Internal Administration (EX1) Subcommittee
Executive (EX) Committee Task Forces and Working Groups Summary Report
Fall 2009 Meeting Summaries Index

The Executive (EX) Committee and Internal Administration (EX1) Subcommittee met in joint session September 21, 2009. The meeting was held in regulator-to-regulator session in accordance with the exceptions contained in the NAIC’s open meeting policy (i.e., internal or administrative matters of the NAIC, as well as consultations with NAIC staff members). 

During the joint meeting, the Committee and Subcommittee:

  • Adopted the minutes of the Subcommittee’s June 13 and Aug. 24 meetings. During the Aug. 24 meeting, the Subcommittee selected the Gaylord Palms in Orlando as the headquarters hotel for the 2010 Fall National Meeting, Oct. 18–21, 2010, and the Gaylord National as the headquarters hotel for the 2015 Fall National Meeting, Nov. 19–22, 2015.
  • Adopted the report of the Audit Committee, which included:
      • A report on the financial results through July 31, 2009.
      • A preliminary update on financial results through August 31, 2009.
      • Strong investment performance versus benchmarks through August 31, 2009.
      • An update on 2009 financial projections and the results of cost control measures implemented by NAIC management.
      • An update on database fee collections.

The Audit Committee also approved a change to broaden the current NAIC Grant Fund Policy to allow for reimbursement of expenses associated with member participation in supervisory colleges and/or other meetings associated with state participation in national regulatory and/or NAIC business.

  • Adopted the report of the Information Systems Task Force, which included its review of member-approved information technology projects.
  • Approved the NAIC’s 2010 budget proposal for presentation to all NAIC members at the Commissioners Roundtable meeting and then release for public review and comment. The 2010 budget proposal includes total revenues of $73,648,374 and total expenses of $70,985,103, which represent a 0.7% increase and 0.8% decrease, respectively, from the 2009 budget, and a 2.0% and 2.3% increase from 2009 projected revenues and expenses, respectively. A copy of the NAIC 2010 budget proposal will be made available from the NAIC Web site with comments due to NAIC staff by Oct. 23 for consideration during the public hearing teleconference, which is tentatively scheduled for November 5.
  • Received an update from Commissioner Kevin McCarty (FL) regarding the report of the National Catastrophe Model Study Group. The Subcommittee plans to continue its review of the feasibility study and evaluate options, including considering additional options not included in the Study Group’s report. Recognizing the need for further transparency to regulators and regulator access to existing market models, and balancing these needs with significant operational and financial impacts of developing a national model, the Subcommittee will continue its evaluation into 2010.
  • Received a report from New York, as chair of the Valuation of Securities (E) Task Force, and SVO staff regarding a proposal to consider modifications to current NAIC designations for residential mortgage-backed securities (RMBS). Given the rating agency downgrades of RMBS holdings, in large part because of models requiring an automatic downgrade regardless of loss severity, the Valuation of Securities (E) Task Force has been evaluating options for considering the loss severity of projected principal losses in RMBS holdings and their resulting impact on NAIC designations and ultimately risk-based capital charges. Assuming a policy decision to pursue this proposal by the Valuation of Securities (E) Task Force and the Capital Adequacy (E) Task Force, through the Financial Condition (E) Committee, the Subcommittee agreed that next steps will include:
  • Development of a Request for Proposal (RFP) to potential vendors to conduct the reviews of RMBS holdings.
  • Development of a framework for the requirements for and related operational and financial impact of this project.
  • Reporting of the potential vendor selection and related operational and financial considerations for approval by the Executive Committee and Internal Administration Subcommittee prior to implementation.
  • Received a report from NAIC Chief Executive Officer, Terri Vaughan, regarding:
  • Implementation and staffing of the Center for Insurance Policy and Research (CIPR).
  • The CIPR’s work and support of the Solvency Modernization Initiative Task Force, including research on systemic risk.
  • NAIC Executive Office outreach efforts and discussions regarding the NAIC’s regulatory modernization efforts designed to strengthen and preserve the state-based insurance regulatory system.
  • Received a report from NAIC Chief Operating Officer, Andy Beal, regarding:
  • Cost control measures implemented in June 2009 and improved operating projections through Dec. 31.
  • An update on year-to-date NAIC staff turnover, which is just above 5% and consistent with local trends.
  • Implementation of the  automated Human Resources Information System and related operational enhancements;
  • SVO staff research of additional analytical tools to significantly enhance the SVO and state regulators’ understanding and evaluation of insurer investment portfolio risks. The NAIC may reserve the right as part of its 2010 budget proposal to assess a portion of the existing $1.68 million SVO assessment (noting that only one-half, or $790,000, of the assessment is currently included in the 2010 budget proposal), in order to cover the potential costs of value-added analytical tools for the benefit of regulators and industry.
  • An update on the NAIC’s evaluation of its Kansas City office space lease and alternatives for this space upon expiration of the current lease on January 31, 2012.
  • Adopted the Subcommittee’s proposed 2010 charges.
  • Discussed a proposal for the establishment of a Multi-State Enforcement (EX) Task Force for the purpose of better oversight and coordination of multi-state settlement agreements and conducting multi-state examinations. The Executive Committee and EX1 Subcommittee agreed to refer the proposal to the Market Analysis Working Group to provide an opportunity for review, prior to considering the establishment of the Task Force and adoption of charges by the Executive Committee at the Winter National Meeting.
  • Discussed an outstanding charge of the Capital and Surplus Relief (E) Working Group, relating to discussion of NAIC procedures for making necessary changes to NAIC guidance, perhaps outside of the normal NAIC process, when necessary to accommodate emergency items. The Executive Committee and EX1 Subcommittee agreed to establish a subgroup of the Executive Committee to consider this charge and to include members from Connecticut, Iowa, Kansas and Wisconsin.
 

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