Summer 2019 Opening Session Prepared Remarks

NAIC President and Maine Insurance Superintendent Eric A. Cioppa's prepared remarks for Summer 2019 National Meeting Opening Session.

Welcome to New York City. In August ! Not a bad time to be sequestered indoors with air conditioning. But, I hope you all find some time to explore this great city while you're here.

Opening SessionKurt Vonnegut labeled New York City "Skyscaper National Park" in his novel Slapstick. New York is known for its many unique and beautiful tall buildings. It is also home to many noteworthy historic buildings that have defined both the city's - and our country's - past and future. On this island you will find Federal Hall, where Congress first met, the New York Stock Exchange, and the Freedom Tower, to name a few.

The diversity of architectural styles, people, and cultures that make up New York is a testament to how people from different backgrounds, with unique styles and approaches, can come together to create a dynamic, ever-evolving place.

You could say that the NAIC is a lot like New York City. It is an organization comprised of people, ideals, and ideas. We are a diverse group determined to build a lasting foundation that can support new styles, and fresh thinking, amid changing demands.

It is a privilege for me to stand before you in New York City, as NAIC President, and to update you on the many activities that our dynamic organization has been engaged in during the past months.

State Ahead

Ben Franklin said, "Without continual growth and progress, such words as improvement, achievement and success have no meaning." I like to think he would appreciate that we have embraced that spirit in our work to date on our strategic State Ahead plan. Of our 94 projects, we have completed 32, another 41 are well on their way, and we're setting the ground work for the last 21.

At the start of the year, I outlined eight key priorities for 2019, many based on the State Ahead framework. I want to tell you about some of the "growth and progress" we have made to date in those eight areas.

Long-Term Care Insurance

At the spring meeting in Orlando, we discussed the formation of an executive-level task force of commissioners to address one of our most challenging issues - long-term care insurance markets. I am pleased to report that this new group has been very active, meeting in regulator-only sessions to confer with actuarial experts, and to discuss objectives, and related strategies. The task force will have its first open meeting here in New York on Sunday.

The task force is organized into six workstreams, and is addressing some of today's most contentious insurance issues. But, I have great faith in the ability of this group, and its leadership, to collaborate and find a sustainable path forward.

Annuity Suitability & Best Interest Standard

Since our last national meeting, the SEC has finalized its rules to enhance retail investor protections. The NAIC is reviewing where, and to what extent, those rules affect the updates we are making to the Suitability in Annuity Transactions Model Regulation. Some insurance products and entities are also subject to the SEC rules, and we should harmonize our work, where we are able

The Annuity Suitability Working Group met this morning to continue discussions related to incorporating a best interest standard into the model regulation. The next step is to complete its work on the model regulation for the A Committee, and eventually for the full membership, to consider.

Health Insurance

As you all know, uncertainty in our health insurance markets continues to challenge many states. When the NAIC can offer guidance, and weigh in on federal regulations and pending legislation, we should - and will continue to do so. Our engagement has shown results through the inclusion of air ambulance provisions, which are part of the larger debate about surprise medical bills, taking place on Capitol Hill.

We will continue to advocate for consumers on this important issue, and to seek opportunities for common ground on market stabilization.

Climate Risk

Few - if any - social and economic costs are as high as those resulting from natural disasters - from the loss of life and property, to the long-term economic impact. The data continues to show that the strength, severity, and cost associated with natural disasters is increasing. Furthermore, localized disasters often have global effects. The economic disruption of a tsunami in Japan can be felt all the way to Maine.

Of the $160 billion-dollar cost of natural disasters just last year, only half that amount was insured. And we know all too well that the long-term effect of blizzards, earthquakes, floods, and hurricanes can slow economic growth and cause companies and consumers to go bankrupt. Even when businesses do recover, they often do so by passing along their increased costs to consumers.

The human impact is even more devastating. The Camp Fire in California - a tragedy that was taking place as we met in San Francisco last year - brought it home for many of us. Since we last met, the California Insurance Department hosted a risk and resilience summit. Regulators visited the town of Paradise and discussed how to build more resilient communities and how insurance plays a part in that equation. Later today, the Climate Risk and Resilience Working Group will be discussing these issues as well as the development of a Wildfire Legislative Toolkit.

In addition, the NAIC communications team has been working with state insurance departments, and has partnered with FEMA, to get the word out about risks associated with flood and wildfire. These programs help consumers understand how insurance can protect the lives they have worked so hard to build.

Data, Innovation & Cyber

Another growing and financially devasting risk for businesses and consumers is cyber-crime. According to a global study conducted by Accenture, security breaches have increased by 11% in the last year and by 67% over the last five years. Notably, the US is the most frequently targeted country.

As insurance innovation continues to evolve, we must be vigilant in how new systems are deployed and what is being done to protect consumers.

Technology is changing the way insurers communicate with policyholders, measure risk, and assess claims. The changes are happening so rapidly, it's like jumping from a stage coach to a bullet train. But regulators must continue to keep up with these shifts.

To better support our members, the NAIC is mid-way through its own transition to cloud computing.

Another way we are keeping up with these rapid shifts is through the NAIC's Innovation and Technology Task Force. Its work focuses on the use of new technologies and whether any regulatory requirements need to be changed to meet consumer needs. Ensuring consumer protection is an essential part of this work.

The NAIC is also beginning to look at the use of artificial intelligence by insurers and the regulatory implications that may arise from its use. Anyone interested in this technology should join us Monday for the NAIC's CIPR program on the use of artificial intelligence, in insurance.

Group Capital

Developing tools together that can be used to more accurately and efficiently assess risk and cost is something the NAIC has always done. Development of the Group Capital Calculation is the most recent example.

Preliminary testing of the GCC began in May. The 33 groups participating will submit their completed templates to their respective lead states within the next couple of weeks. Those results will inform the final calculation. Our intention is to complete our work next year.

This analytical tool is part of our holistic approach to enhanced group supervision. It will help us better understand and quantify financial risks to insurance groups, providing regulators with another tool to improve policyholder protections.

Macroprudential Initiative

The Financial Stability Task Force continues to make progress on the issues included in the NAIC Macroprudential Initiative. The most significant issue is the construction of a liquidity risk assessment framework for life insurers.

This work is primarily meant to inform the task force regarding the material impact, if any, the life insurance industry could have on the broader financial markets in the event of certain stresses.

The current work to develop a liquidity stress test focuses on determining the economic assumptions associated with the regulators' selected stress scenarios, and the methodology for determining expected asset sales and impact on cash flows.

We have also been following the industry's investments in leveraged loans and Collateralized Loan Obligations, or CLOs. Last year, we implemented a change that dis-incentivizes holdings of many structured finance products.

The NAIC is fortunate to have a number of analysts in our New York office who have in-depth experience with CLOs. They are working to stress test the CLOs held by insurance companies at the individual investment level. We hope to have these results by early September.


Much of what I've discussed is essentially building out a stronger regulatory foundation based on new technologies and demands from consumers and the industry domestically. However, our responsibilities to our markets don't stop at the borders of our respective states or nation.

That is why the NAIC continues to engage our international counterparts. We are supportive of the International Association of Insurance Supervisor's new strategic plan for 2020-2024. This plan will place greater focus on addressing emerging opportunities, challenges and risks for the insurance sector.

As the IAIS develops international regulatory standards, including the Common Framework for Internationally Active Insurance Groups and the Insurance Capital Standard, we continue to advocate for our effective, national, state-based approach to insurance supervision - and for U.S. consumers and companies operating across borders.

These projects will reach key milestones later this year. We are committed to being a part of this process, raising concerns and proposing solutions when warranted, and partnering with our colleagues at the Federal Reserve and Treasury to collectively represent U.S. interests.


I leave you with one last thought, Thomas Jefferson said that "The price of freedom is eternal vigilance."

Embracing that thought, we as regulators must keep a laser focus on our work, the actions and activities of the bodies we regulate, and on the future needs of the consumers we serve.

About the NAIC

As part of our state-based system of insurance regulation in the United States, the National Association of Insurance Commissioners (NAIC) provides expertise, data, and analysis for insurance commissioners to effectively regulate the industry and protect consumers. The U.S. standard-setting organization is governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer reviews, and coordinate regulatory oversight. NAIC staff supports these efforts and represents the collective views of state regulators domestically and internationally. For more information, visit

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