Financial Regulation Standards and Accreditation F Committee

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Financial Regulation Standards and Accreditation

(F) Committee

Mission Statement

The mission of the accreditation program is to establish and maintain standards to

promote sound insurance company financial solvency regulation. The

accreditation program provides a process whereby solvency regulation of

multi-state insurance companies can be enhanced and adequately monitored with

emphasis on the following:

Adequate solvency laws and regulations in each accredited state to protect

consumers and guaranty funds.

1.

Effective and efficient financial analysis and examination processes in each

accredited state.

2.

Appropriate organizational and personnel practices in each accredited

state.

3.

Effective and efficient processes regarding the review of organization,

licensing and change of control of domestic insurers in each accredited

state.

4.

The accreditation program will accomplish its mission by continually evaluating the

adequacy and appropriateness of accreditation standards in accordance with the

changing regulatory environment and through continued monitoring of accredited

states by conducting the following accreditation reviews:

Pre-Accreditation Reviews to occur approximately one year prior to a state's

full accreditation review. This review will entail a high-level review of the

financial analysis and financial examination functions to identify areas of

improvement.

Full Accreditation Reviews to occur once every five years subject to interim

annual reviews. This review will entail a full review of laws and regulations,

the financial analysis and financial examination functions, and

organizational and personnel practices to assist in determining a state's

compliance with the accreditation standards.

Interim Annual Reviews to occur annually to maintain accredited status

between full accreditation reviews. This review will entail a review of any

law and regulation changes, the financial analysis and financial examination

functions, and organizational and personnel practices to ensure continuedcompliance with the accreditation standards and to identify areas of

improvement.

2012 Charges

Maintain and strengthen the Financial Regulation Standards and

Accreditation Program.

1.

Assist states, as requested and as appropriate, in implementing laws,

practices and procedures, and obtaining personnel required for compliance

with the standards.

2.

Conduct a yearly review of accredited jurisdictions.3.

A full list of NAIC conference calls & interim

meetings is available on the NAIC Conference

Call Calendar.

There are no advance materials at this time.

2010 Revisions to the Holding Company

Models

In 2010, the NAIC membership adopted revisions

to the Insurance Holding Company System

Regulatory Act (#440) and the Insurance Holding

Company System Model Regulation (#450).

These models are currently required for

accreditation. The revisions to the models include

disclosure of enterprise risk reporting within the

holding company system, reimbursement for

participation in supervisory colleges,

modifications to the requirements for transactions

within an insurance holding company system,

clarifications with regard to the commissioner's

authority to access books and records, and

enhancements to the requirements for divestiture

and disclaimers. Attached is a memo from the

Financial Condition (E) Committee regarding the

revisions and the proposed significant elements

for accreditation purposes.

Memo from E Committee

Proposed Significant Elements

Please forward comment letters to Julie

Glaszczak via email at [email protected].

Comments must be received by December 31,

2012. Comments will be discussed at the

Committee's meeting during the 2013 SpringNational Meeting.

2009 Revisions to the Standard Valuation Law

In 2009, the NAIC membership adopted revisions

to the Standard Valuation Law (#820). This

model is currently required for accreditation. The

revisions authorize a principle-based reserve

basis for life, annuity and accident and health

contracts and the use of a valuation manual. At

the 2010 Summer National Meeting, the

Committee voted to release the revisions for a

Financial Regulation Standards and Accreditation (F) Committee http://www.naic.org/committees_f

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Consider new model laws, new practices and procedures and amendments

to existing model laws and practices and procedures required for

accreditation and determine timing and appropriateness of addition of such

new model laws, new practices and procedures and amendments.

4.

Render advisory opinions and interpretations of model laws required for

accreditation and on substantial similarity of state laws.

5.

Review existing standards for effectiveness and relevancy and make

recommendations for change, if appropriate.

6.

Produce, maintain and update the NAIC Administrative Policies Manual of

the Financial Regulations Standards and Accreditation Program to provide

guidance to state regulators regarding the official standards, policies and

procedures of the program.

7.

Maintain and update the NAICs Financial Regulation Standards and

Accreditation Program pamphlet.

8.

Perform enhanced pre-accreditation review services, including but not

limited to, additional staff support, increased participation, enhanced report

recommendations and informal feedback.

9.

Recent Changes to Accreditation Standards - Now in Effect

Effective January 1, 2012

2006 Revisions to the Risk-Based Capital for Insurers Model Act (#312)

In March 2006, the NAIC membership adopted revisions to the Risk-Based Capital

for Insurers Model Act (#312). These revisions were made to incorporate a new

trend test for P/C companies; language for a life trend test was already included.

The model was changed to cite the P/C trend test as a way for the company action

level to be triggered. Some minor editorial changes were also made to distinguish

the life trend test that with this new P/C trend test. The main revision was made to

Section 3, which is a significant element that is required for accreditation.

Company Licensing and Change in Control Accreditation Standards [PDF]

The Financial Regulation Standards and Accreditation (F) Committee has adopted

new standards relating to the licensing of new companies (primary applications)

and changes in ownership (Form As).

The new Part D accreditation standards will not be a scored section; therefore, a

state could not fail accreditation based solely on its lack of compliance with thecompany licensing standards. If deficiencies are noted, the review team would

provide management comments to the state insurance department similar to the

current Part C.

New Part A Items for Risk Retention Groups [PDF]

At the 2008 Winter National Meeting, the Committee adopted Part A: Laws and

Regulations standards for risk retention groups (RRGs) effective January 1, 2011.

The Risk Retention Group (E) Task Forces deliberations on the Part A standards

took approximately five years. During that time, some of the NAIC model laws and

regulations were revised, but the revisions were not reviewed by the Task Force

until 2009 and 2010. The Committee adopted the Task Forces recommendations

of the Part A standards that changed since the initial review as being applicable to

captive RRGs.

The Property and Casualty Actuarial Opinion Model Law (#745), which became

part of an accreditation standard for traditional insurers effective January 1, 2010

and required the filing of an Actuarial Opinion Summary, was determined to be

applicable to RRG insurers as well. The 2001 and 2006 revisions to the Annual

Financial Reporting Model Regulation (#205), which are currently applicable for

traditional insurers, provide additional guidelines on certified public accountants,

auditor independence, corporate governance, and internal control over financial

reporting and has been determined to be applicable to RRG insurers.

Group Holding Company Analysis [PDF]

A memo from the Group Solvency Issues (E) Working Group suggested the

one-year comment period, which ended

December 31, 2011. As a result of two comment

letters received, the Committee re-exposed the

revisions until December 31, 2012. The revisions

will be reconsidered by the Committee in 2013

when the Valuation Manual is expected to be

completed.

Please forward comment letters to Julie

Glaszczak via email at [email protected] must be received by December 31,

2012. Comments will be discussed at the

Committee's meeting during the 2013 Spring

National Meeting.

Accreditation Informational Pamphlet

Accredited US Jurisdictions

Minutes for the four most recent NAIC National

Meetings are available free for meeting

attendees and members. Members may access

minutes via StateNet. If you do not know your

User ID or password, please contact the NAIC

Help Desk.

Media queries should be directed to the NAIC

Communications Division at 816-783-8909 or

[email protected].

Julie Glaszczak, CPA

Senior Accreditation Manager

Phone: 816.783.8130

E-mail: [email protected]

Mike Sindel, CPA

Accreditation Program Manager

Phone: 816.783.8125


Sara Franson

Accreditation Program Specialist

Phone: 816.783.8425


Please see the current Committee List for a

complete list of committee members.


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Committee adopt new holding company analysis review team guidelines for 2011

annual statement implementation. The current analysis guidelines require holding

company filings to be reviewed, but do not express the extent of the expectations

on the degree of analysis taken with such documents. In response to this, as well

as a variety of other similar efforts all related to group-wide supervision, the

Working Group proposed updates to the Appropriate Depth of Review and

Documented Analysis Procedures standards to provide more defined guidance

regarding holding company analysis.


2008 Revisions to the Model Regulation to Define Standards and

Commissioners Authority for Companies Deemed to be in Hazardous

Financial Condition (#385)

Amendments to the Model Regulation to Define Standards and Commissioners

Authority for Companies Deemed to be in Hazardous Financial Condition (#385)

were adopted in 2008. The model provides additional standards for consideration

by the commissioner to determine whether the continued operation of any insurer

might be deemed to be hazardous to its policyholders, creditors or the general

public. In addition, the revisions give the commissioner additional authority to issue

an order requiring companies deemed to be in a hazardous financial condition to

take corrective action. The revisions to model #385 impact the first two significant

elements under the Corrective Action standard currently required for

accreditation.

Risk Based Capital (RBC) for Insurers Model Act (#312) Required for RRGs

Part A standards became effective for risk retention groups on January 1, 2011.

However, the Capital and Surplus standard did not require that a state adopt the

RBC Model Regulation for use with RRGs. On a December 14, 2011, conference

call, the FRSAC adopted the proposed revisions to the Capital and Surplus Part

A standard that makes RBC applicable to RRGs.


Risk-Based Capital for Health Organizations Model Act (#315)

At the 2010 Spring National Meeting, the Financial Condition (E) Committee

adopted a recommendation to make the Risk-Based Capital for Health

Organizations Model Act (#315) an accreditation standard. There have been no

revisions made to Model #315 since 2009. Model #315 will be included in the Part

A standards under the Capital and Surplus Requirement standard currently

required for accreditation.

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Financial Regulation Standards and Accreditation F Committee