The mission of the NAIC accreditation program is to establish and maintain standards to promote sound insurance company financial solvency regulation. The accreditation program provides a process whereby solvency regulation of multi-state insurance companies can be enhanced and adequately monitored with emphasis on the following:
- Adequate solvency laws and regulations in each accredited state to protect consumers and guarantee funds.
- Effective and efficient financial analysis and examination processes in each accredited state.
- Appropriate organizational and personnel practices in each accredited state.
- Effective and efficient processes regarding the review of primary licensing, redomestications, and change of control of domestic insurers in each accredited state.
The accreditation program will accomplish 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 reviews 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 examination functions, 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, 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 Financial Regulation Standards and Accreditation (F) Committee will:
- Maintain and strengthen the NAIC Financial Regulation Standards and Accreditation Program.
- Assist the states, as requested and as appropriate, in implementing laws, practices and procedures, and obtaining personnel required for compliance with the standards.
- Conduct a yearly review of accredited jurisdictions.
- Consider new model laws; new practices and procedures; and amendments to existing model laws, practices and procedures required for accreditation. Determine the timing and appropriateness of the addition of new model laws, new practices and procedures, and amendments.
- Render advisory opinions and interpretations of model laws required for accreditation and on substantial similarity of state laws.
- Review existing standards for effectiveness and relevancy, and make recommendations for change, if appropriate.
- Produce, maintain and update the NAIC Accreditation Program Manual to provide guidance to state insurance regulators regarding the official standards, policies and procedures of the program.
- Maintain and update the “Financial Regulation Standards and Accreditation Program” pamphlet.
- Perform enhanced pre-accreditation review services, including, but not limited to, additional staff support, increased participation, enhanced report recommendations, and informal feedback.2020 Proposed Charges
RECENT CHANGES TO ACCREDITATION STANDARDS
Effective September 1, 2022 with enforcement for accreditation to begin January 1, 2023
XXX/AXXX Model #787 as a New Accreditation Standard
The Term and Universal Life Insurance Reserve Financing Model Regulation (#787) establishes uniform, national standards governing reserve financing arrangements pertaining to term and universal life insurance policies with secondary guarantees.
The adoption included the following elements: a) Model #787 as a new accreditation standard with significant elements as outlined in the referral; and b) the 2016 revisions to the Credit for Reinsurance Model Law (#785) are considered acceptable but not required. Although the 2016 revisions to Model #785 are not required, there are elements of #785 that are referenced in #787 that should be considered when adopting #787.
Effective January 1, 2022 with enforcement for accreditation to begin January 1, 2023
2019 Revisions to Model #785 and #786 as an Update to Reinsurance Ceded Standard
The 2019 revisions to the Credit for Reinsurance Model Law (#785) and Credit for Reinsurance Model Regulation (#786) outline the requirements for companies to take credit for reinsurance when ceded to a Reciprocal Jurisdiction.
The revisions were adopted on a “substantially similar” basis. However, it should be noted that the Dodd-Frank Wall Street Reform and Consumer Protection Act requires that a state insurance measure be “consistent” with the Covered Agreement in order to avoid federal preemption, which may be interpreted as a higher standard than “substantially similar.” Therefore, states are encouraged to adopt the 2019 revisions in close to identical form to the models. The effective date is September 1, 2022, which aligns with the end of the 60 month period when federal preemption determinations must be completed as outlined in the Covered Agreement. Enforcement for accreditation begins January 1, 2023.
Risk Retention Groups: the 2011 and 2019 revisions to Model #785 and Model #786 also apply to risk retention groups.
Effective January 1, 2020
2014 Revisions to the Insurance Holding Company System Regulatory Act (#440)– Effective Jan. 1, 2020
The 2014 revisions provide authority to a designated state to act as a group-wide supervisor for an internationally active insurance group (IAIG). Provisions apply primarily to those states who act as the group-wide supervisor for an IAIG; however, there are also provisions that may impact any state with a domestic insurer in an IAIG. In addition, acquisitions or other changes in a state's domestic industry can occur quickly and change their role in overseeing a domestic insurer or their role within the holding company. Therefore, the standard was adopted as applicable to all states regardless of current involvement in an IAIG. In addition, the standard is applicable for RRGs in a holding company that meets the definition of an IAIG.
2009 Revisions to the Standard Valuation Law (#820)
The 2009 revisions authorize a principle-based reserving (PBR) methodology for life, annuity and accident and health contracts. The significant elements for these revisions will be included in the Part A, Liabilities and Reserves standard. In addition to the life companies already encompassed in the Part A accreditation standards, the PBR elements, as adopted, are designed to apply to fraternal benefit societies. Since fraternals are currently excluded from the scope of Part A, an update to the Preamble to include them in the scope for this standard is expected prior to the effective date of the standard.
Part A Preamble – Fraternals Subject to PBR (Effective Jan. 1 2020)
The Part A Preamble has been revised to include fraternal benefit societies with respect to principle-based reserving (PBR). There are a limited number of fraternal benefit societies that have life business that exceeds the premium threshold to apply PBR. For those fraternals that meet or exceed the premium threshold, it is important the PBR reserving methodology is followed, and thus the laws of the regulating states must require such treatment.
2014 Revisions to the Annual Financial Reporting Model Regulation (#205)
The 2014 revisions relate to new requirements for an internal audit function, and it is being added as a new significant element in the CPA Audits standard. (Not applicable to RRGs.)
Corporate Governance Annual Disclosure Model Act (#305) and the Corporate Governance Annual Disclosure Model Regulation (#306)
These models require an insurer (or group of insurers) to provide a confidential disclosure regarding its corporate governance practices to the lead state and/or domestic regulator annually by June 1. (Not applicable to RRGs.)
Part B1: Financial Analysis, Timing Guidelines for Analysis of ORSA Summary Reports
Reports for groups that include multiple insurers domiciled in various states should be reviewed and shared by the lead state within 120 days of receipt. Legal entity ORSA Summary Reports (which don't cover insurers domiciled in various states) should be reviewed within 180 days of receipt.
Troubled Company Review Team Guidelines
The changes to the troubled company guidelines in Part B3 of the Review Team Guidelines align the current accreditation guidelines with the revisions made in the NAIC Troubled Insurance Company Handbook. The updates clarify expectations about timely and effective communication between domiciliary and non-domiciliary state insurance departments. The revision is effective Jan. 1, 2020.
Part D: Primary Licensing, Redomestications and Change of Control
The following items represent a significant change to Part D of the accreditation program and the program as a whole by allowing this section to impact a state’s accredited status:
- Update the guidelines to reflect current practices (Effective Jan. 1, 2020)
- Expand the scope to include redomestications (Effective Jan. 1, 2020)
- Subject Part D to a Recommendation A or B from the review teams with the result that the outcome can affect a state’s accredited status (Effective Jan. 1, 2022)
These changes are intended to promote stronger communication between states and reduce risks associated with licensing new companies, reviewing and approving redomestications, and reviewing and approving Form A filings.
2020 Fall National Meeting
Financial Regulation Standards and Accreditation (F) Committee
Monday, December 07, 2020
4:30 PM - 5:30 PM CT
Please see the current Committee List for a complete list of committee members.