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:

1. Adequate solvency laws and regulations in each accredited state to protect consumers and guaranty funds.
2. Effective and efficient financial analysis and examination processes in each accredited state.
3. Appropriate organizational and personnel practices in each accredited state.
4. 4. Effective and efficient processes regarding the review of organization, licensing and change of control of domestic insurers in each accredited state.

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 continued compliance with the accreditation standards and to identify areas of improvement.

2012 Charges

1. Maintain and strengthen the Financial Regulation Standards and Accreditation Program.
2. Assist states, as requested and as appropriate, in implementing laws, practices and procedures, and obtaining personnel required for compliance with the standards.
3. Conduct a yearly review of accredited jurisdictions.
4. 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.
5. Render advisory opinions and interpretations of model laws required for accreditation and on substantial similarity of state laws.
6. Review existing standards for effectiveness and relevancy and make recommendations for change, if appropriate.
7. 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.
8. Maintain and update the NAIC’s “Financial Regulation Standards and Accreditation Program” pamphlet.
9. Perform enhanced pre-accreditation review services, including but not limited to, additional staff support, increased participation, enhanced report recommendations and informal feedback.

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 the company 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 Force’s 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 Force’s 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 (EX) Working Group suggested the 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.

Effective January 1, 2014 

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.