 years of reporting in the P/C Schedule P to all lines of business. | Adopted effective year-end 2024. |
The Working Group then moved on to exposing new items for comment. Those items were:
Reference # | Subject | Disposition |
|---|---|---|
| 2024-01 | Updates the Investments Schedules General Instructions for common and preferred stock residual interest; effective first quarter of 2025 for all insurer types. | Exposed for comment through April 23, 2024. |
| 2024-02 | Revises reporting categories for Schedule DA – Part 1 and Schedule E – Part 2 effective first quarter of 2025 for all insurer types. | Exposed for comment through April 23, 2024. |
| 2024-03 | Adds clarifying language to General Interrogatory 35 for private letter rating securities; effective year-end 2024 for all insurer types. | Exposed for comment through April 23, 2024. |
| 2024-04 | Provides clarifying language indicating separate accounts should be included in the VM-20 Supplement for L/F companies effective year-end 2024. | Exposed for comment through April 23, 2024. |
| 2024-05 | Specifies that General Interrogatory 29.05 should list all investment managers, including sub-advisors; effective year-end 2024 for all insurer types. | Exposed for comment through April 23, 2024. |
| 2024-06 | Eliminates the requirement for the appointed actuary to provide the Board of Directors with annual qualification documentation for P/C and Title companies effective year-end 2024. | Exposed for comment through April 23, 2024. |
Editorial revisions were adopted for Schedule D – Part 1 and Part 2 – Sections 1 and 2, Schedule DL – Parts 1 and 2, the Supplemental Health Care Exhibit – Parts 1 and 2, Notes to Financial Statements #12A(1), the Market Conduct Annual Statement Premium Exhibit for Fraternal Companies, and the Property/Casualty combined statement.
Prior to ending the meeting, it was announced that because of recent and ongoing SAPWG activity (for example, the meeting just one day prior to the BWG meeting), more proposals may be exposed by email to allow for year-end 2024 implementation.
Health Risk-Based Capital (RBC) Working Group – February 22, 2024
The Working Group exposed for comment proposal 2023-09-CA, which provides the annual investment income update to the underwriting risk factors. This update is applicable to the comprehensive medical, Medicare supplement, dental, and vision lines of business. The comment period ends March 26, 2024. The group then discussed comments that had been received on the American Academy of Actuaries (Academy) Health Care Receivables presentation (November 2023) and several options for moving forward with a change in RBC factors for the receivables. No decision was made at this time, mainly because the group needs to decide upon the reporting format desired and the date of implementation. If implementation is wanted for year-end 2024, a decision will have to be soon. Next on the agenda was a summary on pandemic risk. The Working Group adopted its working agenda for 2024, heard an update on the analysis of the underwriting risk being done by the Academy, and announced it would not be meeting at the upcoming NAIC National Meeting in March.
Reinsurance Task Force – February 26, 2024
The Reinsurance Financial Analysis Working Group (ReFAWG) provided a summary of its work since the last Task Force meeting. Because of the nature of the work it does, the meetings are closed to the public and specific details cannot be provided. However, ReFAWG did announce it had approved (or reapproved) 77 reciprocal reinsurers and 41 certified reinsurers, and that 43 states have legislation in place allowing reciprocal and certified reinsurance. A link to the listing of passported reinsures, as well as individual state reinsurer listings, can be found on the Working Group’s webpage. The Task Force received a report on the activities of the Mutual Recognition of Jurisdictions Working Group. Although an official referral from the Life Actuarial Task Force (LATF) has not yet been received, the Reinsurance Task Force is expecting one regarding proposed changes to the requirements for asset adequacy analysis of certain life and annuity reinsurance transactions. Based on work currently being done by LATF, it is anticipated the proposed revisions would require standalone cash flow testing for life and annuity reinsurance transactions, concentrating on those life products that heavily rely on asset returns. The cedent would be subject to testing, not the reinsurer. LATF will be meeting at the upcoming NAIC National Meeting for additional work on this concept. A short discussion of other NAIC projects that might affect reinsurance, including two referrals from the Valuation Analysis Working Group sent to SAPWG, ended the meeting.
Group Capital Working Group – February 27, 2024
The entire focus of this meeting was scalars as used in the Group Capital Calculation (GCC). In July 2023, the Working Group decided to use Excess Relative Ratio (ERR) scalars as the primary scalar methodology in the GCC. The use of ERR scalars will replace the original use of placeholder scalers. As a reminder, scalars are used to adjust available and required capital for non-U.S. insurance regimes in the GCC. Since July 2023, the American Council of Life Insurers (ACLI) along with six of its member companies, OliverWyman, and Lou Felice have been developing ERR scalars, as well as suggested maintenance and updating procedures. A presentation was provided summarizing the work that had been done. One item of note is that although the work focused on life and health scalars, the approach was purposely designed so it could be applied to Property/Casualty business too. Following the presentation, those who had submitted letters of comment on previously exposed material were given an opportunity to summarize their remarks. There was some skepticism voiced in using the developed methodology for application to Property/Casualty and Health companies. Some suggestions were made for consideration before applying this methodology to those entities. The developed ACLI scalars were adopted for use in preparing the 2023 GCC and will affect reporting for 15 jurisdictions. Some jurisdictional scalars increased, while others decreased. The new scalars will be posted to the Working Group’s webpage shortly. At this time, not all jurisdictions had new scalars adopted. Jurisdictions not listed in the ACLI documentation will roll forward the 2022 scalars for use in 2023 reporting. A formal procedure for scalar maintenance and/or updating will now be put together by NAIC staff and will be discussed for possible adoption at a later date. Once adopted, approval for funding for the maintenance process will need to be obtained.
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