The Reinsurance (E) Task Force ("RTF") of the US National Association of Insurance Commissioners ("NAIC") held a virtual meeting on March 6, 2023, in lieu of meeting in person at the NAIC's 2023 Spring National Meeting. In addition to various routine matters such as adoption of the RTF's 2022 Fall National Meeting minutes, the meeting covered the following matters.
- Reinsurance Financial Analysis (E) Working Group
The RTF received and adopted the report from the Reinsurance Financial Analysis (E) Working Group ("ReFAWG"). ReFAWG held meetings in November, December and January to consider and approve applications for reciprocal jurisdiction reinsurer and certified reinsurer statuses, and expects to continue to hold regular meetings to consider additional applications in the coming months. As of March 6, 2023, there are 55 approved reciprocal jurisdiction reinsurers and 41 approved certified reinsurers. The ReFAWG reported that 39 states have already "passported" at least one reciprocal jurisdiction reinsurer, and more states are expected to do so in the near future. "Passporting" is the process under which a reinsurer applies to an initial or "lead" state for recognition as a reciprocal jurisdiction or certified reinsurer, following which ReFAWG evaluates and makes its recommendation concerning the status (and any related rating for the reinsurer). Other states can then choose to defer to the lead state's determination for recognizing a reinsurer as a reciprocal jurisdiction or certified reinsurer, which leads to administrative efficiency in maintaining reciprocal or certified status in multiple states given the reduced level of information that must be submitted to states other than the "lead" state. According to the ReFAWG, the passporting process seems to be working well for all relevant parties.
- Mutual Recognition of Jurisdictions (E) Working Group
The RTF received a report from the Mutual Recognition of Jurisdictions (E) Working Group ("Mutual Recognition WG"), but did not adopt the report, as the Mutual Recognition WG no longer formally reports to the RTF. The Mutual Recognition WG has not met since the NAIC's 2022 Fall National Meeting in December. In November 2022, the Mutual Recognition WG reapproved Bermuda, France, Germany, Ireland, Japan, Switzerland and the United Kingdom as qualified jurisdictions and Bermuda, Japan and Switzerland as reciprocal jurisdictions; the European Union1 and the United Kingdom2 qualify as reciprocal jurisdictions based on the existing respective covered agreements. The Mutual Recognition WG reevaluates the approved jurisdictions annually in the fall, and also monitors developments in such jurisdictions on an ongoing basis. For example, the Mutual Recognition WG plans to track any developments to Bermuda's regulatory framework that might be implemented based on the consultation paper, "Proposed Enhancements to the Regulatory Regime and Fees for Commercial Insurers," issued by the Bermuda Monetary Authority on February 24, 2023.
- Term and Universal Life Insurance Reserve Financing Model Regulation
The RTF received a report on the adoption by the states of the NAIC's Term and Universal Life Insurance Reserve Financing Model Regulation (#787), often referred to as the "XXX and AXXX" model regulation, which became an NAIC accreditation standard on September 1, 2022, with enforcement starting on January 1, 2023. As of February 22, 2023, 33 US jurisdictions had adopted Model Regulation #787 and adoption was under consideration in another three, with Nebraska having adopted it since then through the NAIC's Accounting Practices and Procedures Manual ("AP&P Manual"). In lieu of adopting Model Regulation #787, states can satisfy accreditation standard requirements by adopting Actuarial Guideline XLVIII—Actuarial Opinion and Memorandum Requirements for the Reinsurance of Policies Required to be Valued under Sections 6 and 7 of the NAIC Valuation of Life Insurance Policies Model Regulation ("AG 48") through an insurance bulletin or by adopting the AP&P Manual; however, if a state relies on AG 48 instead of adopting NAIC Model Regulation #787, it must also adopt Section 5B(4) of NAIC Model Regulation #785 (which are exceptions related to certified reinsurers and reciprocal jurisdiction reinsurers). 10 states are relying on AG 48 instead of adopting Model Regulation #787.
As discussed above, the RTF continues to support the states' implementation of the framework for recognition of reciprocal jurisdiction reinsurer status in the US and promote the adoption of Model Regulation #787. We continue to monitor developments regarding these implementation efforts and will continue to provide updates of significant developments.
To view additional updates from the US NAIC Spring 2023 National Meeting, visit our meeting highlights page.
Footnotes
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