United States: NAIC 2015 Spring Meeting Highlights

The National Association of Insurance Commissioners Spring Meeting convened in Phoenix, Arizona from March 28-March 31, 2015. Included herein is an update on important meeting events and information.


A standing room only crowd witnessed the kickoff meeting of the NAIC Cybersecurity (EX) Task Force on March 29, 2015. The Task Force heard a presentation from Anthem executives on their progress in responding to a recent cyberattack, and the Task Force also considered its draft Principles for Effective Cybersecurity Insurance Regulatory Guidance and agreed to extend the comment period until April 10, 2015.

Included among the draft Principles are the following:

  1. Insurance regulators have a significant role and responsibility regarding protecting consumers from cybersecurity risks (Principle 1).
  2. Compliance with cybersecurity regulatory guidance must be flexible, scalable, practical and consistent with the national efforts embodied in the National Institute of Standards and Technology (NIST) framework (Principle 5).
  3. Regulatory guidance must consider the resources of the insurer or insurance producer (Principle 6).
  4. Cybersecurity risks should be included and addressed as part of an insurers and insurance producers Enterprise Risk Management processes (Principle 12).
  5. High level information technology internal audit findings should be discussed at the insurers and insurance producers Board of Director meetings (Principle 13).
  6. Enhanced solvency oversight is needed for insurers selling cyber insurance to businesses and families (Principle 17).

It is evident that cybersecurity will be a focus of the NAIC in 2015, and a number of states are already taking, or have taken, additional steps in this area. For example, in February of 2015, the New York Department of Financial Services ("NY DFS") issued its Report on Cyber Security in the Insurance Sector. The NY DFS conducted a survey of a cross-section of insurance companies during 2013 and 2014, and its findings are included in the Report. The NY DFS has also requested information from insurers regarding cybersecurity, pursuant to its NY Insurance Law § 308 authority. Additionally, Washington Insurance Commissioner Mike Kreidler announced a multistate market conduct examination of Premera Blue Shield, which recently reported a cyberattack.


On March 28, 2015, Commissioner Dave Jones (CA) chaired a meeting of the Sharing Economy (C) Working Group, where a compromise model bill that was developed by a number of transportation network companies ("TNCs"), including Uber and Lyft, as well as by a number of insurers and associations, including AIA, PCI, and NAMIC, was discussed. The model bill is significant in that it represents a compromise on a number of issues that were in dispute between the TNCs and insurers. Since much state legislative and regulatory activity is now occurring in this area, the compromise model bill may assist in the enactment of legislation that is pending in a number of states. Among other things, the compromise model bill: (i) permits personal auto policy exclusions by insurers; (ii) mandates certain coverages by TNC companies during certain periods of ride-sharing activity; (iii) requires TNC drivers to carry proof of insurance; (iv) requires cooperation between the TNC and insurers involved in a coverage investigation; and (v) grants a statutory right of contribution against TNCs for claims insurers may have erroneously paid. Additionally, the Working Group adopted a White Paper, which explains the major issues involved in ride-sharing without endorsing a particular legislative or regulatory approach. Subsequently, on March 31, 2015, the NAIC Executive/Plenary Committee adopted the White Paper.

Market Regulation

The NAIC Market Regulation Accreditation (D) Working Group met on March 28, 2015, chaired by Director Bruce Ramge (NE). The meeting witnessed an animated exchange between Birny Birnbaum, one of the NAIC's funded consumer representatives, and Indiana Insurance Commissioner Stephen Robertson regarding the Working Group's Market Regulation Accreditation Proposal Draft. The Working Group is working on a formal market regulation accreditation proposal for consideration by NAIC membership by providing recommendations on accreditation standards, a process for state implementation of the standards, a process to measure state compliance with the standards, and a process for future revisions to the standards. Commissioner Robertson insisted that "something will be introduced in the 1st Quarter of 2016" presumably to be considered by the NAIC Executive/Plenary Committee. It is anticipated that the states' approach to market regulation, including, but not limited to, market conduct examinations, will be a continued focus of the NAIC in 2015 and 2016.

International Pushback

During the NAIC Opening Session, as well as subsequent meetings of the International Regulatory Cooperation (G) Working Group, the ComFrame Development and Analysis Working Group, and the International Insurance Relations (G) Committee on March 28, 2015, state insurance regulators expressed their ongoing frustration with the International Association of Insurance Supervisors ("IAIS"), as well as with the development of the IAIS capital standards. NAIC President and Montana Insurance Commissioner Monica Lindeen (MT) mentioned the EU's Solvency II regime in her opening remarks and indicated that the United States was likely to focus on enhancing U.S. standards, rather than seeking equivalence under the EU's regime.

Commissioner Lindeen also indicated that the NAIC will continue to consider whether and to what degree it should adopt IAIS standards, but that the NAIC may have to fight against forced adoption of capital standards. Echoing arguments made by state insurance regulators against the Financial Stability Oversight Council's designation of MetLife, Inc. as a non-bank systemically important financial institution (Met Life is challenging the designation in court), states asserted that a lack of transparency by the IAIS undermined its goals of establishing a financial architecture that will be implemented consistently around the world. Insurance regulators indicated that they do not support a "one size fits all" approach, and the states seem more supportive of an outcomes-focused framework, as opposed to a prescriptive regime that adds duplicative layers of global requirements and that would mandate wholesale changes to current state supervision. The states asserted that such an approach is inconsistent with the best interests of US insurers and consumers.

At the ComFrame Development and Analysis (G) Working Group, Commissioner Kevin McCarty (FL) seemed eager to adopt the revised U.S. Insurance Regulators' Views: IAIS Common Framework for the Supervision of Internationally Active Insurance Groups "ComFrame" and the U.S. State Insurance Regulators' Views: International Capital Proposals documents, but Commissioner McCarty agreed to extend the comment period by fifteen days, as certain trade associations indicated it was the first time they had seen the revisions. However, while the states seemed open to compromise, it was clear that their positions were hardening.

Interstate Compact II?

The Commercial Lines (EX) Working Group met on March 27, 2015, and a follow up conference call was scheduled for April 7, 2015. It appears that the Working Group is considering whether to embark down the road of creating another interstate compact to handle commercial filings. Currently 44 states are members of the Interstate Insurance Product Regulation Commission ("IIPRC"), which enables state insurance regulators to develop uniform national standards for asset protection insurance products, such as life insurance, annuities, disability income and long-term care insurance. The IIPRC establishes a central filing point for these insurance products, enhancing the speed and efficiency of regulatory decisions and allowing companies to compete more effectively in the modern financial marketplace, while continuing to provide protection for consumers. It remains an open question as to whether there is sufficient industry support to develop a similar compact for commercial lines, but the process bears watching as it unfolds.

Unclaimed Property

Nearly four years after the first multimillion dollar settlement with a life insurance company for its use of the Social Security Administration Death Master File ("DMF"), the investigations, settlements, legislative activity, and industry pushback continue to generate active debate at the NAIC. The Executive (EX) Committee and Plenary voted to approve the development of a model law for unclaimed life insurance benefits and established a workgroup to develop this law. Commissioner McCarty (FL) made an impassioned plea at the Life Insurance and Annuities (A) Committee Unclaimed Life Insurance Benefits (A) Working Group meeting that the model law enshrine the regulatory settlement agreement provisions, including mandating DMF checks, thorough search requirements, remittance of benefits to states where appropriate, etc., and he strenuously objected to these requirements only being imposed on new policies. Continued pushback from insurers, which included references to litigation in Kentucky and elsewhere that purportedly demonstrates the limits of state authority to mandate changes given the current law, ensures that the Model Law development process will be worth following closely.

Commissioner Changes

While there are always new faces at the NAIC meetings, this one was especially noteworthy, as there were 13 new commissioners since the last meeting in Washington, DC in November of 2014. These commissioners included the following:

  1. Arkansas Insurance Commissioner Allen Kerr
    (appointed by Governor Hutchinson on January 13, 2015).
  2. Connecticut Insurance Commissioner Katharine Wade
    (appointed by Governor Malloy on March 20, 2015). Commissioner Wade replaces Commissioner Leonardi, who had been an active voice among NAIC members on international and financial issues. Commissioner Leonardi left in late 2014 to join Evercore, an investment banking advisory firm. Commissioner Wade is a former CIGNA executive.
  3. Idaho Acting Insurance Director Thomas A. Donovan
    (appointed by Governor Otter, effective January 25, 2015).
  4. Kansas Insurance Commissioner Ken Selzer
    Commissioner Selzer was elected Commissioner in 2014 and began service on January 12, 2015.
  5. Maryland Insurance Commissioner Alfred W. Redmer, Jr. (appointed by Governor Hogan in January 2015).
    Commissioner Redmer previously served as Commissioner from June 2003 to October 2005.
  6. South Dakota Director of the Division of Insurance Larry Deiter (appointed Director on January 8, 2015).
  7. Texas Insurance Commissioner David Mattax
    (appointed by Governor Perry on January 12, 2015). Commissioner Mattax spent many years in the Texas Attorney General's office prior to his appointment.
  8. Illinois Acting Director Jim Stephens
    (appointed by Governor Rauner on March 16, 2015).
  9. Massachusetts Acting Insurance Commissioner Gary Anderson.
  10. Wyoming Insurance Commissioner Tom Glause
    (appointed by Governor Mead on January 3, 2015).
  11. Northern Mariana Islands Acting Secretary for the Department of Commerce Mark O. Rabauliman
    (serves as Insurance Commissioner, Banking Director and Workers Compensation Commissioner).
  12. U.S. Virgin Islands Lieutenant Governor Osbert Potter
    (has oversight over the Division of Banking and Insurance).

Pennsylvania Commissioner Change

Deserving of special mention is the new Pennsylvania Insurance Commissioner, Teresa Miller, who was appointed by Governor Wolf on January 20, 2015. Commissioner Miller formerly served in Washington, D.C. in a high level capacity for the Centers for Medicare & Medicaid Services. Prior to coming to Washington, D.C., Commissioner Miller was the Director of the Oregon Insurance Division. Coincidentally, Miller followed a similar path to former Pennsylvania Insurance Commissioner Joel Ario, who also served in a high level capacity in Washington, DC and who also served as Oregon Insurance Director. Ario is now a Managing Director at Manatt Health Solutions. Former Pennsylvania Insurance Commissioner Consedine, while being knocked from his President-elect perch with the NAIC, has landed safely on his feet as Senior Vice President, Deputy General Counsel and Executive Director of Government Affairs at Transamerica.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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