In the News
Regulatory Update
Principle-based reserving, wildfire liability and auto insurance are a focus.
Principle-based Reserving: New York Gov. Andrew Cuomo signed legislation allowing the state to implement a principle-based reserving standard for life insurers, replacing formulas industry representatives said forced carriers to over-reserve.
After the bill was signed, the state Department of Financial Services released an emergency regulation to begin the implementation of the PBR standard, effective Jan. 1, 2020, Financial Services Superintendent Maria Vullo said in a statement.
“PBR, as now implemented by DFS, modernizes New York's life insurance market while ensuring that insurance companies domiciled and licensed in New York are fiscally strong and hold the reserves necessary to meet their contractual obligations to pay claims to beneficiaries of life insurance policies over the long term,” said Vullo.
In addition to New York, 48 states have passed the model since the National Association of Insurance Commissioners approved it in 2012.
The new PBR law impacts individual and group life insurance policies and annuity contracts. Massachusetts is the lone hold out.
The new system will be governed by a DFS regulation using the NAIC model as a basis and allows New York to deviate from that model as long as reserve valuations are no lower than the minimum standards set in the valuation manual.
The NAIC model requires life insurers to compare reserve calculations based on a set formula against a reserve calculation based on several factors, including mortality, policyholder behavior and other economic conditions.
IFRS 17: A coalition of 11 insurance industry trade associations is seeking a two-year delay in the implementation of IFRS 17, which is designed to improve the insurance underwriting processes.
In a letter to the International Accounting Standards Board, the groups applauded the IASB's proposal that the effective start of IFRS 17 and IFRS 9, which deals with accounting for financial instruments, be put off for a year. The letter was sent to Hans Hoogervorst, chairman of the London-based IASB.
Despite its support of the IASB's suggestion of a one-year delay, the group of associations said in the letter, “we continue to be of a strong view that a two-year deferral is required to both fix the problems with IFRS 17 and to give insurers enough time to have a successful global implementation of the standard.”
Under the present schedule, IFRS 17 is due to come into force on Jan. 1, 2021. The standard was published on May 18, 2017.
A September Best's Briefing outlined how IFRS 17 “could provide better insight into underwriting performance and enable comparisons to be drawn between insurers.” IFRS 17 “is likely to provide greater granularity,” it said.
“In AM Best's opinion,” the briefing said, the 2021 start date, “leaves insurers with a relatively short period for preparation as they also have to provide comparative figures for the previous year (2020) and there have already been calls for a postponement to its implementation date.”
Wildfire Probe: A federal judge has asked California Attorney General Xavier Becerra to assess the criminal liability of PG&E Corp. if an investigation finds the reckless operation of power lines sparked the deadly Northern California wildfires that have killed 85 people.
“The court requests that the Office of the California Attorney General advise the court of its view, the extent to which, if at all, the reckless operation or maintenance of PG&E power lines would constitute a crime under California law,” wrote Judge William Alsup, of the U.S. District Court for the Northern District of California.
The company is under Alsup's supervision after it was convicted of safety violations in the wake of 2010 natural gas pipeline explosion that killed eight people.
Auto Insurance: A National Association of Insurance Commissioners panel has voted to give state regulators a chance to review automobile insurance affordability data it collects.
The auto working group voted during the Fall National Meeting to allow requesting states to receive affordability data collected by the NAIC in a 2017 data call and to send its parent committees an NAIC staff outline of what such a report should look like.
Aaron Brandenburg, NAIC statistical information manager said the panel's two parent committees would allow NAIC to complete a final report early this year should the committees approve its release.
If fully approved, states will be able to get auto insurance affordability data by going to the NAIC instead of having to do their own separate data calls, said Lisa Brown, the American Insurance Association's assistant general counsel and director, compliance resources.
States can use the data to help inform policymakers, who make the ultimate decisions about auto insurance affordability in their states, she said.
