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Summaries from NCOIL and NAIC 2005 Winter Meetings

PIA participated in the Winter meetings of the National Association of Insurance Commissioners (NAIC) December 3-6, 2005 in Chicago; and in the annual meeting of...
December 16, 2005

PIA participated in the Winter meetings of the National Association of Insurance Commissioners (NAIC) December 3-6, 2005 in Chicago; and in the annual meeting of the National Conference of Insurance Legislators (NCOIL) November 17-20, 2005 in San Diego. Below is a brief synopsis of the issues PIA is engaging.

Issues Discussed & Outcomes Achieved

We presented and discussed PIA positions & issues before the following.  Results and follow-throughs are noted:

Insurance Premium Accounts

D-Committee will continue to work on improvements.  In addition to review by the NAIC Anti-Fraud Task Force, PIA is asking for it to be referred back to the Producer Licensing Working Group for changes.

Fingerprint & Criminal Background Checks

D-Committee voted to continue their work on this model.  They are accepting additional comments on the actual wording of the model itself.  They will then decide whether there are unresolved issues that need to be clarified before NAIC either completes consideration or acts to adopt a draft model.  If the former, those issues will be discussed by the NAIC Commissioners during their February retreat.  The commissioners will also convene a plenary session at the end of that retreat for the purpose of voting adoptions of NAIC models, this one included. 

Patriot Act, Money Laundering & Know Your Customer

A U.S. Treasury Enforcement Team presented this NAIC body with their final rules and compliance schedule for the insurance sector.  They confirmed that no regulations or rules have been issued for the "Know Your Customer" portion of this law, because they've realized how legally complicated the insurance sector is compared to the other two sectors.  Final regulations and rules for both money laundering and "Know Your Customer" have been published for the other sectors (banking and securities).  A special task force of all federal regulatory interests has been formed to decide which regulators will handle what entities and how reports regarding compliance will be handled.  They will work with NAIC and trades to "get the word out."  However, the NAIC will be asking for a more formal "seat-at-the-table" regarding the division of oversight.

True All-States Coverage for W/C, Emergency Response

The NAIC Workers Compensation Task Force will work with state W/C commissions to develop a protocol to be imposed when State or Multi-State Federal Disasters have been declared, so that immediate responders (both official first-responders and commercial needs responders) will be able to have their domestic state W/C insurance policy and coverage apply in any other state for the period of the emergency response.  It will provide for possible extensions should the state/federal emergency necessitate it.  This will provide further opportunity for this multi-state problem to be resolved for everyday coverage issues, as well.

Natural Catastrophe (NAT-CAT)

NAIC Special NAT-CAT Task Force issued its first public draft exposure of its vision, and held a hearing.  They will continue to work on this, but there are some sharp differences on several issues between industry and the Task Force proposal, and there are also intra-insurer differences.  Several key issues requiring further discussion:

  1. Should insurers be required to provide first tier all NAT-CAT coverage for homeowners, to include flood?
  2. In doing so, should insurers be required to provide the same policy coverages, and: how many, what nature, and with how much latitude should insurers be permitted to retain usual and customary coverage exclusions from such policies?
  3. At what point should the next layer of financial reserving hit?
  4. Should this second layer be comprised of all states participating in a weighted NAT-CAT central fund?
  5. At what level should the federal third layer attach?
  6. Where is the role of private sector reinsurance?
  7. Should a system be created to permit any insurer to write well beyond insurance actuary discipline concerning concentration ratios (e.g., an insurer writing 35% of a Florida homeowners market)?
  8. Should insurers be required to provide consumers with discounts when they've followed a NAT-CAT protection process?
  9. Should mitigation by local, state and federal governments be voluntary and encouraged, or should it be mandatory?

PIA National will also be participating on the NAT-CAT panel scheduled for the NCOIL spring 2006 Meeting.

Producer Licensing - Next Reforms in 2006

D-Committee invited and accepted suggestions of where next to target its focus for 2006 in furthering reform and update of the state functional oversight system for insurance. 

Among the suggestions PIA advanced were for the NAIC to achieve better clarity and compliment among the several groups at NAIC working on different (and sometimes conflicting) versions of the NAIC Unauthorized Insuring Entity Model, and include discussion of whether there is a need for more than one version -- and/or whether additional models for unauthorized insurance transactions, as well as unauthorized insurance producers, are really needed.  PIA will be submitting further details to the several suggestions we advanced that were shared with PIA affiliates and members.

NAIC has requested that in addition to our written and oral submissions on these issues that PIA provide further follow-up and details. We will do so in the next week.

Working with You

As you can see even from this brief summary, the number of issues is expanding and each has a potential material consequence to PIA members and PIA affiliates. These effects can take place among some states before final and formal adoption of models by the NAIC as a whole body. 

Given this, it is important that PIA members' interests as a whole be addressed at every step of the process open to us -- not just when it comes to a "big vote." For example, a situation in which five state DOIs begin moving collectively in a compliance direction that imposes adverse effects on PIA members doing business in those states (on both a resident and non-resident basis) can either be seen as (1) the leading edge of state DOI reform, thus spurring it on in that direction or (2) it can be viewed as the evidence of why federal oversight is needed, thus spurring interest in a federal optional charter. Vested interests opposed to state regulation could attempt to "spin" such progress in multiple states into an argument for federal regulation.

PIA Issues Phone Conferences for PIA National & Affiliate Leadership

Continuing the close working relationship we enjoyed on the broker disclosure issue and in response to several of your requests, PIA National will be scheduling a series of issues phone conferences with PIA affiliate leadership. 

As before, the purpose of these issues phone conferences is to discuss the given issue and get your input included at every step in the formal policy development process in which PIA is engaging. This way, acting together with PIA National policy committees, PIA can craft a PIA message on each issue which each of us will deliver for use in our efforts at the NAIC, NCOIL and on Capitol Hill.

We believe that we need to begin with the NAIC Fingerprint & Criminal Background Check Model.  We appreciate the holidays are upon us, so we'd like to suggest that this first phone conference be conducted on Friday January 6, 2006 at 11:30 am ET.

PIA National and PIA affiliate leadership, please contact Teresa Goddard at to advise us of your availability to participate. We welcome your inviting other members of your staff and your outside lobbyists to also take part in the call.