The following represents a summary of the key actions and decisions made by the National Association of Insurance Commissioners (NAIC) during the 2020 Summer National Meeting.
- The Information and Technology (EX) Task Force received updates on an initiative to develop guidelines for insurer use and the regulation of artificial intelligence (AI) in the insurance industry.
- The Health Risk-Based Capital (E) Working Group held discussions on whether the Pandemic and Biological Risk – Interrogatories – should be modified based upon lessons learned from the 2019 Novel Coronavirus (COVID-19) pandemic.
- The Life Risk-Based Capital (E) Working Group adopted structural changes to the life risk-based capital model to incorporate longevity risk.
- The Property and Casualty (P&C) Risk-Based Capital (E) Working Group adopted revisions to the P&C risk-based capital model, which eliminates the unrated reinsurer category from the determination of credit risk (R3) capital charges. As a result, the R3 charge will vary by reinsurer financial strength rating while reinsurers with no financial strength rating shall be classified as “vulnerable 6 or unrated” resulting in a capital charge of 5% and 14% for collateralized and uncollateralized reinsurance receivables, respectively.
- The P&C Risk-Based Capital (E) Working Group discussed the possibility of revising the process by which NAIC designations are assigned to reinsurers for risk-based capital purposes. The idea being contemplated is to create an internal reinsurer equivalent to an NAIC designation using data provided and maintained by the Securities Valuation Office.
- The Financial Stability (EX) Task Force discussed an initiative to incorporate pandemic risk into the 2019 Liquidity Stress Test Framework.
- The Statutory Accounting Principles (E) Working Group adopted substantive revisions to SSAP No. 32, Preferred Stock, which results in perpetual preferred stock being carried at fair value regardless of NAIC designation and redeemable preferred stock of a high credit quality being reported on an amortized cost rather than cost.
- Finally, there were several revisions or changes adopted by the Blanks (E) Working Group which are captured in Appendix A.