Last Updated 4/20/2021
Issue: The NAIC Accreditation Program was established to develop and maintain standards to promote effective insurance company financial solvency regulation. The purpose of the accreditation program is for state insurance departments to meet baseline standards of solvency regulation, particularly with respect to regulation of multi-state insurers. NAIC accreditation allows non-domestic states to rely on the accredited domestic regulator to fulfill a baseline level of effective financial regulatory oversight. This creates substantial efficiencies for insurance regulators, who are then able to coordinate and rely on each other's work. It also creates far greater efficiencies for insurance companies licensed in accredited states, which are then not subject to financial examinations or other financial oversight by multiple jurisdictions. All fifty states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands are currently accredited.
Overview: Accreditation is a certification given to a state insurance department once it has demonstrated it has met and continues to meet an assortment of legal, financial and organizational standards as determined by a committee of its peers. The concept of accrediting state insurance departments began in the mid-to-late 1980s when several large insurance companies became insolvent. In May 1988, as a response to the insolvencies, a congressional inquiry began looking at the insolvencies. Subsequently, in September 1988, the NAIC began discussing and shaping the Financial Regulation Standards and Accreditation Program. In June 1989, the NAIC adopted the Financial Regulation Standards and a formal certification program in June 1990.
The accreditation program relies on state certification by other regulators (i.e., peer review), requires risk-focused financial surveillance including on-site examinations, and requires solvency-related model laws, rules and guidelines that have been produced through consensus and collaboration. Accredited insurance departments are required to undergo a comprehensive review by an independent review team every five years to ensure the departments continue to meet baseline financial solvency oversight standards. These departments are also required to undergo a desk audit annually. The accreditation standards require state insurance departments to have adequate statutory and administrative authority to regulate an insurer's corporate and financial affairs, and that they have the necessary resources to carry out that authority.
The accreditation program accomplishes its mission by continually evaluating the adequacy and appropriateness of accreditation standards in accordance with the changing regulatory environment and through continued monitoring of accredited states by conducting the following accreditation reviews:
- Pre-Accreditation Reviews to occur approximately one year prior to a state's full accreditation review. This review will entail a high-level review of the financial analysis and financial examination functions to identify areas of improvement.
- Full Accreditation Review to occur once every five years subject to interim annual reviews. This review will entail a full review of laws and regulations, the financial analysis and financial examinations functions, department oversight, organizational and personnel practices, and primary licensing, redomestications and change of control of domestic insurers to assist in determining a state's compliance with the accreditation standards.
- Interim Annual Reviews to occur annually to maintain accredited status between full accreditation reviews. This review will entail a review of any law and regulation changes, the financial analysis and financial examination functions, department oversight, and organizational and personnel practices, and primary licensing, redomestications and change of control of domestic insurers to ensure continued compliance with the accreditation standards and to identify areas of improvement.
The accreditation program is generally updated every year with changes effective on January 1. For a listing of the changes effective in 2021 and beyond, please visit the Financial Regulation Standards and Accreditation (F) Committee webpage.
To become accredited, the state must submit to a full on-site accreditation review. During this review, the team of independent consultants reviews the department's compliance with the standards to develop a recommendation regarding the state's accredited status. For a state to remain accredited, an accreditation review must be performed at least once every five years with interim annual reviews. If necessary, key areas for improvement may be provided to the state and interim follow-up may be required on those areas.
The Financial Regulation Standards and Accreditation (F) Committee, consisting of regulators from across the country, ultimately decides whether a state meets the requirements set forth in the Financial Regulation Standards. The meetings in which matters of state accreditation are discussed are held in a regulator-to-regulator session to protect the states, regulators, and in some instances, insurers from disclosure of confidential information.
Accreditation Review Process and Procedures