Best’s News & Research Service - June 05, 2014 04:08 PM (EDT)
Ohio Governor Signs Omnibus Bill Updating NAIC Model Laws, Aiding Consumers
COLUMBUS, Ohio //BestWire// - Ohio Gov. John Kasich has signed legislation that will ensure the state's accreditation standard by modernizing provisions using language based on the National Association of Insurance Commissioners' model laws regarding own risk solvency assessment, credit for reinsurance, principles-based reserving and holding company regulations.
Senate Bill 140 also provides consumer protections, including a one-page summary document homeowners can refer to when they need a simple explanation of what is in their insurance policies.
"These changes are among the most sweeping and impactful insurance reforms to pass the Ohio Legislature in years," Ohio Department of Insurance Director Mary Taylor said.
The American Insurance Association, the National Association of Mutual Insurance Companies, The American Council of Life Insurers and the Property Casualty Insurers Association of America offered support for the new law. "This legislation addresses many critical areas of insurance law and will help ensure that Ohio's insurance markets remain competitive and fair for many years to come," said Joe Thesing, NAMIC's vice president of state affairs.
Several updates to Ohio law in SB 140 are similar to updated language in the NAIC's Model Insurance Holding Company Act, the Own Risk and Solvency Assessment Model Act, the Credit for Reinsurance Model Law and provisions that it approved in 2012 to adopt principles-based reserving for life insurers.
Such changes regarding holding companies may not be the last for Ohio or other states. The NAIC at its Spring National Meeting in Orlando voted to reopen the holding company model act for possible changes, with an eye toward explicitly providing states with group-wide supervision authority, which has already been approved in some states (Best's News Service, March 31, 2014).
SB 140 does not directly address the issue of group-wide supervision, but states the director can create and participate in a supervisory college for any domestic insurer that is part of an insurance holding company system with international operations to determine compliance with state laws. The new law said the director can also clarify membership and participation of other supervisors. Supervisory colleges under Ohio law are forums that facilitate discussions on group-wide supervision of the entire insurance group; the effectiveness of the supervision of entities within an insurance group; and improving the supervision of entities within the insurance group, SB 140 said.
The reinsurance credit provisions in SB 140 permit a reinsurer to post a decreased amount of collateral -- based on how the reinsurer is rated -- to provide reinsurance to an insurance company, said Stephen Schneider, AIA Midwest region vice president. "It encourages reinsurers to enter a market to which they may not have had access to and helps our companies buy reinsurance in markets in which they were not able to do so in the past," Schneider said.
Ohio becomes the latest state to approve ORSA rules, which the Ohio Department of Insurance Public Information Officer Robert Denhard said are new to the code. Schneider said the ORSA confidentiality provisions regarding information to be submitted in Ohio were slightly different than NAIC's model, but AIA supported the final result. ORSA filings are set to begin in 2015, but NAIC and some states have completed two pilot efforts and are ready to embark on a third.
Ohio is the latest state to pass legislation that would have personal lines insurers provide a one-page summary of coverages and exclusions in personal lines policies, although SB 140 would not require them to do so. Summaries must include a brief description of principle coverages and exclusions, a statement of loss valuation and include a notice indicating that the document is for informational purposes only and cannot replace or change policy terms.
The new law states the one-page policy summaries were a reaction to consumer difficulties that followed Hurricane Sandy in 2012, when homeowners discovered they did not entirely understand their policy content and ended up with uncovered damages. New Jersey was among the first to do so, indicating that a one-page policy summary that cannot be considered a replacement for policy terms and that would serve as a guide to homeowners.
Ohio becomes the latest state to adopt the NAIC's principles-based reserving measure, designed to right-size reserves that supporters of the concept view as redundant. The ACLI, which supports the ratification of principles-based reserving, strongly supported the bill, according to Whit Cornman.
In order for principles-based reserving to become a national standard, the NAIC needs approval from 42 of 56 jurisdictions that have 75% of the life insurance premiums.
(By Thomas Harman, associate editor, BestWeek: Tom.Harman@ambest.com)