NAIC 2019 Highlights – Year In Review
The stars were indeed bright, deep in the heart of Texas, in Austin, where the National Association of Insurance Commissioners (NAIC) met for the final National Meeting of 2019. Amidst the music and barbeque, regulators worked diligently to wrap up another year and close out the decade. Below is an annual update of NAIC adoptions made within the Statutory Accounting Principles (E) Working Group (SAPWG) that will impact 2019 statutory basis financial statements and a summary of significant activities related to reinsurance, risk retention groups and cybersecurity and privacy.
Statutory Accounting Updates
The following FASB ASUs were rejected by the SAPWG during 2019:
- ASU 2015-08, Business Combinations: Pushdown Accounting – Amendments to SEC Paragraphs Pursuant to Staff Accounting Bulletin No. 115
- ASU 2018-08, Not-For-Profit Entities: Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made
- ASU 2019-02, Entertainment – Films – Other Assets – Film costs and Entertainment – Broadcasters – Intangibles – Goodwill and Other: Improvements to Accounting for Costs of Films and License Agreements for Program Materials
- ASU 2019-03, Not-For-Profit Entities: Updating the Definition of Collections
- ASU 2019-05, Financial Instruments – Credit Losses: Targeted Transition Relief
- ASU 2019-06, Intangibles – Goodwill and Other, Business Combinations, and Not-for-Profit Entities: Extending the Private Company Accounting Alternatives on Goodwill and Certain Identifiable Intangible Assets to Not-for-Profit Entities
2019 saw the culmination of nearly a year and a half of hard work by the Reinsurance (E) Task Force. The necessary revisions to the Credit for Reinsurance Model Law (#785) and the Credit for Reinsurance Model Regulation (#786) were completed and adopted to implement the collateral provisions of the Bilateral Agreement between the United States of America and the European Union (EU) on Prudential Measures Regarding Insurance and Reinsurance and the Bilateral Agreement between the United States of America and the United Kingdom on Prudential Measures Regarding Insurance and Reinsurance (collectively, the Covered Agreements).
With revisions to the models complete, revisions to the Accounting Practices and Procedures Manual (AP&P Manual) by the Statutory Accounting Principles (E) Working Group and revisions to Schedule F and Schedule S of the Blanks by the Blanks (E) Working Group are underway. At the 2019 Fall National Meeting, Bermuda, Japan and Switzerland were approved as reciprocal jurisdictions.
The Covered Agreements became operative September 22, 2017 and states have five years to adopt the necessary reinsurance reforms or face potential federal preemption by the Federal Insurance Office (FIO). Given the October 1, 2022 deadline in the Covered Agreements, the revised Credit for Reinsurance Model Law and Regulation were adopted as state accreditation standards on an expedited basis to avoid federal preemption. The revised Model Law and Regulation becomes a state accreditation standard effective September 1, 2022, with enforcement beginning January 1, 2023.
Risk Retention Groups
The Risk Retention Group (E) Task Force adopted revisions to the NAIC Uniform Risk Retention Group – Registration Form. The revisions intend to ensure the questions and expectations are clear, to limit the time necessary to determine if an application is complete and accurate and to reorganize the information into a more user-friendly format.
The Task Force also adopted a Frequently Asked Questions (FAQ) document and a Best Practices document. These documents were developed to assist states with registering RRGs and includes information about the federal Liability Risk Retention Act, the role of the domiciliary state in overseeing an RRG and communication between domiciliary and non-domiciliary states.
Cybersecurity and Privacy
The Innovation and Technology (EX) Task Force heard updates on cybersecurity and privacy initiatives and issues at each National Meeting, including a legislative update on the adoption of the Insurance Data Security Model Law #668. Eight states have adopted the Model Law as of the 2019 Fall National Meeting, with more anticipated to follow in 2020. The Treasury Department endorsed Model #668 and “recommended its prompt adoption by states to avoid congressional action.”
In 2019, the Task Force referred a charge to the Market Regulation and Consumer Affairs (D) Committee to “review state insurance privacy protections regarding the collection, use and disclosure of information gathered in connection with insurance transactions.” In response the Committee created the Privacy Protections (D) Working Group, which held its first meeting at the 2019 Fall National Meeting and began reviewing state privacy laws and regulations. NAIC staff provided an update to the Working Group regarding various NAIC model laws and regulations that address privacy. This presentation included a discussion of the California Consumer Privacy Act (CCPA) (effective January 1, 2020) and the European General Data Protection Regulation (GDPR).
If you have any questions about this annual update you can contact us.