NAIC President and Maine Insurance Superintendent Eric A. Cioppa's prepared remarks for Fall 2019 National Meeting Opening Session.
Some of you have noticed the theme for our meeting is "Bigger in Texas."
Appropriate because the global insurance market is big, with more than one point two trillion dollars in net premiums written. Not to mention the size of the NAIC – 56 members strong, backed by nearly eleven thousand state insurance regulators and 500 NAIC staff.
It's a good thing we are so well supported because our vision is equally ambitious. In Texas-fashion, for us it was either “go big, or go home.” We chose going big in 2019. Whether it was taking on and achieving critical domestic and international priorities, or the continued progress on our strategic plan, State Ahead, we did not shy away from the big, tough issues and challenges. To the contrary, we embraced these challenges and laid out large-scale ideas and overarching objectives to propel us to meet the needs of insurance markets of the future.
In keeping with the Texas-sized theme, this meeting is sizeable. They say little pieces make up the big picture. With nearly 100 official meetings in five days, it is certainly true here. Looking back to our Spring National Meeting in Orlando, we set out goals for 2019 and made a commitment to achieve real, meaningful progress on each.
I know none of us, myself included, did this for a personal legacy, but because we truly believe each of these areas is critical to the future of insurance regulation, both here in the U.S. and abroad.
This reminds me of my favorite Harry Truman quote “It is amazing what you can accomplish if you do not care who gets the credit” – that fits for all the members around the table.
I am proud of the work of this body, in both long strides and incremental steps. Let me share with you some of that progress on each of our key initiatives that now form our collective legacy.
Annuities are lifetime protection for many Americans, and it's important that those products are suitable for those purchasing them. To make sure NAIC guidance reflects changes since the model was first adopted in 2003, we are working through a number of updates.
In 2019 we made significant advancements in revising the NAIC Suitability Model to evolve into a best interest standard, consistent with market trends and complimentary action at the federal level. The current strategy focuses on alignment, where appropriate, with the SEC's regulations to enhance regulatory consistency.
Progress on this important initiative highlighted one of the most enduring qualities of NAIC members – our ability to find consensus in areas where others fall victim to partisanship and politics. It’s often been remarked that regardless of the states we come from, their size, their politics, or demographics, we put that all aside when we enter these rooms and are bound by our common duties as regulators and our shared commitment to policyholders.
Long-Term Care Insurance
Related to policyholder protection is the very real issue of solvency and stability in the long-term care insurance market. This year, the NAIC formed an executive-level task force focused on rate coordination and consistency of long-term care insurance products. Tough topics, and while there is more work to be done, important progress was made this year.
We’ve known for some time there is no “silver bullet” that is going to solve the complex issues surrounding Long Term Care. If we can tackle individual elements, progress will be made. After all, the best way to eat a Texas-sized plate of BBQ is one bite at a time, and we’re doing just that.
But just as we need to resolve legacy issues, we need to keep an eye to the future. I know many of you joined us yesterday for our special program on the State of Long-Term Care Insurance. There is a need for innovation and fresh thinking in this space, and programs like these should help drive a productive conversation forward.
Health insurance markets remain a focus for insurance regulators. The NAIC supports member efforts to stabilize their markets while advocating for state flexibility and control, especially for the unique challenges faced by the territories. We remain one of the few national organizations not paralyzed on the topic of healthcare.
That’s not to suggest our members don’t have different points of view on healthcare – they do. One of our greatest strengths is that the nature of our state-based system can serve as laboratories of innovation, especially when we are united in a common cause for consumers.
An example of our consumer-centric focus on healthcare was our push for air ambulance balance billing reforms. In September, the U.S. Department of Transportation formed the Air Ambulance and Patient Billing Advisory Committee and appointed 13 members, including a state insurance regulator. This is a great opportunity and huge challenge, so we are lucky to have the world's tallest politician advocating for us on the committee.
Climate Change and Resiliency
Another record was set this year in our communication collaboration efforts. To help educate consumers about the dangers of flood and wildfire, the NAIC partnered with state insurance departments, the Federal Insurance and Mitigation Administration, and FEMA. In partnership, we launched the Your Risk is Real integrated consumer campaign. Education leads to preparation, and preparation makes communities more resilient.
For everyone sitting around this table and in this room, this is not just a sector priority – this is a generational priority. I know Director Farmer in his upcoming year as NAIC President is going to take on climate risk and resiliency as his top issue.
We are committed to being part of the solution to this global crisis. History will not forgive complacency.
We all know natural disasters are becoming more frequent, costly and Texas-sized. I hope you will join us on Sunday for a workshop on natural disaster resiliency. Tying together the needs of consumers, businesses large and small, and innovations in mitigation tools, this program promises to open a lively discussion about recovery.
On the federal side, the NAIC continues to support a long-term reauthorization of the National Flood Insurance Program. We are hopeful that there will not be another lapse in the program, and all of you can help.
Please reach out to your members of Congress and share your support for reauthorization of the NFIP.
Data, Innovation & Cyber
Keeping ahead of changes in the insurance sector has always been a challenge this body has faced head-on. Technology-based innovations are no different. In addition to our work on adoption of the NAIC's cyber model by the states, we are developing tools and resources to keep this membership informed.
We continue to develop resources for members and for the public, to engage, learn and look forward to upcoming challenges so we can tackle them together.
From a policy perspective, how we balance regulation of data usage, Artificial Intelligence, and privacy will be a defining moment for this sector. We have taken all that we’ve learned in prior years and are now applying it in the development of informed policymaking in these critical areas.
Group Capital Calculation
While innovations are exciting and challenging, the core of what we do is rooted in protecting policyholders through monitoring company solvency. To this end, we have made progress on the development of a Group Capital Calculation. When finalized, this calculation will provide additional analytical information for use in assessing group risks and capital adequacy.
The NAIC finalized Group Capital Calculation specifications for further evaluation and field testing in 2019.
Through our coordination with the Federal Reserve throughout the process, our method largely aligns with their Building Block Approach, which again will lead to enhanced regulatory consistency in the U.S.
International & International Capital Standard
While domestic negotiations are never easy, they are a cakewalk compared to some of the pressures we face internationally. Despite being the world's largest insurance market – and for reference Texas is twice the size of Germany – we are constantly pushing back against other jurisdictions’ approaches to regulation.
In 2019 we saw intense negotiations internationally, regarding the development of an international Insurance Capital Standard by the International Association of Insurance Supervisors.
Despite some extraordinary challenges, the NAIC was ultimately successful in executing our strategy and achieving our objectives for the next stage of development. We took what had only been a beachhead for our Aggregation Method two years ago and turned it into a global front-line.
While the U.S. does not plan to implement the reference ICS, Team USA remains committed to protecting U.S. consumers and companies that engage globally. I believe we have a clear path forward to that end.
Changes globally will impact companies in the U.S., whether they are international standards, or ties to other financial sectors. A global understanding of the factors that impact our insurance markets is imperative.
To that end, the NAIC continued to work on the U.S. regulatory framework’s program on liquidity risks, with a focus on life insurers – due to their potential for large-scale economic impact. Our macroprudential initiative will give regulators more data points to better scope the risks taken on by the insurers they regulate.
State Ahead Highlights
In addition to executing on our policy priorities, I've been privileged to be President as we have moved forward on many of the objectives laid out in the State Ahead framework. Some highlights include enhanced tools for state insurance departments, better and more training opportunities for state regulators, and improved actuarial modeling resources.
We have enhanced financial analysis tools, improved data modeling capabilities and updated consumer resources. State Ahead is our blueprint for the future of the NAIC. Every person sitting around this table has played a part in helping with the construction of that future. And like so many things with the NAIC, we are not building this just for ourselves, but for the generations of regulators to come. We have a 150-year legacy to protect and we can all be proud of the role we’ve played in adding to the rich tapestry that is the NAIC.
At this point, the outgoing president typically turns to the president-elect to tell him or her about the shoes they have to fill or to offer advice. I'm not going to do that today. Instead, I turn to all of you around the table and in the audience.
I know Ray will do his part. I'm asking that all of you support him and continue to do your part. It is so important that everyone in this room participate, engage, support and – when necessary – push back. Together, we will set our course, adjust and ultimately advance the state-based system of insurance regulation.
Our collective resources and talents are immense. Leveraging these assets can and will position us not only for the next year, but for decades to come.