Positioning, Patience and Precision

The following are NAIC President and Wisconsin Insurance Commissioner Ted Nickel's Opening Session prepared remarks.

As NAIC president, I'm not supposed to play favorites, but I am very happy to be here in Colorado. I logged so much time here in my younger days that Colorado was practically a second home during my "misspent youth." Those of you who know me well know I am an avid hunter, fisherman and did a lot of skiing when I was younger. I have many cherished memories of trips here—probably because it's such an amazing place to enjoy the great outdoors. My skiing motto was "cliffs, rocks and trees." I have always been in awe of this state's natural beauty from the Frying Pan, Yampa and Roaring Fork Rivers, to the majestic splendor of Aspen's peaks and high mountain meadows. I've also experienced the challenges of field dressing, quartering and packing out an elk while being waist deep in snow. It's a skill I have yet to use as NAIC President, but the year is young. Kidding aside, these experiences were character building for me and taught me some important lessons.

I've discovered that much of what I know about good insurance policy and regulation I learned by being an outdoorsman. Some of the most important qualities of being a good sportsman AND an insurance commissioner include: positioning, patience and precision.

When hunting, you need to know where and when to search for your trophy buck. You also need the persistence to wait, watch and then wait some more. Finally, when you are ready to pull the trigger, your aim needs to be exact, with a deep respect for the consequences of your actions.

In the regulatory arena, these same skills are crucial. Understanding the needs of consumers and the industry is important in order to map our position to promote fair, strong and competitive markets. Patience is required because there are likely as many voices out there as there are choices in the quest for good policy. And while precision in insurance is not the same as "Ready, Aim, Fire," working together through the NAIC, we understand the importance of exercising caution and care in our collaboration. And most of the time, we know better than to act with a call of Ready, Fire, Aim!

Innovation & Tech

One area of rapid growth impacting every line of insurance is innovation in technology. Annual investment in InsurTech increased to more than $2.5 billion in 2016 and we expect continued growth. Because of this need, NAIC created the Innovation and Technology Task Force to help regulators stay on top of developments affecting our sector, including products and services from start-up companies, as well as developments by established industry players. As regulators, we have an opportunity and responsibility to support innovation by working with individuals and companies as they develop new product offerings and services while ensuring consumers are adequately protected.

The new task force reports directly to the NAIC Executive Committee.


One of the working groups under the umbrella of this new task force is cybersecurity.

The NAIC's efforts in cybersecurity this year include updating our cybersecurity examination standards in the Financial Examiners and Market Conduct Examiners Handbooks and continuing to develop standards for data security.

With cyber threats growing, there is an increased demand for cybersecurity insurance policies. Analysis of a new data supplement showed more than 500 insurers provided U.S. businesses and individuals with cyber insurance in 2015. In addition, there are a significant number of non-U.S. surplus lines insurers writing cyber risk coverages. We all look forward to learning more about this expanding sector especially after we complete our analyses of the 2016 filings. Understanding the market helps us do our jobs better.

Capital Standards

Another area of innovation where we are continuing to make good progress on is a proposed group capital calculation. Many factors are under consideration, such as approaches for treatment of non-regulated entities as well as potential approaches for treatment of non-RBC filing U.S. insurers. We anticipate continued discussions on these topics, as well as exploration of other topics such as treatment of structural subordinated debt and stress testing with a goal of developing a version for testing later this year. The recently negotiated covered agreement, which I'll get to in a moment, includes a provision on capital that would seem to deviate from our current path. We are hoping for some clarity from our federal and foreign colleagues on that point.

On a global scale, IAIS is developing an International Capital Standard. However, we have concerns with the prescriptive approach they are taking, which appears to favor the European framework. Given its current trajectory, we would have serious reservations about implementing an ICS domestically.

PBR Implementation

There are several big projects we have ahead of us. One of the most rewarding experiences is when we achieve a significant milestone for one of our key initiatives. This past January was one such marker, as it was the activation date for the transition to Principles-Based Reserving. This new policy reserving methodology is much more adaptable to innovative life insurance products.

A number of volunteer companies and states have been part of the multiple pilots, and thanks to them, we've learned a great deal and can better support this transition. We are also implementing a training program for regulators so they are prepared to review companies using PBR. This shift represents a significant accomplishment and improvement to our system, and we're excited to bring it on line.


Looking to our efforts in Washington, it has been a busy year. Protecting consumers and promoting stable markets has been a challenge in a number of states, with fewer carriers and higher prices. Some of our state exchanges are doing well, but others are near collapse. As administration officials and Congress consider various efforts to address our markets, the NAIC has been, and will remain, actively engaged as they work their way through these issues.

NAIC's role, as the voice of the regulators, is to serve as a nonpartisan source of expert information on how various proposals would impact consumer protection and the stability of the health insurance marketplace. We have and will continued to point out when ideas on the table – such as preemptive interstate sales or overturning McCarran-Ferguson provisions – do more harm than good. Congress and administration officials have signaled their desire to return authority to our states, which is encouraging. It's our responsibility to hold them accountable, and to tailor solutions which encourage strong local markets to continue to flourish and struggling markets to rebound.

Dodd Frank Reform

Since the passage of Dodd-Frank, it has become clear reform is needed to reduce duplicative roles and needless complications in the regulatory arena.

Among reforms NAIC supports is elimination of Federal Insurance Office, a review of the Financial Stability Oversight Council's designation process for non-bank Systemically Important Financial Institutions and allowing our state insurance regulator member a vote on the council. Combined, these reforms would encourage deference to state insurance expertise and authority where it is needed and clarify the role of the primary prudential regulators for the sector at federal and international levels.

Covered Agreement

Looking internationally, we have serious concerns regarding disparate treatment U.S. companies have received in the European Union. Ironically, this comes at the same time states are working to reduce requirements for firms from the EU.

Negotiators of the agreement told us the two goals of the process were to gain equivalence for U.S. insurers operating in the EU and to grant recognition by the EU of the U.S. regulatory system. Unfortunately, the agreement reached in January accomplishes neither. Further, it is littered with ambiguous language. I testified before Congress in February on these very issues. Last month NAIC staff met with Treasury officials to discuss their options and we reiterated our concerns about a lack of clarity and certainty in the agreement.

Regardless of what happens with the agreement, state insurance regulators have an obligation to ensure policyholders are protected by their insurers and their insurer's counterparties. We will consider any and all necessary steps to ensure a strong and safe marketplace.

Flood Reform

Speaking of safety, just last year, the U.S. experienced 15 natural disaster events, each with more than a billion dollars in losses. As we consider disaster resiliency efforts, millions rely on the National Flood Insurance Program. NFIP reauthorization expires on September 30. Congress has begun considering changes to the program. NAIC stands ready to assist Congress in this process and has weighed in with reauthorization principles resulting from an open and transparent NAIC deliberation.

Parallel to reauthorization, NAIC supports efforts by Congress to remove barriers and develop a robust private flood insurance market regulated by state insurance departments. We'll be talking about the future of flood insurance at our spring CIPR event here in Denver on Monday afternoon. I hope to see you there.

LTC Insurance

Another market sector in need of innovation is long-term care insurance. In the past decade, the market has grown from covering less than 3 million lives to more than 7 million. Conversely, the number of companies writing polices which was once greater than 100, now stands at less than 15. This trend is not sustainable.

NAIC is working to make things better, including protections to keep up with changes in product design and to address historical problems in this marketplace. We are taking a broad look at recent changes and examining ways to help markets stabilize.

Retirement Security

Consumers need to be better prepared for retirement, and there are areas where insurance products – like long-term care insurance and lifetime income products – can play a crucial role in long-term financial security. NAIC is continuing its three-pronged Retirement Security Initiative focusing on education, consumer protection and innovation through the work of our committees to enhance laws and regulations and encourage modernization in the insurance industry.

During the past year, we've worked with educators to improve financial literacy among students. In Wisconsin, I serve as vice-chair of our Governor's Council on Financial Literacy. Insurance is an important component of consumers' money management plans. And I believe part of our mission should be to enhance these vital skills. It's an area I'm looking to strengthen in our consumer outreach initiatives.

We are also monitoring our laws and regulations to ensure they are consistent with public policy needs to protect those most vulnerable. We are engaged in Washington with relevant leaders demonstrating that these markets are well regulated and can be a part of retirement security solutions.

Consumer Outreach

Tied to our retirement security efforts is our expanded partnership with legendary entertainer Rita Moreno. After our initial success with her radio public service announcement last year, we are excited to release a corresponding television PSA this summer.

We recently wrapped up our partnership with Breaking Bad star RJ Mitte. RJ's campaign did a great job of reaching millennials on social media about insurance needs for their age group. RJ's "Bad Breaks" campaign totaled nearly 130 million impressions.

The rest of NAIC's 2017 consumer outreach plan is centered on the core four: auto, home, life and health insurance. For the first wave, we recently launched our Disasters Redefined initiative to educate homeowners about specific disaster risks. Already this year, we have seen severe winter storms, tornadoes, mudslides and flooding in more than 14 states. It is important that we continue to educate consumers to help them with disaster prevention, preparedness and recovery.


We have much to accomplish here in Denver. I wish you all a productive and successful meeting. And while there's plenty of work to do at this meeting, I do hope you'll find some time to escape to enjoy a genuine Rocky Mountain High—pun intended! And if you get a chance to do some skiing or fly fishing, I'll be with you in spirit.



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