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NAIC Bulletin: January 2017 - EY

January 2017 . naic bulletin Highlights of the national association of insurance commissioners meeting Fall 2016 update In this issue: The national association of insurance commissioners ( naic ) recently held its Fall national Meeting on Executive Committee and Plenary .. 2. 9-13 December 2016 in Miami. This publication highlights issues that various naic groups have addressed Cybersecurity (EX) Task Force ..2. Principle-based reserving .. 2 since the 2016 Summer national Meeting. We hope you find it informative, and we welcome your PBR pilot project ..3 comments. Please contact your local EY professional for more information. Valuation Manual amendments ..4. XXX/AXXX Reinsurance Framework .. 4. Accreditation standards ..5. Variable Annuity Framework .. 5. What you need to know Quantitative impact study ..5 The Executive Committee and Plenary adopted the XXX/AXXX Credit for Reinsurance Model Effect on statutory accounting and Regulation to address the regulation of term life ( , XXX) and universal life with secondary Accounting Practices and Procedures guarantees ( , AXXX) reserve financing transactions.

The National Association of Insurance Commissioners (NAIC) recently held its Fall National Meeting on 9-13 December 2016 in Miami. This publication highlights issues that various NAIC groups have addressed

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Transcription of NAIC Bulletin: January 2017 - EY

1 January 2017 . naic bulletin Highlights of the national association of insurance commissioners meeting Fall 2016 update In this issue: The national association of insurance commissioners ( naic ) recently held its Fall national Meeting on Executive Committee and Plenary .. 2. 9-13 December 2016 in Miami. This publication highlights issues that various naic groups have addressed Cybersecurity (EX) Task Force ..2. Principle-based reserving .. 2 since the 2016 Summer national Meeting. We hope you find it informative, and we welcome your PBR pilot project ..3 comments. Please contact your local EY professional for more information. Valuation Manual amendments ..4. XXX/AXXX Reinsurance Framework .. 4. Accreditation standards ..5. Variable Annuity Framework .. 5. What you need to know Quantitative impact study ..5 The Executive Committee and Plenary adopted the XXX/AXXX Credit for Reinsurance Model Effect on statutory accounting and Regulation to address the regulation of term life ( , XXX) and universal life with secondary Accounting Practices and Procedures guarantees ( , AXXX) reserve financing transactions.

2 (E) Task Force .. 5. Statutory Accounting Principles (E). Working The Property and Casualty (C) Committee adopted the 2016 Workers' Compensation Large Blanks (E) Working Group ..7 Deductible Study performed by the naic /IAIABC Joint (C) Working Group detailing the use and Life insurance and Annuities (A) potential risks of policies with large deductibles. Committee .. 7. Life Actuarial (A) Task Force ..7 Various naic groups have taken actions to address the effect of long-term care insurer VM-22 (A) Subgroup ..8. Unclaimed Life insurance Benefits (A) insolvencies on the naic statutory framework, including revisions to SSAP No. 35R, Guaranty Fund Working and Other Assessments, to allow insurers to consider expected renewals of short-duration health Health insurance and Managed Care (B). Committee .. 8 contracts in determining the asset recognized from accrued guaranty fund liability assessments. Health Actuarial (B) Task Force.

3 9. Long-Term Care Actuarial (B) The Variable Annuities Issues (E) Working Group made progress in its efforts to develop the scope Working and objectives of the 2017 Quantitative Impact Study that will assess the feasibility of potential Property and Casualty insurance (C). Committee .. 9 changes in the statutory accounting, reserving and risk-based capital (RBC) requirements for Financial Condition (E) Committee .. 9 variable annuities. Capital Adequacy (E) Task Force ..10. Investment RBC (E) Working The naic elected its 2017 executive officers: President Ted Nickel (Wisconsin), President-elect Group Capital Calculation (E). Working Julie Mix-McPeak (Tennessee), Vice President Eric A. Cioppa (Maine) and Secretary-Treasurer Group Solvency Issues (E) David Mattax (Texas). Working ORSA Implementation (E) Subgroup ..11. Receivership and Insolvency (E). Task Force ..11. Reinsurance (E) Task Force ..11. Risk-Focused Surveillance (E).

4 Working Valuation of Securities (E) Task Force ..12. Financial Regulation Standards and Accreditation (F) Committee .. 13. International insurance Relations (G). Committee .. 13. Appendix A Statutory Accounting Principles Working Group .. 14. Appendix B Blanks Working Group .. 19. Appendix C Capital Adequacy Task 20. EY AccountingLink | Executive Committee and Plenary The Executive Committee and Plenary adopted amendments to the Long-Term Care insurance Model Act (#640) and the Long-Term Care insurance Model Regulation (#641) to update the disclosure and performance standards for long-term care insurance in response to the significantly large and/or multiple rate increases experienced by policyholders on their long-term care policies. Separately, the Executive Committee and Plenary adopted revisions to the naic Guidance Manual for Rating Aspect of the Long-Term Care insurance Model Regulation, which is used to evaluate compliance with the requirements of the model regulation.

5 The Executive Committee and Plenary adopted amendments to the Life and Health insurance Guaranty association Model Act (#520) to clarify guaranty association coverage does not apply to factored structured settlement annuity benefits ( , structured settlement annuity benefits that have been sold to a third party by the original annuitant). The Executive Committee and Plenary also adopted amendments to the Separate Accounts Funding Guaranteed Minimum Benefits Under Group Contracts Model Regulation (#200) to update and align its content with the Synthetic Guaranteed Investment Contracts Model Regulation (#695). The Executive and Plenary Committee adopted the Term and Universal Life insurance Reserve Financing Model Regulation ( , XXX/AXXX Credit for Reinsurance Model Regulation), as well as revisions to Actuarial Guideline XLVIII Actuarial Opinion and Memorandum Requirements for the Reinsurance of Policies Required to be Valued under Sections 6 and 7 of the naic Valuation of Life insurance Policies Model Regulation (AG 48).

6 Refer to the XXX/AXXX Reinsurance Framework section in this publication for more information. The Executive Committee and Plenary also adopted revisions to: Actuarial Guideline XLVII The Application of Company Experience in the Calculation of Claim Reserves Under the 2012 Group Long-Term Disability Valuation Table (AG 47), limiting its application if an insurer does not have a large enough number of group long-term disability (GLTD). claims to require the development of an experience study Actuarial Guideline XLVIX The Application of the Life Illustrations Model Regulation to Policies with Indexed-based Interest (AG 49), making its provisions applicable to all in-force life insurance policies within its scope, regardless of the date the policy was sold In addition, the Executive Committee and Plenary adopted revisions to the Review Team Guidelines and the Accreditation Review Process and Procedures to enhance the accreditation program and related guidance, effective 1 January 2017 .

7 The revisions shift the focus of the accreditation standards from compliance toward substance and quality of the work performed in the accreditation review process. Cybersecurity (EX) Task Force The Task Force formed an ad hoc drafting group to continue its work on the revised draft of the insurance Data Security Model Law. This group has focused on addressing the concerns raised in the following six key areas of the proposed model law: state uniformity and exclusivity, the potential to exempt licensees already subject to federal privacy regulations ( , the Health insurance Portability and Accountability Act or the Gramm-Leach-Bliley Act) from certain of its provisions, the need to include a harm trigger in the definition of a data breach, the definition of personal information subject to the model law, scalability and suitability of information security requirements for smaller licensees and licensee oversight of third-party service providers.

8 The drafting group plans to hold biweekly meetings until a compromise can be reached on the provisions of the proposed model law. Principle-based reserving The revised Standard Valuation Law (#820) incorporates the various sections of the Valuation Manual (VM) that establish the minimum reserve and related requirements for principle-based reserving (PBR). for life products and variable annuities and the minimum reserve requirements for health insurance and credit life and disability insurance . 2 | naic bulletin January 2017 . EY AccountingLink | The naic has continued addressing PBR implementation initiatives ahead of the implementation date ( , 1 January 2017 , subject to a three-year transition period during which the application of a PBR. methodology for life products is optional). Developments include the following: The Statutory Accounting Principles (E) Working Group (SAPWG) adopted revisions to Statement of Statutory Accounting Principles (SSAP) No.

9 54, Individual and Group Accident and Health Contracts, to reference the health reserving requirements in the Valuation Manual (Ref #2016-34). Currently, the applicable health reserving guidance in Appendix A and actuarial guidelines in Appendix C of the Accounting Practices & Procedures Manual (AP&P Manual) are referenced in the Valuation Manual. The adopted revisions also update Issue Paper 15X Implementation of Principle-based Reserving. SAPWG revised the requirements in SSAP No. 54 for the recognition of a change in valuation basis (Ref #2016-34). The adopted revisions indicate that changing morbidity assumptions regarding the length of claim continuance based on regularly updated credible experience as required for products subject to AG 47 and Actuarial Guideline L 2013 Individual Disability Income Valuation Table (AG. 50) would not be considered a change in valuation basis. Other uses of regularly updated credible experience ( , continuing claim payments required for morbidity assumptions by Appendix A-010, Minimum Reserve Standards for Individual and Group Health insurance Contracts) would also generally not be considered a change in valuation basis.

10 The Financial Regulation Standards and Accreditation (F) Committee exposed the referral from the Life Actuarial (A) Task Force (LATF) to consider additional sections from Model #820 as significant elements for inclusion in Part A: Laws and Regulations Liabilities and Reserves of the accreditation standards. Currently, only Section 3 (Actuarial Opinion of Reserves) and Section 4 (Computation of Minimum Standard) have been identified as significant elements of Model #820. The recommended revisions to the accreditation standards would become effective as of 1 January 2020 ( , after the three-year transition period is complete). Comments are due by 8 February 2017 . LATF received an update from the American Council of Life Insurers (ACLI) on their PBR testing for term insurance . The testing plan intended to understand the relationship between the net premium reserve (NPR) and deterministic reserve calculated for level term insurance under VM-20 and the gross premium reserve calculated for these life products based on pricing assumptions.


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