The Summer 2015 Meeting of the National Association of Insurance Commissioners (the "NAIC"), which concluded on August 18, saw further developments on issues that Duane Morris has been following. This Alert discusses the controversy over confidentiality of the details of the reports required by the Own Risk and Solvency Assessment ("ORSA") laws being adopted by the states.
At the Financial Standards and Accreditation (F) Committee meeting held on August 15th, a group of seven trade associations, representing a significant number of stock and mutual life, health and property/casualty insurers and reinsurers strongly stated their concern that the failure of a few states to follow Section 6 of the Risk Management and Own Risk and Solvency Assessment (ORSA) Model Act (#505) (the "Model Act") may expose insurers and insurance groups to potentially serious risks of disclosure of sensitive information. Section 6 specifies that all materials included in ORSA reports provided to a state insurance department are proprietary, contain trade secrets, and are considered confidential, privileged, and not subject to state freedom of information/sunshine acts. Section 6 further provides that these materials are not subject to subpoenas or discovery and are not admissible in any private civil action. The industry group noted that a handful of states have not included the latter provisions in the version of the Model that was enacted into law. As a result, this material could be made available to private litigants.
The industry group recognized that the ORSA requirements are important for a robust insurance regulatory system and supported making adoption of the Model Act a part of the NAIC's accreditation program. The industry group argued, however, that it is critical that states adopt the Model Act with the entire confidentiality provisions included. Representatives of some states responded, however, that the laws of their states may not permit "blanket" protection for such information.
Although the insurance industry in the United States weathered the 2008 financial crisis reasonably well, a non-insurance unit of the American International Group ("AIG") nearly brought down the entire AIG holding company system (and contributed significantly to the worldwide crisis). This prompted insurance regulators both in and outside the United States to reevaluate their group supervisory framework and pay closer attention to the risks that are created by holding company groups that have both insurance and non-insurance members. It became clear that insurance regulators needed the ability both to assess the holding company's financial...