Financial Regulation Standards and Accreditation
(F) Committee

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.

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.

2009 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 states.
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, and enhanced report recommendations and informal feedback.
   

Recent and Upcoming Changes to Accreditation Standards

Effective Immediately

Insurer Receivership Model Act (#555) The Receivership Part A standard that referenced Insurers Rehabilitation and Liquidation Model Act (IRLMA) and simply requires that state law set forth a receivership scheme for the administration of insurance companies found to be insolvent, will now reference the Insurer Receivership Model Act instead (IRMA). Within the Receivership Part A standard, all reference to IRLMA has been replaced to reference IRMA. Please note that a state does not have to have language that is “substantially similar” to what is included in the model, but rather have a scheme similar to what is contemplated in the model.

Effective January 1, 2009

Actuarial Opinion and Memorandum Regulation (AOMR) The Part A standards for the AOMR will be amended to include as significant elements the requirement of an asset adequacy analysis for all companies and for the filing of a regulatory asset adequacy issue summary by March 15.

Effective January 1, 2010

Annual Financial Reporting Model Regulation (#205)
At the 2006 Summer National Meeting, the NAIC membership adopted revisions to the Model Regulation Requiring Annual Audited Financial Reports (commonly referred to as the Model Audit Rule). These revisions, which included renaming the model to the Annual Financial Reporting Model Regulation, require that insurers comply with certain best practices related to auditor independence, corporate governance and internal controls over financial reporting. The 2006 revisions to the Annual Financial Reporting Model Regulation included new significant elements that are required for accreditation.

Property and Casualty Actuarial Opinion Model Law
This model will be included as a new Part A standard. The model will be judged on a “substantially similar” basis with Sections 2A, 2B, 3A and 3B(1) as significant elements and requires an insurer to annually file with its domestic state an “Actuarial Opinion Summary” on March 15. Other states that the company is licensed in may also request this summary.

Adopted Guidance on Risk-Focused Examinations  [PDF]
The Review Team Guidelines have been revised for those examinations completed using the new risk-focused approach. Traditional company examinations commencing on or after January 1, 2010 must follow the new approach, although early adoption is permitted. See information below for requirements specific to captive RRGs.

Effective January 1, 2011

Part A: Laws and Regulations accreditation standards to RRGs organized as captive insurers - Previously, captive RRGs were exempt from the Part A standards due to their unique statutory structure. The Part A standards for captive RRGs are similar to those required for traditional companies but do include some distinct differences in areas such as accounting methods, RBC, and reinsurance. The Part A standards will become effective for captive RRGs beginning January 1, 2011. [PDF]

Risk-Focused Examinations for Captive Risk Retention Groups
At the Financial Regulation Standards and Accreditation (F) Committee meeting on Sunday, March 15, 2009, the F Committee voted to approve a one-year delayed implementation of the risk-focused surveillance approach for risk retention groups (RRGs) chartered under a state's captive insurance laws. Captive RRG examinations commencing on or after January 1, 2011 must follow the risk-focused surveillance approach. This delay was approved primarily because a subgroup of the Financial Examination Handbook (E) Technical Group is currently discussing various issues related to captive RRG examinations.

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 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.