Accreditation

Last Updated: 12/12/2024

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, organizational, and licensing standards as determined by a committee of its peers. The NAIC accreditation program began in 1989 as a result of several large insurance companies becoming insolvent. In May 1988, a U.S. congressional inquiry began investigating the reasons for the insolvencies and issued a report, "Failed Promises: Insurance Company Insolvencies," that concluded that federal regulation, rather than state-based regulation, may be more efficient. 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 the first two states were accredited in 1990.

The accreditation program relies on state certification by the Financial Regulation Standards and Accreditation (F) Committee members, made up of 15 state insurance commissioners. It requires risk-focused financial surveillance including on-site examinations, and 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, as well as primary licensing, redomestications and change of control of domestic insurers 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. A listing of the changes effective this year and beyond is available on the Financial Regulation Standards and Accreditation (F) Committee webpage.

The Financial Regulation Standards and Accreditation (F) Committee, consisting of state insurance 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. The Committee also holds open meetings to consider new or revised standards for accreditation.