Regulatory Update: NAIC Summer 2017 National Meeting

The National Association of Insurance Commissioners held its Summer 2017 National Meeting in Philadelphia, Pennsylvania from August 6 to 9, 2017. This Sidley Update summarizes the highlights from this meeting.

1. NAIC Task Force and Working Group Adopt Insurance Data Security Model Law

   The Innovation and Technology (EX) Task Force and Cybersecurity (EX) Working Group adopted a final version of the Insurance Data Security Model Law (IDS Model Law). The IDS Model Law next must be approved by both the Executive (EX) Committee and Plenary, which is anticipated by year-end. Assuming such approval, the IDS Model Law, when adopted by a state, would apply to virtually all insurance licensees in such state and provide standards for data security and the investigation, and notification to the insurance commissioner, of a cybersecurity event.

2. NAIC Proposes Predictive Analytics Team to Review Insurers' Rating Models

   The Big Data (EX) Working Group (Big Data Working Group) proposed the formation of a Predictive Analytics Team (PAT) to assist states in reviewing complex rating models for personal lines automobile and homeowners' insurance. The PAT would consist of NAIC employees with predictive analytics, insurance and actuarial experience. The proposal is in response to the Big Data Working Group's charge to "[p]ropose a mechanism to provide resources and allow states to share resources to facilitate states' ability to conduct technical analysis of and data collection related to the states' review of complex models used by insurers for underwriting, rating and claims." A Predictive Analytics Working Group (PAWG), consisting of 5 to 10 regulatory actuaries, would also be created. Among other matters, the PAWG would formulate a checklist of required data that insurers must include in their SERFF rate filings for any models used in their rating plans. The checklist would facilitate a state's determination of whether the model should be sent to the PAT for review (e.g., if it is a new model or involves updates to a previously approved model). If a model were referred to the PAT, the PAT would issue either a report to the state with its findings or an objection letter to the insurer requesting additional information. The PAT would maintain a record of all models reviewed for access by the states.

3. NAIC Ceases Efforts to Develop Unclaimed Life Insurance and Annuities Model Act

   The Life Insurance and Annuities (A) Committee ((A) Committee) voted to disband the Unclaimed Life Insurance Benefits (A) Working Group (Unclaimed Property Working Group) and to cease efforts on the draft Unclaimed Life Insurance and Annuities Model Act (NAIC Unclaimed Property Model Act). The vote followed the Unclaimed Property Working Group's report regarding the three issues with respect to which the Unclaimed Property Working Group has been unable to achieve consensus, namely: (a) the applicability of the NAIC Unclaimed Property Model Act generally (i.e., retroactive versus prospective application), (b) the applicability of the NAIC Unclaimed Property Model Act to policies that have lapsed within 18 months of the effective date of the NAIC Unclaimed Property Model Act, and (c) the definition of "Death master file match."

4. NAIC Addresses the Changing Marketplace for Long-Term Care Insurance Products, Including the Potential Impact on Guaranty Funds

   The NAIC has formed the Long-Term Care Insurance (B/E) Task Force (LTC Task Force), which is charged with coordinating the NAIC's work regarding the changing long-term care (LTC) insurance marketplace, with a particular focus on the financial solvency of LTC insurers, financial reporting and actuarial valuation standards applicable to LTC insurance, proposed rate increases on existing LTC insurance blocks and the impact of LTC insurer insolvencies on state guaranty funds. In connection with such issues, the NAIC has approved model law development requests (a) to re-open and potentially amend the Life and Health Insurance Guaranty Association Model Act (Guaranty Fund Model Act) for the limited purpose of addressing issues related to LTC insurer insolvencies, and (b) to develop the Short Duration Long-Term Care Policies Model Act and Regulation.

5. NAIC Developing Model Act Regarding Travel Insurance

   Through the Travel Insurance (C) Working Group, the NAIC is developing the NAIC Travel Insurance Model Act (NAIC Travel Model Act), which is intended to provide a uniform, comprehensive framework for regulating the marketing and sale of insurance products related to travel protection. The Travel Insurance (C) Working Group intends to finalize and adopt the NAIC Travel Model Act on an expedited basis.

6. NAIC Evaluates Impact of U.S.-EU Covered Agreement on NAIC Initiatives

   Several NAIC Task Forces and Working Groups indicated during the Summer Meeting that they are uncertain about how to proceed with certain NAIC initiatives following the recent announcement that the U.S. Department of the Treasury and the Office of the U.S. Trade Representative intend to sign the "Bilateral Agreement Between the European Union and the United States of America on Prudential Measures Regarding Insurance and Reinsurance" (Covered Agreement). The Covered Agreement, the final legal text of which was submitted to Congress on January 13, 2017, addresses the following two issues of importance to the NAIC: (a) group supervision of...