Volume 2, No. 1
 
NAIC Considers Proposals to Ease Reserve Requirements for Life Insurance Companies

The National Association of Insurance Commissioners (NAIC) is considering a request from the American Council of Life Insurers (ACLI) for capital and surplus relief for life insurance companies.

First requested by the ACLI in November 2008, the appeal urges state regulators to change capital and surplus reporting rules in time to affect the 2008 financial statements. The request for changes in capital and surplus rules included four for life insurance products, two for variable annuities, one for investments, and one for accounting.

The NAIC immediately formed the Capital and Surplus Relief Working Group to review the ACLI request. The Working Group, over the last several months, has been working diligently to understand what is being requested and what might be necessary and possible. The Working Group enlisted the aid of several NAIC technical groups to provide their initial analyses of the ACLI proposal. The Working Group last met by conference call on January 2, 2009 during which the Working Group announced that, in addition to the written comments received prior to the December 26, 2008 deadline, it was planning a public hearing to gather additional comments and information. The public hearing is scheduled for January 27, 2009 in Washington, DC. The Working Group will accept additional comments from interested parties by January, 23 2009. The hearing was scheduled after some critics argued that the ACLI had presented the request in secret and the NAIC Working Group was not giving consumers and others a chance to weigh in.

NAIC President Roger Sevigny, in a January 5, 2009 NAIC News Release stated that, “Over the past two months, we have been working diligently to analyze what is being requested by the ACLI. While many of the ACLI’s requests have been under consideration by insurance regulators for quite some time, I can assure you that careful deliberation will be exercised before any action is taken.” Sevigny also stated that, “We will not contemplate making any changes that would negatively impact existing consumer-protection measures.

Joseph Belth, insurance professor at Indiana University and Editor of the Insurance Forum, in a December 26, 2008 comment letter to the NAIC Working Group stated, “I urge regulators to abandon this rushed and secretive effort to provide capital relief for life insurance companies until there has been an opportunity to determine, through a careful, deliberate, and open process, (a) whether relief is needed, (b) the extent of the relief needed, and (c) whether the relief is in the long-term best interests of the insurance-buying public”. Also, in a December 26, 2008 comment letter to the Working Group, Robert Hunter, Director of Insurance, Consumer Federation of America (CFA) stated, “CFA encourages you not to lower consumer protections such as reserve requirements during these rough economic times when consumers must rely even more on your consistent and steadfast protection.”

The NAIC Working Group plans to finalize its recommendations to the NAIC leadership with regard to the ACLI request after the January 27 hearing. What remains uncertain is whether, following the hearing, regulators will make decisions that can be incorporated into the 2008 financial statements. The 2008 financial statements must be filed by March 15. The Working Group anticipates a vote by the full NAIC in early February.

NAIFA will attend the January 27 public hearing and report on any decisions that the NAIC takes on the ACLI request for capital and surplus relief.

NAIFA Staff Contact: Roland L. Panneton, Senior Counsel – Government Relations, at 703-770-8187.