Financial Regulation Standards and Accreditation
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.
- Effective and efficient financial analysis and examination processes in each accredited state.
- Appropriate organizational and personnel practices in each accredited state.
- 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.
2014 Proposed Charges
- Maintain and strengthen the Financial Regulation Standards and Accreditation Program.
- Assist states, as requested and as appropriate, in implementing laws, practices and procedures, and obtaining personnel required for compliance with the standards.
- Conduct a yearly review of accredited jurisdictions.
- 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 the addition of such new model laws, new practices and procedures, and amendments.
- Render advisory opinions and interpretations of model laws required for accreditation and on substantial similarity of state laws.
- Review existing standards for effectiveness and relevancy and make recommendations for change, if appropriate.
- Produce, maintain and update the “NAIC Accreditation Program 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.
- Maintain and update the NAIC’s “Financial Regulation Standards and Accreditation Program” pamphlet.
- 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
In 2011, NAIC membership adopted revisions that were made to the Credit for Reinsurance Model Law (#785) and Credit for Reinsurance Model Regulation (#786) to reduce reinsurance collateral requirements for certified non-U.S. licensed reinsurers that are licensed and domiciled in qualified jurisdictions. During the Fall National Meeting, the Committee adopted the 2011 revisions to the significant elements under the "Reinsurance Ceded" standard currently required for accreditation, effective immediately. The revisions are being treated as an optional standard in that the states are not required to adopt collateral reductions for nonadmitted insurers. However, if a state chooses to do this, it must do so in accordance with Model #785 and Model #786.
Revisions to Review Team Guideline in the Examinations Communication Standard
At the 2012 Fall National Meeting, the F Committee adopted revisions to the Communication of Relevant Information to/from Examination Staff standard in Part B2: Financial Examinations. Specifically, one of the Review Team Guidelines requires results of the examination to be shared with the financial analyst. The revisions update this Guideline to be more in-line with the guidance in the NAIC Financial Condition Examiners Handbook.
Effective January 1, 2014
Business Transacted with Producer Controlled Property/Casualty Insurers (#325) for RRGs
Part A: Laws and Regulations Standards for risk retention groups (RRGs) went into effect in 2011, and one of the Part A standards includes the Business Transacted with Producer Controlled Property/Casualty Insurer Act (#325). The Part A requirement is that the states have a regulatory framework similar to Model #325. It was later noted, however, that the model specifically exempts RRGs from its definition of “licensed insurer.” This issue was referred to the Property and Casualty Insurance (C) Committee, and it removed the exemption for RRGs from the definition of “licensed insurer” in Model #325. Therefore, those states with multi-domestic RRG that are controlled by a producer should have a regulatory framework similar to that included in Model #325 by Jan. 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.
Effective January 1, 2015
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.
Effective January 1, 2016
2010 Revisions to the Insurance Holding Company System Regulatory Act (#440) and the Insurance Holding Company System Model Regulation (#450)
Revisions to the Insurance Holding Company System Regulatory Act (#440) and the Insurance Holding Company System Model Regulation (#450) were adopted by the NAIC membership in December 2010. The revisions to Model #440 and Model #450 primarily relate to supervisory colleges and the Form F (Enterprise Risk Report) filing. States should have the revisions enacted no later than Jan. 1, 2016. Please note: The Form F filing requirement in the model and adopted by the Committee does not have a premium threshold. All insurers that are in a holding company should be required to file a Form F. Attached are tracked changes versions of the models and the significant elements.